Earlier this week, Bitcoin's price briefly broke through the $100,000 mark but quickly retreated, prompting investors to reassess this year's interest rate outlook. There is a clear divergence in the market regarding the future direction of Bitcoin, and fluctuations in a series of economic data and policy expectations have intensified this uncertainty.
On Friday, the employment report released by the U.S. Department of Labor showed that the U.S. added 256,000 jobs, far exceeding the expected 160,000, while the unemployment rate also fell from 4.2% in November to 4.1%. This strong employment data is seen as negative news for risk assets like Bitcoin, as it may imply that the Federal Reserve will be more cautious in cutting interest rates. Subsequently, U.S. Treasury yields rose to their highest level since November 2023, and the dollar strengthened, putting pressure on the crypto market. After the report was released, Bitcoin's price briefly fell from $95,000 to $92,000.
Goldman Sachs adjusted its expectations for Federal Reserve interest rate cuts after the non-farm report, predicting a total of 50 basis points of cuts this year, with 25 basis points each during the policy meetings in June and December. The previous forecast was for a 75 basis point cut. This adjustment reflects the market's new understanding of the Federal Reserve's policy path and has impacted the prices of risk assets like Bitcoin.
It is noteworthy that on Wednesday, the Bitcoin spot exchange-traded fund (ETF) recorded its second-largest single-day outflow of funds since it began trading in January last year. This data further indicates that institutional investors are becoming more cautious about the cryptocurrency market. As Bitcoin's price volatility intensifies, investors are starting to reassess their investment strategies and risk tolerance.
From the chart, Bitcoin's price has recently formed a bearish engulfing pattern, indicating that buying momentum is weakening. The relative strength index (RSI) has fallen below the 50 threshold, while the price has also dropped below the important 50-day moving average (MA). These technical indicators all suggest that Bitcoin's price may continue to decline.
Analysts believe that the primary support level for Bitcoin's price is around $92,000. If this area can attract buying interest and the potential downward trend line of a new descending channel also forms support here, then Bitcoin's price may stabilize around this position. However, if it falls below this level, the price of Bitcoin may drop further to $87,000. This is where Bitcoin bulls may look for entry points below the flag pattern that previously propelled the cryptocurrency to a historic high.
Some analysts hold an optimistic view. They believe that strong employment data may actually mean that the bull market lasts longer than expected. This is the best data in six months and lays the groundwork for the possibility of the unemployment rate bottoming out. In addition, the bullish policy potential of the Trump administration and the easing of recession concerns have also created a favorable environment for Bitcoin's continued rise.
In the short term, Bitcoin's price movement will be influenced by the upcoming inflation data, including PPI and CPI. This data will have a significant impact on the Federal Reserve's policy expectations and may further sway the trends of risk assets like Bitcoin. Investors need to closely monitor these data changes to adjust their investment strategies in a timely manner.
In addition, the volatility of the Bitcoin market reminds investors to remain cautious. Although Bitcoin has seen significant gains over the past few years, its price is still influenced by various factors, including the macroeconomic environment, policy expectations, and market sentiment. Therefore, investors need to fully understand market conditions and develop reasonable investment strategies and risk management measures when participating in Bitcoin trading.
Overall, the volatility of Bitcoin's price has intensified market divergence. Investors need to reassess this year's interest rate outlook and market trends to make informed investment decisions. At the same time, investors must maintain a cautious and rational attitude, avoiding blind following or excessive trading that could lead to losses. In the cryptocurrency market, a robust investment strategy and risk management measures are key to success.
