Market Wrap: Bitcoin, Other Risk Assets Fall Again Following Disappointing Jobs Data

Price Action

Bitcoin and ether traded down to close the week, decreasing in line with traditional risk assets, though not to the same extent.

The CoinDesk Market Index (CMI), a broad-based market index that measures the performance of a basket of cryptocurrencies, decreased -0.80%.

In traditional financial markets, the Dow Jones Industrial Average (DJIA), tech-heavy Nasdaq Composite and S&P 500, which has a strong technology component, were down 2.1%, 3.8%, and 2.8%, respectively.

Bitcoin (BTC) fell sharply to start the U.S. trading day, decreasing 1.9% on heavy volume following the release of the U.S. jobs report. Prices recovered slightly in subsequent hours before declining again to around $19,450.

Ether (ETH), which still maintains a tight relationship with BTC, traded in similar fashion. The second-largest cryptocurrency by market capitalization shed 1.7% during the 12:00 UTC (8:00 a.m. ET) hour, also on higher-than- average volume.

Both BTC and ETH have resiliently held within a narrow band throughout the recent flurry of economic releases – good ones and bad ones alike. BTC’s increased correlation to gold prices further reflects its muted volatility. Gold has historically been viewed as a haven asset for investors.

U.S. jobs growth slowedin September, but by not as much as most market observers expected. Non-farm payrolls increased by 263,000, a 17% decrease from August, but more than the projected 250,000.

The unemployment rate declined to 3.5% versus expectations of 3.7%, and the labor participation rate was 62.3% essentially identical to the 62.4% rate in the prior month.

The employment figures offered the latest evidence that the economy is slowing, but not enough for the Federal Open Market Committee (FOMC), the group of Federal Reserve officials that sets the central bank’s policy rate, to justify pivoting away from its recent spate of hikes.

The CME FedWatch tool now assigns an 82.3% chance for a 75 basis point rate hike in November, up from 56.5% just a week ago. The next question may be whether market participants begin considering the probability of a 100 basis point increase.

The higher increase seems unlikely unless the September consumer price index report on Oct. 13 is surprisingly high. A greater-than-expected report would indicate that current efforts to stem inflation are not working as well as the Fed would like. A plausible outcome in this scenario would be even more aggressive rate hikes.

Latest Prices

Bitcoin (BTC) $19,457 2.9

Ethereum (ETH) $1,326 2.4

CoinDesk Market Index (CMI) 961.31 1.9

S&P 500 daily close 3,639.66 2.8

Gold $1,703 per troy ounce 0.5

Treasury Yield 10 Years 3.88 daily close 0.06

Bitcoin, ether and gold prices are taken at approximately 4pm New York time. Bitcoin is the CoinDesk Bitcoin Price Index (XBX); Ether is the CoinDesk Ether Price Index (ETX); Gold is the COMEX spot price. Information about CoinDesk Indices can be found at coindesk.com/indices.

Technical Take

Bitcoin searching for trading level following release of jobs data

Friday’s labor market report was better than expected, which is bad news for risk assets in the current environment.

The decline in traditional equities is pronounced, though more in aggregate than percentage terms. A few data points stand out in BTC’s hourly chart today.

• Momentum increased prior to the jobs announcement, on a progressively narrower trading range.
• The post-announcement decline was exacerbated by excessive trading volume, which placed downward pressure on prices.
• The volume profile visible range (VPVR) tool highlights the lack of volume between $19,900 and $19,500 for BTC. Prices tend to move rapidly through “low-volume node” areas such as these, in search of an area where a large degree of price agreement exists.
• The move higher during the 14:00 UTC (10 a.m. ET) hour came on lower-than-average volume, which can be interpreted as a bearish signal.
• The relative strength index (RSI), often used to indicate whether an asset is over- or undervalued, only reached oversold levels during the 15:00 UTC (1 p.m. ET) hour.

That BTC prices fell below the next high-volume node at $19,500 is likely concerning for traders because the next price level where significant agreement exists is close to $19,200.

The $19,200 mark is dangerously close to the $19,000 mark where the open interest for put options (which give the right to sell), exceeds that of call options (the right to buy). Breaching this level is likely to put additional weight on the price of BTC.

Investors should monitor BTC’s reaction to moving into oversold territory, particularly in trading volume. Low buying volume at BTC’s current level would indicate more trouble to come, at least in the short term.

On-chain analytics offer a glimmer of hope, as the movement of stablecoins onto centralized exchanges has been increasing, while BTC flows onto exchanges has been falling.

As stablecoins can represent dry powder for investors looking to go long, the recent increase implies bullish sentiment by investors who may simply be lying in wait for their desired price point.

By contrast, the inflows of BTC onto exchanges has declined. Typically, BTC moving to exchanges represents a willingness to sell. The extent to which this changes or stays the same within the next few days will be key to evaluating the next price direction.

Altcoin Roundup

• BNB Smart Chain Resumes Operations After $100M Exploit: A tweet from the official BNB chain Twitter account indicates the chain is back in operation after pushing out a software update to freeze hackers' accounts. The BNB Chain was halted earlier after an exploit was discovered that drained $100 million in crypto from the platform. BNB token was down 4.13% and was trading at $281.50 as of 17:00 UTC on Oct. 7, 2022. Read more here.
• Crypto Exchange FTX's Token Surges 7% After Visa Partnership Report: FTX has partnered with Visa to roll out crypto debit cards across 40 countries. FTX’s token FTT surged as much as 7% Friday before reversing course in the subsequent hours. Read more here.

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CoinDesk Market Index

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Asset Ticker Returns DACS Sector Celsius CEL +8.89% Currency Injective INJ +8.33% DeFi 1inch Network 1INCH +6.79% DeFi

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Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive and standardized classification system for digital assets. The CoinDesk Market Index (CMI) is a broad-based index designed to measure the market capitalization weighted performance of the digital asset market subject to minimum trading and exchange eligibility requirements.