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The crypto market has regained some stability, with Bitcoin (BTC) rising back to nearly $95,000 as order books indicate the presence of bargain hunters. Late Wednesday, prices tested the solid support zone of $90,000-$93,000, which has prevented downward movements multiple times since late November.
This recent price increase will be put to the test by the U.S. nonfarm payroll report due Friday, expected to show an addition of 164,000 jobs in December after a gain of 227,000 in November, according to FXStreet. The unemployment rate is projected to match November's level of 4.2%, while average hourly earnings are expected to cool slightly to 0.3% month-to-month, down from 0.4%.
A stronger-than-anticipated jobs report could exacerbate existing hawkish Federal Reserve concerns, further increasing inflation-adjusted bond yields. These yields have been rising due to inflation worries, complicating the situation for risk assets. Inflation fears and rate volatility likely sparked Bitcoin's sudden decline from $102,000 to $93,000 over the past few days.
This morning, signs of bearish sentiment from traders were evident as the perpetual market's funding rates turned negative, indicating a predominance of shorts, especially when BTC is just 15% away from its record high.
With Fed-led pessimism prevailing, any weak payroll figures are likely to cause sharp market reactions, reviving prospects for Fed rate cuts and shifting sentiment significantly in favor of risk assets. Conversely, if the data falls short of estimates by a considerable margin, BTC could very well attempt to reach $100,000 again, unless the U.S. government, which holds approximately $18.50 billion worth of BTC, floods the market with sales. Do stay vigilant.
