The US labor market is holding better than expected, as per the latest nonfarm payroll data released on Friday. It noted a surge of 216,000 jobs last month, potentially influencing the macroeconomic policies of the central bank. The Federal Reserve’s interest rate decisions dictate how the stock and crypto markets will perform in the coming days.
The industry expects the Fed to pivot in the first quarter due to slowed-down inflation. A soft job market would have ensured that the rate cuts started as early as March. What would a resilient job market do?
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Snapshot of the job market
The US Labor Department reported a notable increase in nonfarm payrolls, adding 216,000 jobs in December. This adjustment slightly reduced November’s gains to 173,000 from 199,000. The data also reveals that the unemployment rate is constant at 3.7%. A significant contribution came from the healthcare and government sectors.
When will the Fed pivot?
This surge in employment indicates a stronger-than-expected labor market, casting doubt on an early rate cut. Even if 2023 saw a decrease from the previous year’s pace in job addition. Additionally, the economy managed to steer clear of a recession.
These conditions may bolster the arguments of Fed policymakers, who believe it may not be time to loosen policy.
What will be the projected impact on Bitcoin?
In the wake of this employment data, U.S. stock indices initially intensified their losses, reflecting disappointment over the potential delay in rate cuts.
Contrarily, the bond market reacted with a rise in U.S. Treasury yields for both 10-year and two-year notes, staying above 4%. The US dollar also strengthened and approached 103.
For Bitcoin, these economic developments suggest a somewhat volatile near-term outlook but a bullish medium- to long-term outlook.
A stronger dollar and higher bond yields usually deter investment in riskier assets like Bitcoin. However, in the medium to long term, factors such as the decision on the Bitcoin ETF, the anticipated halving event, and upcoming rate cuts set a positive tone against short-term macroeconomic backdrops.
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BTC impacted by other events
While an ETF approval could increase institutional interest in Bitcoin, the halving event will tighten supply and potentially boost prices.
At the time of writing, the Bitcoin price has remained steady above $44,000 without clocking in major gains or losses. All major stock indices have recovered to trade in the green.
If the Federal Reserve decides to cut interest rates sooner, investors will likely flock away from bonds and savings accounts due to lower returns. That’s when alternative assets like Bitcoin and other cryptocurrencies offer higher returns. Rate cuts would also make borrowing cheaper, fueling market liquidity. This increased liquidity could push for riskier investments in crypto.
Meanwhile, if interest rate cuts lead to inflation moving above its target range, Bitcoin may still be viewed as a hedge. Therefore, it appears like a win-win scenario for BTC from the next quarter.
Also Read: Bitcoin halving advocated by “Rich Dad Poor Dad” author
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
