Yahoo Finance’s Brian Sozzi and Julie Hyman spoke with DailyFX.com Senior Strategist Christopher Vecchio about bitcoin’s market cap topping $1 trillion for the first time since mid-May, the outlook for cryptocurrency, predictions for the latest jobs report, and the Fed’s potential impact on crypto.
BRIAN SOZZI: Let’s stay on all things crypto here, as we’ve seen some big moves higher this week in the space, as we just mentioned. Christopher Vecchio is a senior strategist at DailyFX.com. He joins us now.
Chris, you just heard us talking about crypto. It has been a very supportive case this week for the bulls. What are you seeing in terms of the charts? What could that next move be?
CHRISTOPHER VECCHIO: Hi, Brian. Thanks so much for having me.
Yeah, Bitcoin is looking very technically clean right now to the upside. We’re seeing that prices are building through the early summer swing highs. And momentum remains firm. The fact of the matter is that there are some nice headlines coming out here, not just about predictions but the fact that Bitcoin’s market cap has surpassed 1 trillion again for the first time since mid-May.
Now, this could be, perhaps, a– how should I say this? An indictment of what’s going on at the Federal Reserve here. We’ve seen that Rosengren and Kaplan have now resigned as a result of some trading activity that was done at the start of the pandemic. And so this makes it more likely that we have a more dovish tilt next year, more easing, if you will. The stimulus flow should remain rather significant.
And so with Fed Chair Powell on the hot seat, whether or not he will retain his title there, the obvious replacement would be Lael Brainard. And she herself is rather dovish. She would actually perhaps delay the start of the rate hike cycle.
So if Bitcoin is a risk asset, the risk asset of risk assets, if you will, then it is certainly an indication that the market feels like we may be having a more dovish Federal Reserve for longer than what the market’s currently anticipating.
JULIE HYMAN: Chris, it’s Julie here. Our Jared Blikre, who is a chartist, I think it’s fair to say, has talked about the rising dollar could be a potential obstacle for Bitcoin. How are you thinking about the interplay, as you see it, between the two?
CHRISTOPHER VECCHIO: I don’t necessarily see the two playing off of one another in that manner. Bitcoin is more of a global unit than anything specific related to the US dollar. And I don’t think that we’re talking about a situation where the US dollar is going to be losing its world reserve currency status anytime soon, in part because there’s really no other viable alternatives, certainly not the euro or the pound or the yen or the Chinese yuan or the ruble, despite what some may say out there. It just doesn’t have that market depth and liquidity.
And Bitcoin doesn’t have the market penetration that it needs to succeed if it’s adopted on a widespread society level. We’ve already seen this conversation arise in places like Afghanistan after the Taliban takeover or with Ecuador. The fact of the matter that, as many significant parts of the world don’t have access to the internet still, it’s difficult for them to adopt cryptocurrency as their main means of transaction.
So can the dollar still rise? Yes. Bitcoin itself could be harmed by a dollar rise if the dollar rise is predicated on rising US interest rates. But for the foreseeable future right now, with tech stocks bouncing, with what we’re seeing in terms of Fed policy changes, the two can go hand-in-hand in the very near term, both to the top side.
BRIAN SOZZI: Is crypto back as that safe haven trade? We’ve seen a real decoupling this week from Bitcoin compared to the broader markets.
CHRISTOPHER VECCHIO: It’s difficult for me to call an asset with that kind of volatility a safe haven. But it’s certainly noteworthy that Bitcoin, which has been tracking the NASDAQ for the better part of the last year, has decoupled and has traded to the top side.
If anything, I see it as an indication that tech stocks may be due for a bounce here. And when we take a look at some of the software companies, for example, if we’re looking at your Cisco or your Microsoft, these have actually outperformed relative to those tech companies that are reliant on, say, supply chains, like your Amazon. Microsoft’s bounce here the last few days has been noteworthy.
We’re also seeing that some of these companies that were the darlings of the pandemic, your Zoom, your Teladoc, your Peloton, they have continued to struggle. So from my perspective, Bitcoin is a good sign for the broader tech market. It could be a suggestion that we’re looking for a decent bounce in risk here around tomorrow’s non-farm payrolls report.
JULIE HYMAN: Very interesting, Bitcoin as a sort of risk indicator for some of those other stocks. That’s not a view that we’ve heard that often here. So I like it.
I wanted to ask about Bitcoin price action then from here. So if Bitcoin is perhaps a leading indicator, is its latest move done, or do you think we’re going to continue to see it rally? And do you have particular price targets?
CHRISTOPHER VECCHIO: I do think that after we had another institutional event earlier this year with the Coinbase direct listing, very similar to what happened in 2017 when we saw those futures contracts come into the market, it was an opportunity for long-term holders to sell and pass the bag off to the public. But now when we have all these headlines about the US debt ceiling being kicked down the road until December, when we have perhaps a more dovish composition at the Federal Reserve coming into play with these resignations, I’m of the mindset that Bitcoin can trade higher here.
And if we’re seeing prices back at 60 or 65K, clearing out the all-time highs in the next few weeks, that totally would not shock me. Some of these calls for 200,000, 100,000, they still seem to be a little bit beyond what the charts are suggesting in the very near term. But price is the best indicator to change one’s mind.
So it’s certainly possible if we continue to see this kind of development over the past few weeks. And we have more institutional adoption, which of course, has been coming into play over the past year.
BRIAN SOZZI: Chris, if one has bought into this Bitcoin rally this week, should they be rooting for a worse than expected jobs report tomorrow or a better than expected jobs report?
CHRISTOPHER VECCHIO: Oh, I kind of think they want the Goldilocks figure here. I mean, we’ve already seen some data this week that suggests we’re looking for a topside beat on the consensus forecast. We just had the initial jobless claims come out today at 326K. That’s the second lowest reading that we’ve had since the start of the pandemic. The ADP report yesterday top 500,000.
And so it’s looking like we’re going to see a better than expected non-farm payrolls tomorrow. And right now, when we take a look at what the Federal Reserve’s various branches are suggesting, the Atlanta Fed jobs calculator says that we need 455K– excuse me, 435K jobs per month over the next 12 months to get back to the pre-pandemic employment status of 3.5% unemployment rate with a 62.4% labor force participation.
So if we can just get right around those numbers, if we can hit that Goldilocks target where it’s not too hot, suggesting a faster than expected taper but not too cold, suggesting that consumers don’t have money in their pockets, I still think that helps fuel this crypto narrative that we’re looking at a stronger Bitcoin, Ethereum, et cetera over these next few weeks.
BRIAN SOZZI: We will be here to report about it. Christopher Vecchio, senior strategist at DailyFX.com. Good to see you.