Bitcoin fell to a near five-week low on Thursday as upbeat economic data from the US lifted demand for the US dollar.
A decline in unemployment claims (now below 1 million) and uplifting manufacturing data (a two-year high) earlier this week decreased bids for safe-haven assets. As a result, gold and Bitcoin fell almost in tandem, while the US dollar index (DXY), which was trading near its two-year low, rebounded higher.
BTC/USD shed a massive 14.87 percent off its valuation in the last 48 hours. The pair formed a weekly low at $10,005 before rebounding higher on the “buy-the-dip” sentiment.
While some analysts saw the bounce-back as a sign of a short-term recovery trend, others warned about an extended downside move towards $9,600. It is because of the level’s proximity with a CME Bitcoin futures gap. They typically get filled 90 percent of all the time.
“If this CME Bitcoin futures gap needs to be filled, then I say get it over with,” said Josh Rager, the founder of Blockroots.com. “I’m also cool if whales just push price back up from here and never bother with filling the meme gap.”
Non-Farm Payroll Data
Technicals aside, Bitcoin’s fundamentals are also turning bearish for the short-term, given an increase in US economic recovery expectations.
On Friday, the US Department of Labor will release the non-farm payroll (NFP) data. The figures represent the number of jobs added, excluding workers from the farm, government, private household employees, and nonprofit sectors.
Economists forecast an addition of 1.4 million jobs in August. Overall, the unemployment rate could go down to 9.8 percent from its post-lockdown peak of 10.2 percent in July.
That could improve the US dollar’s rebound outlook further into this week. Meanwhile, even a slightly stronger greenback could reduce Bitcoin bids, given how a weaker dollar earlier boosted Bitcoin upward by more than 200 percent.
The Silver Lining for Bitcoin
Junichi Ishikawa, a senior foreign-exchange strategist at IG Securities in Tokyo, said that he expects the greenback to fall on a medium-term timeframe despite the US dollar’s recent gains.
“The dollar has rebounded against the euro and could continue to rise a little further,” he said. “However, my main scenario is for the dollar to fall, for stocks to rise and for yields to fall because the Fed is expected to stick with low-interest rates.”
Last week, the US central bank changed its policy framework to focus less on inflation and more on jobs. That served as cues for a more extended period of higher inflation and lower interest rates. It is harmful to the US dollar.
Meanwhile, many see Bitcoin as the ultimate global hedge against inflationary practices thanks to its underlying scarcity. A Bloomberg report published earlier this year predicted that the cryptocurrency would reach $20,000 by 2020.
BTC/USD was trading at 10,292 at the time of this writing, up 1.22 percent into the Friday trading session.