First Mover Americas_ Bitcoin slips as report shows faster-than-expected U.S. job growth

First Mover Americas_ Bitcoin slips as report shows faster-than-expected U.S. job growth

The latest movements in the crypto markets in the context of June 3, 2022.

Good morning and welcome to First Mover. I'm Bradley Keoun, here to guide you through the latest crypto markets, news and insights. (Lyllah Ledesma is not here).

  • Price Point: Bitcoin fluctuated around $29,700 after a report showing U.S. job growth slowed in May.
  • Market Movements: Crypto winter may have really, really, really arrived now.

Price Point.

Bitcoin (BTC) struggled to find direction on Friday after a U.S. government report showed that job growth slowed in May, possibly a sign that the Federal Reserve's recent actions to cool the economy may be starting to have an impact.

At press time, the largest cryptocurrency was changing hands around $29,500, down 1.7% in the last 24 hours.

Crypto traders and analysts have been watching the Fed's actions because many believe that the U.S. central bank's more than $4 trillion in money printing in recent years has stimulated risky asset prices. Now, as the Fed (and President Joe Biden) promise to curb inflation, which is higher than it has been in four decades, bitcoin and stock prices have come under heavy downward pressure.

In traditional markets, European indexes were mixed Friday and U.S. stock futures were lower. Gold prices fell 0.5% to $1,860 an ounce.

According to the U.S. Bureau of Labor Statistics, employers added 390,000 jobs in May, a slight slowdown from April's 436,000 but exceeding economists' expectations of 325,000.

According to MarketWatch, gold prices slipped after news that job growth was faster than expected. Analysts believe that gold prices will struggle as long as the U.S. dollar is strong in currency markets, which is theoretically when the Fed raises interest rates.

Market Moves

Crypto winter may have arrived

As the bitcoin price has steadily declined - the largest cryptocurrency just completed a record-breaking nine-week losing streak - analysts in the digital asset markets have wondered if a "crypto winter" is on the horizon.

The term harkens back to the cold snap of 2018, when bitcoin prices fell 73% this year alone, accompanied by a crash in token prices recently marked by "initial coin offerings," or ICOs, at the top of the market. Cryptocurrency companies cut jobs, bitcoin miners discontinued new projects, and breathless headlines disappeared from the mainstream press.

After this year's 35% plunge (so far), there are now signs that it may be time to hunker down again.

Recent cost-cutting measures by exchanges Coinbase and Gemini show how seriously industry heavyweights are taking this setback.

Riot Blockchain, one of the largest publicly traded bitcoin miners, unloaded more than half of the bitcoins it mined in May, CoinDesk's Aoyon Ashraf reported Thursday. As the bitcoin price falls, more miners are shutting down or selling their holdings to fund their operating budgets; high energy prices are squeezing profits on the cost side.

"The impact is being felt across the industry. Nothing has been spared from this downturn," QCP Capital, a trading firm, wrote Friday in a note to Telegram subscribers.

QCP made some of the key comparisons between the current market and 2018. Below are some of the key highlights. Be on the lookout.

  • "If we see BTC and ETH repeat the drawdowns of 85% and 95%, respectively, from 2017, we will be looking at levels of $10,000 for BTC and $250 for ETH."
  • "Although we think this is unlikely, the strong negative skew in the vol markets reflects some fear of this happening."
  • "In 2017, it took about 1 year to find the bottom for BTC and ETH. We may still be some time away from the absolute bottom."

According to QCP, a major reason for the pullback was the withdrawal of stimulus liquidity by the Federal Reserve and other central banks. Some of the riskiest tokens may have been the biggest beneficiaries of central bank balance sheet expansion fueled by money printing.

"DeFi and meme coins had the largest declines," QCP wrote. "When easy money dries up, the coins with the lowest utility and highest multipliers suffer the most."

When does the cycle turn? In the upside-down logic of financial markets, where the Federal Reserve acts as both a balancing economic force and an 800-pound gorilla, that could happen when the data start to look really ugly.

"We are therefore now entering a period where bad news is good news in terms of growth and employment data," QCP wrote. "The market would react positively to negative news as it would reduce the Fed's hawkishness.

Recent headlines

  • Crypto firms, especially exchanges, cut jobs as market rout continues Many crypto firms are announcing significant job cuts and hiring freezes amid tough times for cryptocurrency and equity markets.
  • Head of Binance Labs Bill Qian will leave the company: Report Bill Qian will leave Binance Labs, days after the VC raised a $500 million fund.
  • Japan passes landmark stablecoin law to protect investors: report The new legal framework will take effect in a year's time
  • New York Senate Passes Bitcoin Mining Moratorium The state Assembly has already passed legislation that would ban new mining operations powered by carbon-based energy sources for two years.
  • Brazilian crypto unicorn 2TM lays off over 80 employees The company cites "the changing global financial landscape" as the reason. Its main competitor in Latin America, Bitso, laid off a similar number of employees last week.

Today's newsletter was edited by Bradley Keoun and produced by Parikshit Mishra and Stephen Alpher.