Bitcoin Dips as Upbeat U.S. Job Data Dampens Hopes for Early Fed Rate Cuts; SEC Spot ETF Decision Looms
Crypto News – The latest U.S. nonfarm payrolls (NFP) data, released on Friday, painted a surprisingly upbeat picture of the American economy, with 216,000 new jobs created in December, significantly surpassing the anticipated 170,000. This robust job growth, coupled with a steady unemployment rate of 3.7% and a notable 4.1% year-on-year increase in average hourly earnings, has injected a dose of skepticism into the market’s expectations of early Federal Reserve rate cuts.
In the wake of these figures, Bitcoin (BTC) experienced a moderate dip in its value. As of 4:32 UTC on Monday, the premier cryptocurrency was trading at $43,600, marking a 0.8% decline, according to CoinDesk. This downward trend was mirrored across Asian stock markets, with Hong Kong’s Hang Seng Index falling by 2%, amid intensified regulatory scrutiny on the gaming sector.
The recalibration of expectations following the NFP report is evident in the shift in the CME Fed Watch tool’s predictions. Whereas a rate cut in March was previously seen as a near certainty, with odds over 75%, the likelihood is now reevaluated to 60%. This change is reflective of the market’s reassessment of the Federal Reserve’s potential moves, given the stronger-than-expected economic indicators.
Moreover, the anticipation of approximately five 25 basis point rate cuts this year, as per Financial Times, marks a revision from the earlier forecast of six or seven cuts. This reassessment is further underscored by the rise in the 10-year Treasury yield, a bellwether for risk-free rates, which increased by 15 basis points to 4.05% since Friday.
Greg Magadini, director of derivatives at Amberdata, highlighted in a weekly newsletter the significant aspect of the rising wage gains, which are outpacing current inflation rates. This trend, he notes, is a critical element in the inflation psychology, suggesting that it could prompt the Federal Reserve to maintain a more flexible approach in its policy decisions moving forward.
While the increase in yields poses a potential risk to various risk assets, the crypto market, particularly Bitcoin, may find some support from the anticipated launch of spot ETFs in the U.S. The U.S. Securities and Exchange Commission is expected to approve one or more such ETFs by January 10th. Analysts have speculated that this development has already been factored into the market over the past three months, possibly leading to a “sell the fact” price reaction post-approval.
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