Bitcoin Surges Above $86,000: Are Traders Facing a Potential Trap?

Bitcoin (BTC) maintained a price above $86,000 on Monday after a steady recovery over the weekend from a drop to $80,600, its lowest point since April. This surge occurred as traditional markets cautiously opened the week, with the US Dollar Index (DXY) stabilizing above 100, close to a six-month peak.

Key Insights:

The US Dollar Index remained at 100 following a robust Nonfarm Payrolls (NFP) report, which reported 119,000 jobs added, surpassing the expected 53,000.
Bitcoin’s recovery from $80,600 to over $86,000 has raised questions about the sustainability of this rally, with one analyst cautioning that it may be misleading.
The BTC/gold ratio suggests Bitcoin may be underperforming despite its bounce against the USD.

Fed’s Instability Persists as NFP Boosts US Dollar

Bitcoin’s rise coincided with global markets adjusting to new macroeconomic indicators, starting with a strong NFP report released on November 20, which noted the addition of 119,000 jobs, far exceeding the anticipated 53,000.

This unexpectedly high NFP result injected new tension into market forecasts. Typically, favorable job data signals economic resilience, leading to a reduction in rate-cut expectations, but this outcome has led to mixed effects: while the US Dollar Index (DXY) remained strong above 100, traders recalibrated expectations regarding the Fed’s future policy decisions.

Recently, New York Federal Reserve President John Williams indicated that a short-term rate cut might still be on the table, stating that the softness in the labor market, rather than inflation, now poses the greater risk ahead.

Conversely, markets reflected a more positive outlook on Monday, with CME Group data indicating a 78.9% probability of a 0.25% interest rate cut in December, an increase from 44% just a week prior. However, Boston Fed President Susan Collins stated her indecision on the matter, emphasizing a growing divide in the Fed’s policy.

Fed Reserve’s interest rate cut expectation for December. Source: CME Group

The dollar increased against both the euro and sterling as fiscal pressures in Europe intensified, while the yen lost part of its Friday gains despite continued verbal intervention from Tokyo.

Is Bitcoin’s March Genuine or Just Dollar Influence?

Despite Bitcoin’s uptick over the weekend boosting short-term sentiment, analysts warn against misinterpreting this movement. Market technician Tony Severino noted that the recent increase in BTC against the dollar might merely represent a “B-wave” rally, driven by a declining dollar rather than actual strength in cryptocurrencies.

BTC/GOLD Elliot Wave market cycle analysis. Source: Tony Severino/X

According to Severino’s BTC/gold ratio analysis, a peak is anticipated in March 2025 around 46, followed by a corrective phase expected to bottom towards the end of 2025 and early 2026, coinciding with Bitcoin’s halving cycles. Severino asserted that the decreasing ratio indicates Bitcoin is underperforming relative to gold, suggesting that the apparent rise in BTC/USD may be concealing underlying weaknesses.

Nonetheless, Bitcoin’s ability to regain footing in the mid-$80,000 range amidst a strengthening dollar offers traders a tactical opportunity until market volatility and uncertainty regarding the Fed’s decisions are resolved in advance of the next significant market movement.

This article does not provide investment advice or recommendations. All investment and trading actions carry risks, and it is crucial for readers to conduct their personal research before making decisions.