Author: Mary Liu, Bitpush News

On Tuesday, the cryptocurrency market was in a narrow fluctuation mode. Bitcoin's early morning trading price was close to $63,000, but it fell after Powell's comments and hit a low of $61,730 in the afternoon. It has since rebounded to $61,901 at the time of writing, with a 24-hour decline of nearly 2%.

Most altcoins have fallen along with Bitcoin, with more tokens in the top 200 market capitalization ranking falling than rising.

BinaryX (BNX) performed outstandingly, pumping 21.4% with a trading price of $0.9755. Arcblock (ABT) rose 9.8%, Helium (HNT) rose 6.5%. Pendle (PENDLE) had the largest decline, dropping 14.1%, followed by ether.fi (ETHFI) with a 10.3% decrease, and Aave (AAVE) with an 8.3% decrease.

The current overall market capitalization of the cryptocurrency is 2.29 trillion US dollars, with Bitcoin's market share at 53.2%.

In terms of US stocks, at the close, the S&P, Dow Jones, and Nasdaq indexes all rose, up 0.62%, 0.41%, and 0.84% respectively. The S&P and Nasdaq indexes both closed at record highs.

The Fed, Employment Data Drive the Market

The latest data from the US Bureau of Labor Statistics shows that the number of job vacancies in the United States at the end of May was 8.14 million, an increase from 7.92 million in April. Market observers are currently awaiting the release of the June employment report on Friday, hoping that the report will provide more evidence that the labor market is cooling down, thus supporting a rate cut.

Earlier in the day, Powell said that the cooling inflation was encouraging to him. The inflation data for April and May showed that the Fed is moving towards the path of deflation, but he refused to comment on the timing of the first rate cut, reiterating the need to see more evidence of progress before cutting rates.

Powell said, "We have made significant progress. We just want to understand whether the levels we see reflect the actual situation of potential inflation."

ETC Group research director André Dragosch commented: "As US employment data usually includes lagging indicators, with only a few exceptions such as initial claims for unemployment benefits, we expect that US employment data may deteriorate in the coming months, just as observed in the patterns of housing and other leading indicators. More importantly, there is increasing evidence that the latest employment data should be treated with caution."

He said, "Despite the latest May non-farm payroll numbers exceeding widespread expectations, the 'details' of the employment report indicate that the US labor market is clearly weakening."

Dragosch emphasized some 'unexpected negative growth' in the recent labor market and said that these 'led to further repricing of global benign growth expectations as market participants increasingly took into account the possibility of a US economic recession.'

Meanwhile, major US stock indices hit record highs in June. However, this happened amid weakening market breadth, as the performance of the bottom 490 stocks typically lags behind the top 10 large-cap stocks in the S&P 500 index. Therefore, the polarization in the traditional stock market also indicates increased risks of recession and adjustment.

Dragosch said, "The risk of Bitcoin and other encrypted assets is, first of all, that major large stock indices such as the S&P 500 still show a relatively high correlation with major encrypted assets. Secondly, global growth expectations remain the major macro factor affecting Bitcoin's performance."

He pointed out that the S&P 500 index and Bitcoin are currently dominated by global growth expectations in terms of macro factors, which also explains the high correlation between the two markets. The liquidity of US government bonds is a 'potential systemic risk that could support Bitcoin and encrypted assets,' and the available liquidity is 'currently worse than during the 2020 COVID-19 pandemic,' which could mean increased volatility in government bonds and the possibility of the Federal Reserve intervening in the bond market (i.e. quantitative easing), which may also require interest rate cuts, as in 2019.

If the Federal Reserve reopens the easing cycle and the US dollar weakens, this will be favourable for Bitcoin and encrypted assets. Major central banks around the world have already lowered interest rates this year, such as the Bank of Canada, the European Central Bank, or the Swiss National Bank. Therefore, the liquidity situation appears to have started to change.

Dragosch said, "We believe that the potential economic recession in the United States and the increasing risk of the U.S. Treasury market malfunction are the main catalysts for the Fed's final policy shift this year. Unless global risk appetite rises again, our basic forecast is still short-term consolidation until the positive effects of the halving begin to show around August 2024. That being said, due to the recent adjustment, the valuation has become more attractive, and BTC is now close to 'fair value.'"

$65,000 is the resistance level.

Blockware Intelligence analysts stated in the latest newsletter: "In the short term, we should expect some resistance around the $65,000 level, as short-term market speculators may seek to exit positions at the 'break-even' level. Last summer, when BTC lost the support level of STH [short-term holder] RP, the price traded sideways for two months before finally breaking through again."

Independent analyst Ali Martinez also mentioned this on X platform, stating that based on the measurement of market value and actual value, the BTC price may encounter resistance above $65,000.

Martinez said that breaking this level could pave the way for Bitcoin to pump to $78,700.

Meanwhile, Thomas Fahrer, the founder of the cryptocurrency company Apollo, is more optimistic about Bitcoin's breakthrough of $65,000. In his X post on July 2, he claimed that the $940 million Bitcoin shorts would be liquidated at $65,000. The first rule of Bitcoin is not to short it. Funds will flow in, and shorters will be punished.