Jobs Report May be Key to Bitcoin Rally

Bitcoin BTCUSD -0.04% and other cryptocurrencies were higher on Thursday, chasing stocks after the latest Federal Reserve decision to raise interest rates. There are reasons to believe the crypto rally is fragile-and the U.S. jobs report on Friday could be a catalyst for a downward movement in the crypto market.

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Over the past 24 hours, Bitcoin's price has increased 3% to $23,800, making it one of the highest levels it has reached in six months and nearing $24,250 at the peak of recent trading activity.

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Despite a rally that started in February 2023, Bitcoin has continued to rise by almost 45% this year amid buoyancy across cryptos and stocks, spurred by improved risk appetite among investors. While Bitcoin is still near a third off its mid-2021 high, traders are becoming increasingly confident that the worst of the bear market and the "crypto winter" that have gripped the asset class over the past few months is over.

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In the last 24 hours, Bitcoin has taken another step in the right direction by hitting a new six-month high, according to Craig Erlam, an analyst at broker Oanda. “It now faces significant resistance around $24500-$25,500, which if broken could provide a massive psychological boost to the price of the stock.”

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In the wake of the Fed's recent monetary policy decision, Bitcoin's latest upward leg followed in the footsteps of the Dow Jones Industrial Average and the S&P 500 which also saw gains in the wake of the Fed's decision. After a spate of much bigger rate hikes last year, the central bank raised interest rates by a quarter of a percentage point on Wednesday, as expected. This marked a slowdown in the pace of tightening financial conditions after a spate of much larger rate hikes last year.

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A tough macro backdrop increased the correlation between stocks and cryptos last year -- and the latest rally was a response to those higher rates sparked by optimism that the worst is over from the Fed. Investors were jubilant even as Fed Chairman Jerome Powell detailed in a press conference that “ongoing increases” are on the horizon.

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Bitcoin has been benefited in the short term as a result of this. Taking a step back, the spike higher only feeds into the narrative that investors might be trying to “fight the Fed,” pushing prices up despite repeated statements from central bankers that financial conditions will continue to tighten, causing headwinds for the economy.

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According to Yuya Hasegawa, an analyst at crypto exchange Bitbank, the market seemed to be cherry-picking what they thought was important, and disregarding the possibility that the Fed might still hike rates for a while to come. Bitcoin's rally remains precarious, he said.

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With multiple signs that the recent rally in digital assets seems precarious—with signs of a new bubble forming amid a weak technical and fundamental picture—crypto holders should be prepared for volatility if this continues. There is a growing possibility that the U.S. jobs report on Friday will provide a macro catalyst for stocks and cryptos to plummet. Investors may begin to realize that the Fed will remain cautious if signs show that the labor market remains tight—and that could cause a selloff.

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In spite of the price increase that occurred on Wednesday, [Bitcoin] did not close above $24,000, and its momentum appears to be decreasing. Although Friday's jobs report may help to boost the economy, Hasegawa said that given the recent decreases in weekly initial jobless claims, having high expectations may be a little too optimistic.

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In addition to Bitcoin, Ether ETHUSD +1.38% -the second-largest crypto - increased by 6% to sit around $1,675. Cryptocurrencies and altcoins on the smaller scale also did well, with Cardano up 6% in value and PolygonMATICUSD +3.35% spiking 13% in value. Memecoins were slightly more muted, with DogecoinDOGEUSD –2.50%  advancing 2% and Shiba InuSHIBUSD +0.67%  3% in the green.