Bitcoin dips below $71,000 on positive US jobs data

Is your dip-buying opportunity here?

Market Movements

Global Macro Market Observations

?? S&P 500 and Nasdaq close at record highs, as Nvidia leads tech rally

?? US Nonfarm payrolls expanded by 272,000 for the month, up from 165,000 in April

?? Gold slumps as China’s central bank halts 18-month buying spree

??GameStop tumbles 40% as ‘Roaring Kitty’ reveals little on livestream

Over the week, 10y treasury yields eased, perhaps led by softer than expected economic data in the earlier half of the week. The 10y broke 4.30% briefly on Thursday, marking a sharp decline from 4.50% at the start. The gauge reversed hard on Friday in the wake of a hot non-farm payroll print to close at 4.435%.

Friday’s job reports caused whipsaws in the US equity market uptrend. Buying flows had been steady throughout the earlier part of the week, especially late in the NY session. The S&P 500 and NASDAQ 100 both hit new all-time highs mid week, led by the usual mega tech names and helped by easier financial conditions thanks to lower yields. A hotter than expected print caused brief dips in the indices, but underlying weakness in the data helped spur buy-the-dip price action.

Gold’s price action was noteworthy, as the news that China was stopping its 18 month long accumulation of the metal sparked a 2% selloff on Friday. This was exacerbated by the NFP print, which also helped push the Dollar higher overall. Gold ended Friday down 3.45% to 2,293, after making a weekly high on the same day.

The GME saga continued this week, courtesy of Keith Gill aka Roaring Kitty revealing his positions in GME calls, and egging the market on to new highs with news of a livestream late

Friday night. GME closed Thursday near $62, just shy of the $70 mark which would have minted Roaring Kitty as a new billionaire.

However, Gamestop’s weak earnings report and an announced share sale plan in Friday’s pre-market session opened the trap door beneath that plan. The livestream came and went with little fanfare, and GME closed the week at $28.22, nearly unchanged from Monday’s pre-market open.

Malaysia Market Observations

??SIDC to raise knowledge on sustainable investments

??ByteDance to Develop AI Hub in Malaysia with a 2.13 Billion USD Investment

????Ringgit edges up amid mixed US economic signals

The rally in US Treasuries during the week spilled over to the local bond market with the largest gains across tenures that were previously sold off i.e. the belly of the curve.

Unsurprisingly, government bonds led gains but there was still a decent uplift for the corporate bond space too.

The “Fed is going to cut” rally also supported the KLCI which gained +1.06% in Week 23 with stock specific catalysts driving price action for the gainers with no clear segment bias.

Key caveat: Malaysia’s market closed before the US nonfarm payrolls data release.

Crypto Market Observations

? Australia Approves First Spot Bitcoin ETF, Following APACs Like Thailand, Hong Kong

?? Bitcoin briefly tops US$70,000 with GameStop mania spurring crypto

?? Ethereum ETFs set to arrive in the U.S., could attract $4B in five months, K33 Research says.

It was a promising start to the week for crypto majors. Bitcoin led the token economy higher with a strong close above the $70,000 level, but remained trapped in the $70,000-$72,000 range as value continued to change hands. Ether was a laggard though, being unable to make new highs from the SEC 19b-4 approval news. Ahead of the US jobs report, Bitcoin did attempt to break the $72,000 level, perhaps in anticipation of a poor number pushing the ‘bad news is good news’ narrative. The hot report poured cold water onto the market though, causing dips back to the $71,000 level while Ether fell below $3,800.

Friday night saw another major liquidation event, mainly in the alts space. Perhaps in the wake of disappointment from the lack of follow through in the GME saga, crypto prices started selling off in unison across most major alts. Bitcoin broke through $70,000 to hit a low of $68,420 on Binance, before recovering to trade above $69,000 for the remainder of the session.

Other alts made more significant lows (ETH broke $3,750 to hit $3,570, SOL from $161 to $153, ONDO from $1.34 to $1.20). As expected, memecoins were hit hard. PEPE, which saw some correlation to GME in the previous run up, was at one point down over 20% on the day. Coinglass estimates some $450 million of derivative liquidations took place over that period. As with most liquidation episodes, the lows marked an extreme, and prices rallied off that to rebound (albeit modestly) from there.

