January's blockbuster jobs data was just the tonic a battered cryptocurrency market needed, with the data sparking a furious 10% intraday rally in Bitcoin (BTC-USD) that took the digital token above $40,000 for the first time since late last month.
The rally was even more brisk in smart contract coins like Ethereum (ETH-USD) and Solana (SOL-USD), which jumped by over 12% on the day. Ether now trades close to $3,000, posting a recovery of nearly 20% from last week's levels after a rout that pummeled risk-sensitive assets.
Crypto has been trading almost lockstep with Wall Street, which also posted gains after the jobs data defied economists gloomy expectations. The sentiment swing also pushed crypto stocks higher with MicroStrategy (MSTR) soaring by 14%, Bakkt (BKKT) and Coinbase (COIN) both rallying by over 7%.
Meanwhile bitcoin miners including Hive Blockchain (HIVE), Riot Blockchain (RIOT) and Marathon Digital (MARA) were up at least 9% intraday.
A selloff that began in the fall and extended into the new year left a lot of wreckage in its wake, but Bitcoin's re-taking of the $40,000 mark is meaningful, with that level serving as a bulwark separating bulls from bears, according to analysts.
“From a technical perspective, you’re actually breaking the entire downtrend from the beginning of November," Fundstrat’s Mark Newton told Yahoo Finance live on Friday.
“We have seen sentiment get washed out in the last couple of months but now you’re seeing evidence of the retail trader gradually starting to put more money back to work… my own [research] is that the larger low happens some time this spring,” he added.
Regardless, Friday's price action suggested crypto's fortunes continue to be yoked to Wall Street, with a tight correlation between digital coins and risk-sensitive technology stocks in the Nasdaq (^IXIC)
Edward Moya, senior markets analyst with investment banking firm, Oanda, admits there’s no real catalyst for why the crypto market is getting a boost, given that it still faces a bearish macro outlook. Monetary tightening from many of the world’s largest central banks, including the Federal Reserve, is dampening crypto's value case.
Still, Moya suggested that "there is optimism that Bitcoin has stabilized. We’re also seeing that the global inflationary story will likely continue to drive several countries into more diversification trades which should benefit cryptos,” he told Yahoo Finance.
“The blood bath for cryptocurrencies appears to be winding down,” Moya added.
Although global bond yields surged on the jobs report in expectation of higher rates, cryptocurrencies still held their gains. However, the sector has already lost more than $1 trillion in the last 3 months, and Bitcoin is still languishing well below its record near $69,000 hit last fall.
More evidence for the market’s dynamic could come from the cryptocurrency futures market. Across all cryptocurrencies, over $245 million positions have liquidated in the last 24 hours, with a major portion occurring in the last 4 hours according to the derivatives data provider, CoinGlass.
Within that window, the ratio between long and short positions has flipped, with more short sellers closing their positions. That means short sellers make up at least 82% of liquidations that occurred over the past 12 hours.
David Hollerith covers cryptocurrency for Yahoo Finance. Follow him @dshollers.
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