Markets
Bitcoin price shakes off Fed nervousness following positive labor market data
The price of Bitcoin rallied on Friday following stronger-than-expected U.S. jobs data, which could potentially force the Federal Reserve to delay cutting interest rates.
The Department of Labor She said that the unemployment rate increased slightly to 4% in May, but that job growth also accelerated in an environment of the most restrictive interest rates in 20 years. Economists expect employers to add 180,000 nonfarm jobs, but the report indicates that 272,000 jobs were added to the U.S. economy last month.
Soon after the report was released, Bitcoin dropped to $70,700 from around $71,800, according to CoinGecko data. However, as of this writing, the asset price has risen to $71,050, showing a slight decline of 0.4% over the past 24 hours.
Federal Reserve Chairman Jerome Powell She said earlier this month inflation had fallen substantially from 2022’s multi-decade high, despite the strength of the labor market. Previously, policymakers believed some easing would be needed to bring inflation back to the target level of 2%, with lower labor demand easing upward pressure on wages.
“Job growth was extraordinarily strong in May,” Grayscale head of research Zach Pandl said Decipher in a statement, adding that it “likely further reduces the likelihood of Fed rate cuts this year.”
However, Pandl believes the Fed will cut rates in the medium term, following the government’s easing of monetary policy. Bank of Canada and the European Central Bank during the past week. According to the ECM Group FedWatch Tool, the prospect of the Fed keeping interest rates stable through the end of the year increased from 5.5% to 11.3% after the report was released.
However, the market sees a 50% chance that the Fed will cut rates in September, which would likely accelerate economic growth by reducing borrowing costs.
Higher interest rates typically weigh on the value of so-called risk assets, including stocks and cryptocurrencies, as the payments for holding cash or U.S. Treasuries become relatively more attractive. Regardless of the report’s implications or the Fed’s potential delay in cutting rates, Pandl believes “Bitcoin will retest its all-time high in the coming months.”
Meanwhile, CoinShares’ head of research, James Butterfill he said on Twitter (also known as X) that Bitcoin “has become very sensitive to interest rate expectations.” In 2022, macroeconomic data – and associated nervousness – could send Bitcoin swinging around 10% in any direction. given day.
Expectations on rate cuts in April are changing dented The price of Bitcoin along with the growing geopolitical tensions in the Middle East. Regardless, the Fed will communicate its next move at its June policy meeting next week.