Bitcoin is a good sign for the wider tech market: strategist

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Brian Sozzi and Julie Hyman of Yahoo Finance spoke with Christopher Vecchio, senior strategist at DailyFX.com, of the bitcoin market cap surpassing $ 1,000 billion for the first time since mid-May, the outlook for crypto currency, forecasts from the latest jobs report and the Fed’s potential impact on crypto.

Video transcript

BRIAN SOZZI: Let’s stick to everything crypto here, because we’ve seen some big higher moves this week in space, as we just mentioned. Christopher Vecchio is senior strategist at DailyFX.com. He’s joining us now.

Chris, you just heard us talk about crypto. It has been a very good case this week for the bulls. What do you see in terms of graphics? What could this next move be?

CHRISTOPHER VECCHIO: Hello, Brian. Thank you very much for having me.

Yes, Bitcoin looks very technically clean on the rise right now. We are seeing prices rise throughout the early summer highs. And the momentum remains firm. The point is, there are some nice headlines coming out here, not just about predictions, but that Bitcoin’s market cap has once again surpassed $ 1 trillion for the first time since mid-May.

Now, that could be, maybe, a … how should I say that? An indictment of what’s going on at the Federal Reserve here. We have seen that Rosengren and Kaplan have now resigned following a business activity that was carried out at the start of the pandemic. And so that makes it more likely that we will have a more accommodating tilt next year, more easing, if you will. The flow of stimulus should remain quite large.

And so with Fed Chairman Powell in the hot seat, whether or not he retains his title there, the obvious replacement would be Lael Brainard. And she herself is rather dovish. In fact, it might delay the start of the rate hike cycle.

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So if Bitcoin is a risky asset, risky asset risky asset, if you will, then that’s definitely an indication that the market feels like we could have a more accommodating Federal Reserve for longer. than what the market is currently predicting.

JULIE HYMAN: Chris, it’s Julie here. Our Jared Blikre, who is a chartist I think it’s fair to say, said the rising dollar could be a potential hurdle for Bitcoin. How do you see the interaction, as you see it, between the two?

CHRISTOPHER VECCHIO: I don’t necessarily see the two playing out that way. Bitcoin is more of a global unit than anything specific to the US dollar. And I don’t think we’re talking about a situation where the US dollar is going to lose its status as a global reserve currency anytime soon, in part because there really aren’t any other viable alternatives, certainly not there. The euro or the pound or the yen or the Chinese yuan or the ruble, despite what some may say. It just doesn’t have that depth of market and that liquidity.

And Bitcoin lacks the market penetration it needs to be successful if adopted at the corporate level on a large scale. We’ve seen this conversation crop up in places like Afghanistan after the Taliban takeover or with Ecuador. The fact that, as many important parts of the world still do not have access to the Internet, it is difficult for them to adopt cryptocurrency as their primary means of transaction.

So, can the dollar still rise? Yes. Bitcoin itself could be affected by a rising dollar if the rising dollar is based on rising US interest rates. But for the foreseeable future right now, with the rebound in tech stocks, with what we’re seeing in terms of Fed policy shifts, the two may go hand in hand in the very short term, both upward.

BRIAN SOZZI: Is crypto making a comeback as a safe haven? This week we have seen a real decoupling of Bitcoin from the larger markets.

CHRISTOPHER VECCHIO: It’s hard for me to call an asset with this kind of volatility a safe haven. But it’s certainly noteworthy that Bitcoin, which has tracked NASDAQ for most of the last year, has decoupled and traded higher.

On the contrary, I see it as an indication that tech stocks might rebound here. And when we look at some of the software companies, for example, if we look at your Cisco or your Microsoft, they have actually outperformed compared to the tech companies that depend on, say, supply chains, like your Amazon. . Microsoft’s rebound here in recent days has been remarkable.

We also see that some of these companies which were the darlings of the pandemic, your Zoom, your Teladoc, your Platoon, they continued to fight. So from my perspective, Bitcoin is a good sign for the wider tech market. This could suggest that we are looking for a decent rebound in risk here around tomorrow’s nonfarm wage report.

JULIE HYMAN: Very interesting, Bitcoin as a kind of risk indicator for some of these other stocks. This is not an opinion that we have often heard here. So I like it.

I wanted to ask about Bitcoin price action then from here. So if Bitcoin may be a leading indicator, is its latest move made, or do you think we’re going to continue to see it rally? And do you have specific price targets?

CHRISTOPHER VECCHIO: I think after we had another institutional event earlier this year with the direct listing of Coinbase, very similar to what happened in 2017 when we saw these futures hitting the market, c ‘was an opportunity for long-term holders to sell and pass the bag on to the public. But now that we have all these headlines about capping US debt through December, when we perhaps have a more accommodating composition at the Federal Reserve that comes into play with these resignations, I think Bitcoin can trade. above here.

And if we saw prices move back to 60 or 65K, erasing all-time highs over the next few weeks, that wouldn’t shock me at all. Some of those calls for 200,000, 100,000, they still seem to be a little bit beyond what the charts are suggesting in the very short term. But the price is the best indicator to change your mind.

So it’s certainly possible if we continue to see this kind of development over the last few weeks. And we have more institutional adoption, which of course has come into play in the last year or so.

BRIAN SOZZI: Chris, if someone joined this Bitcoin rally this week, should they be looking 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 data this week that suggests we’re looking for an upward beat on the consensus forecast. We just had the first UI claims today at 326K. This is the second lowest reading we have had since the start of the pandemic. The ADP reported yesterday the top 500,000.

And so it looks like we’re going to see a better than expected non-farm payroll tomorrow. And right now, when we take a look at what the various branches of the Federal Reserve are suggesting, the Atlanta Fed Jobs Calculator says we need 455,000 – sorry, 435,000 jobs a month over. the next 12 months to return to the pre-pandemic employment situation of 3.5% unemployment rate with 62.4% participation in the labor force.

So if we can just get around those numbers, if we can hit that Goldilocks target where it’s not too hot, suggesting a decrease faster than expected but not too cold, suggesting consumers haven’t money in their pockets, I still think that helps fuel this crypto narrative that we envision a stronger Bitcoin, Ethereum, et cetera over the next few weeks.

BRIAN SOZZI: We’ll be here to talk about it. Christopher Vecchio, senior strategist at DailyFX.com. Happy to see you.

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