The debasement trade, where investors move money out of fiat currencies like the dollar and into “hard assets” with limited supply, such as bitcoin (BTC) and gold, could be back in vogue if Thursday’s U.S. nonfarm payrolls data backs up Fed Chair Kevin Warsh’s latest take on inflation.

On Wednesday, Warsh said inflation risks have come down. That comment sparked a quick reassessment of Fed interest-rate increase prospects and triggered a bounce in both the largest cryptocurrency and the precious metal. Bitcoin has already pushed above $61,000, while gold has stabilized above $4,050 after dipping to $3,942 earlier this week.

These budding recovery rallies could really accelerate if the jobs data due at 8:30 a.m. ET shows clear labor-market weakness. Economists expect a 110,000 increase in jobs for June, down from 172,000 in May, with the unemployment rate holding steady at 4.3%. Average hourly earnings are forecast to edge up to 3.5% from 3.4%.

Weaker labor market numbers would mean less money in the hands of workers and salaried employees, which usually translates into softer consumer demand and lower demand-pull inflation. That would validate Warsh’s view, reduce the case for aggressive Fed rate increases and put real pressure on the U.S. currency.

With bullish positioning in the dollar and rates markets already lopsided, a soft payrolls report could trigger a sharp snap-back in the Dollar Index (DXY), giving bitcoin and gold a solid tailwind.

That said, if the numbers come in hotter than expected, especially on the wage side, the bounce could stall, fast. Stay alert!

Read more: For analysis of today's activity in altcoins and derivatives, see Crypto Markets Today . For a comprehensive list of events this week, see CoinDesk's "Crypto Week Ahead."

What’s trending

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Today’s signal

The chart displays bitcoin’s daily price action in candlestick format, with the 14-day Relative Strength Index (RSI) shown in the lower panel.

The RSI, a widely used momentum oscillator, is flashing a bullish divergence, a signal of weakening downside momentum and a potential trend reversal higher.

This divergence occurs when the RSI and price start moving out of sync. While bitcoin fell to 21-month lows earlier this week, the RSI held relatively resilient above its recent lows.

In simple terms: The price was getting weaker, but the momentum behind the selling was starting to fade. This mismatch is what traders call a bullish divergence.