What We Are Monitoring For The Week Ahead

Looking Ahead: Our Insights

It was a tough trading week for US equity indices. While the daily charts show a relentless trend, prices were mainly run up in the closing hours of the US trading sessions. Starting from the previous Friday, and continuing both Monday and Tuesday, US equity futures traded very weak during regular trading hours, but would suddenly shoot up into the close. This was particularly true over the PCE data release, which came in below expectations — US markets flopped after an initial rally, with ES futures trading down to 5,205 at one point. Yet, they closed the month at 5,295, all in the last hour of trading. Such behaviour points towards some form of mechanical flow buying, but there’s no reliable way to get ahead of that.

Friday’s NFP data was strong on the surface, but looking more deeply showed several cracks. Unemployment surged, marking the first 4% print in 26 months. In terms of part time vs. full time employment, full time workers actually declined by 625k, while part time workers surged instead. Such a divergence is more commonly seen during a recession vs. current expectations of a soft/no landing.

Fed Chair Powell had hinted at worries over the labour market before last month’s NFP print, and despite the surge in treasury yields over this print, it’s probably hard to make a case for a rate hike now, at least going into the election period. A case could be made to tactically fade the move in the 10y higher, though the 4.30% level remains a key support to watch.

Next week heralds the May CPI print followed closely by the June FOMC meeting. The market expects no action at this meeting, despite counterparts in the ECB and Bank of Canada pre-empting the Fed and cutting rates by 25 bps last week. The recent data has remained mixed, but following previous CPI and PCE data, this coming print would hopefully allow the Fed some breathing room. Look for Powell’s stance to continue focusing on employment and growth, provided that the May inflation data does not tighten the screws too much.

It was also a very ‘meme-y’ week, even in tradfi markets. Let’s not forget Jensen Huang making pop culture history by signing an adoring fan’s ‘motherboard’ at the NVIDIA AI Summit in Taiwan. Extreme sentiment is one of several indicators that the top is near (if not here), but please don’t go shorting the AI infrastructure trade. Trying to call the top on a strong narrative, no matter how crazy the valuations, usually ends in tears — especially after being squeezed out of the move prior to the actual collapse.

For domestic asset markets, a pullback resulting from the blowout US nonfarm payroll data is all but assured in Week 24. If you’re scared and you’re in Ringgit, the Halogen Shariah Ringgit Income Fund could be the temporary destination for your funds before picking up some bargain deals later on.

In our previous publication, we noted the possibility of further leverage flushes and dip buying opportunities, especially in ETH (which did probe into the $3,500 levels but not significantly). In general though, the system seems to be rife with leverage — Coinglass noted that in Bitcoin alone, open interest across exchanges reached an all time high of 37 billion. That said, the flush in Bitcoin was relatively benign, perhaps buffered by continued inflows into spot ETFs.

So that just leaves the altcoins to worry about. Altcoins continue to be avenues of higher speculation given perceived beta to Bitcoin, but without the institutional adoption story, it’s understandable that pockets of support in spot markets are fewer and further between. The current market looks to follow the typical period of consolidation following a leverage flush.

Despite the sharp selldown into Friday’s close, implied volatility in BTC and ETH options has since fallen across the board. Such an occurrence supports the notion that dips will help support the market, and we expect dips in the majors to be bought, especially in ETH and SOL given the relative discounts there. That said, don’t rule out the possibility of a new candle close below Friday’s closing level. Dip your toes in, but be wary of sizing.

Narratives in the altcoin space continue to change quickly. SOL continues to hang around in the background as the next ETH killer, though we also like FTM as it transitions to its Sonic rebranding and complete upgrade. Will these see ETFs? Not soon probably, as Gensler has already said the next steps in the approval process will take some time. Out of the older L1 tokens though, SOL will likely have the most focus, while other coins consolidate in their recent ranges.

Thank you for reading and we’ll see you next week!

Team Halogen

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