The cryptocurrency market experienced a slight rebound, with a 1.5% increase in its net worth to reach $1.14 trillion. This comes after three consecutive days of decline. Leading digital assets like Bitcoin (BTC) and Ethereum (ETH) also saw modest gains of around 1.8% and 1.75% respectively. Notably, Solana (SOL) stood out as one of the best performers, surging by 8.5%. This resurgence in the crypto market coincided with the release of the US Labor Department’s jobs report.
According to the report, 209,000 new jobs were added in June, a decrease compared to the 306,000 added in the previous month. This slowdown in the jobs market gave rise to hopes that the Federal Reserve would not raise interest rates during its upcoming July meeting. Nick Timiraos, the chief economic correspondent at the Wall Street Journal, noted that there may be pushback from hawks who support a rate hike in September. On the other hand, doves will likely seek to delay any decision until Halloween, as the June jobs report will be considered old news by then and may not reflect a significant change in hiring trends.
Interestingly, the release of the jobs report also coincided with a weakened US dollar index (DXY), which dropped to a two-week low. This decline in the dollar’s value had a positive impact on the crypto market, with a negative correlation observed between the two. As the dollar weakened, the crypto market saw a significant increase, reaching a total market capitalization of nearly $1.2 trillion.
Technically, the crypto market’s recent bounce back occurred near its 50-day exponential moving average (50-day EMA) at around $1.12 trillion. This moving average has acted as a support level, preventing further declines in the market since late June. In fact, the last retest of the 50-day EMA on June 29 preceded a 7.5% rebound in the crypto market’s valuation.
Looking ahead, despite the weaker monthly jobs data, there is a 95% probability, according to the market, that the Federal Reserve will hike rates by 25 basis points (bps) in July. This possibility poses a risk to the crypto market’s upward momentum, and there is even a technical pattern suggesting a potential downside ahead.
The crypto market has formed what appears to be a bearish reversal pattern known as a head-and-shoulders (H&S) pattern. If this pattern confirms, it could lead to a drop towards the neckline at approximately $1 trillion. Furthermore, a decisive close below this level may trigger another drop towards $800 billion.
However, there is also a bullish scenario to consider. If the crypto market continues to rise and surpasses $1.3 trillion, it may complete an inverse head-and-shoulders (IH&S) pattern. This pattern is seen as bullish and could propel the market towards an upside target of over $2 trillion for the remainder of 2023, representing a potential 100% increase from current levels.
It is important to note that this article does not provide investment advice or recommendations. Investing in cryptocurrencies involves risks, and individuals should conduct their own research and analysis before making any investment decisions.