Bitcoin recovery on edge amid Fed rate cut uncertainty & ‘liquidity squeeze’

Key Takeaways 

Will BTC recover this week? 

It depends on the Jobs report. A weak report could improve the odds of a Fed rate cut, sentiment, and trigger a relief rally. But a strong labor could deepen the sell-off. 

What’s the analysts’ outlook on the same? 

Swissblock believes BTC could stabilize, while QCP Capital and Nansen analysts warned of a potential dip to $80k. 

Bitcoin [BTC] consolidated recent losses above $90k, after briefly slipping to $89.2k on the 18th of November, ahead of the September Jobs report scheduled for the 20th of November. 

This will be the most crucial macro print of the week, having been delayed due to the U.S. government shutdown.

It will influence expectations for a Fed rate cut and, by extension, the market sentiment in risk assets.

At the time of writing, the market was pricing a nearly 50/50 scenario, either for a cautious rate pause or a 25 bps cut. 

The upcoming data release on the 20th of November will provide key insights into labor market conditions and help shape expectations for the Federal Reserve’s decision at the December meeting.

For Singapore-based crypto trading firm, QCP Capital, the Jobs report will determine whether the market rebounds or accelerates the current sell-off. 

“Overall, conditions look more late-cycle than recessionary, but with fiscal constraints, uneven consumption, and liquidity thinning, the coming data will decide if $BTC’s drop is a shakeout or the start of a broader risk-off phase.”

Is BTC’s drop below $90k inevitable?

As mentioned by QCP Capital analysts, U.S. dollar liquidity has also thinned out since late October, a stance reiterated by Arthur Hayes, founder of BitMEX. 

Collectively, the deleveraging event on the 10th of October, the macro uncertainty, and the ‘liquidity squeeze’ have compounded market rout across risk assets, including crypto. 

That said, the liquidity front is expected to recover in early December, just around the time of the Fed’s rate decision. 

However, before then, the BTC price could slip into the $80k-$85k region, warned Nicolai Søndergaard, Research Analyst at Nansen. In an email statement, Søndergaard told AMBCrypto, 

“Based solely on BTC options data and assuming all else is equal, there’s a non-negligible chance of a move toward the mid-$80K range, though current levels or a bounce appear more probable.”

Meanwhile, on-chain data sets flagged that a potential stabilization and a likely recovery were still on the cards.

Notably, miner dump had reset to net buying in the past few days during the extended plunge. Such moves always precede a cooling-off period after a massive sell-off. 

Similarly, short-term holders (STH) capitulation had hit $427 million per day, matching previous pivotal zones and medium-term bottoms, noted Swissblock. 

Put differently, on-chain data suggested that the market was nearing a bottom and poised for a reversal. However, the Jobs report data and the Fed’s rate decision will ultimately set the year-end market direction.