An early morning sell-off in the Bitcoin market struggled to cause any serious damage as traders assessed the cryptocurrency’s potential against uncertain macroeconomic indicators.
In the latest news, the jobless claims in the US—a proxy for layoffs—remained above the pre-pandemic high of 695,000. The Labor Department reported that the new application for unemployment claims surged to 861,000 last week, denting hopes that the US economy is recovering speedily.
The statistics matched what Jerome Powell feared in his recent address at the Economic Club of New York last week. The Federal Reserve Chairman noted that the real damage of the coronavirus pandemic on the labor market is far worse than reported. He added that the Fed would continue its accommodative policies until they see a maximum drop in unemployment claims.
The US central bank is currently buying $120 billion worth of government and corporate debts every month. Meanwhile, it has announced to keep interest rates near zero until 2023.
Bitcoin tends to react positively to economic uncertainties. Of late, the Fed’s quantitative easing, coupled with the US government’s trillions of dollars worth of stimulus packages, has pressured the US dollar lower. In turn, that has helped Bitcoin record a 1,100 percent price rally from its mid-March nadir of $3,858.
The rally also appeared as mainstream investors, including Paul Tudor Jones and Stan Druckenmiller, projected Bitcoin as a better hedge against inflation than gold. A report released by Bloomberg also noted that the cryptocurrency was slowly eating up the precious metal’s market.
Its emergence as an alternative store of value asset prompted many corporate firms to add it into their balance sheets. They include the US carmaker Tesla and software intelligence firm MicroStrategy.
Bitcoin to Moon?
With economic uncertainties intact, Bitcoin reclaimed $52,000 as support and was targeting higher levels above its previous record high of $52,640 entering the US session. Technical indicators pointed to an uptrend continuation towards $55,000.
The US stock market tumbled, led by losses in the tech-savvy Nasdaq Composite index, which fell 1.7 percent. Meanwhile, the benchmark S&P 500 and the blue-chip Dow Jones declined by 1 percent and 1.1 percent in the morning session.
US government yields continued their climb amid an ongoing bond sell-off, with the yield on 10-year Treasury notes edging up to 1.312 percent from 1.297 percent in the previous session. Yields rise as bonds fall.