Key Bitcoin takeaways
- Bitcoin reclaimed $43,000 for the first time since May 2021.
- The uptrend appeared after an optimistic US jobs report.
- Delta variant continues to pose risks to the US economy’s growth.
YEREVAN (CoinChapter.com) — Bitcoin rose on Friday after a better-than-expected jobs report showed that the US economy continues to rebound.
The benchmark cryptocurrency crossed over $43,000 for the first time since May 2021, hitting an intraday high of $43,399 before turning lower. Similarly, its top rivals, including Ethereum, Cardano, and XRP, printed decent intraday gains.
Employment, Stocks, Delta
Traders appeared encouraged by Friday morning’s nonfarm payrolls data. In July, it showed that the US employment numbers surged at their best pace in nearly a year, adding 943,000 jobs, which led the unemployment rate down to 5.4%. The strong uptick came majorly from the leisure and hospitality industry, adding 380,000 jobs.
Investors watched the US jobs report closely due to its potential impact on the Federal Reserve’s ongoing expansionary policy. In his recent press conference, the US central bank’s chairman, Jerome Powell, stated that they expect to keep their $120bn a month asset purchasing program and near-zero interest rates intact until they see substantial growth in the labor market.
Ideally, a strong upside move in jobs data could have deterred investors from raising bets in riskier assets. But that did not happen on Friday as the Nasdaq Composite, S&P 500, and the Dow Jones inched higher in tandem with Bitcoin.
Kathy Bostjancic, the chief U.S. financial economist at Oxford Economics, told the Wall Street Journal that the Fed might want to see more evidence before they decide to hike their benchmark lending rates and start winding down their bond and mortgage-backed securities purchases.
Part of the reason, Bostjancic hinted, is Delta. The latest Covid-19 variant has emerged to be the deadliest one so far and spread faster than its predecessors. Meanwhile, a report penned by UK researchers late Thursday claimed that even vaccines could not stop the delta’s transmission.
In the US, White House chief medical advisor Dr. Anthony Fauci warned that a new variant could emerge as the daily Covid-19 caseload reached 100,000. The spike raised the prospects that authorities might impose another lockdown, thereby requiring the Fed to keep supporting the economy for longer than anticipated.
Why Bitcoin rallied
Excessive liquidity and stay-at-home rules in 2020 prompted a retail boom across markets.
In addition, bored people turned traders overnight due to their easy access to cryptocurrency exchanges and zero-commission trading apps like Robinhood. That played a major role in boosting the Bitcoin price from its pandemic low below $4,000 to over $65,000 in 2021.
So far, uncertainty over high jobs data appears the simplest explanation for Friday’s risk-on rally that benefited Bitcoin and the US stocks side-by-side.
Trevor Greetham, a fund manager at Royal London Asset Management, said the recent rally looks fragile, adding:
“It feels like the stock market could get knocked, at least temporarily, by bad Delta variant news. But it would be a dip that would bounce back.”
As for Bitcoin, the on-chain indicators show that investors are accumulating it against the ongoing macroeconomic setup. For example, on-chain analyst Willy Woo highlighted a graph that showed people buying Bitcoin with an intention to HODL it long-term. That certainly means they are looking to park their money in a hedge that could protect them from the Fed-induced inflationary risks.
“Just a matter of patience and time before $42k breaks,” noted Woo.
“Strong HODLers, the Rick Astleys of this world, have been taking this opportunity to scoop large amounts of coinage while we’re under the resistance ceiling.”
Meanwhile, David Neuhauser, founder and managing director of Livermore Partners hedge fund, noted that traders are buying Bitcoin because of speculation, not because it is a hedge against the macroeconomic risks. In his Friday interview with TD Ameritrade, he called Gold a better haven alternative than Bitcoin, saying:
“I don’t look at (bitcoin) as an inflation hedge, I look at it still like a very speculative asset.”