The crypto market has been on a rollercoaster in recent months. The ups and downs have caused Bitcoin to fall back to 2017 levels. Bitcoin stayed near $23,000 in the past 24 hours after a report showing that the U.S. added more employment than expected last month reignited concerns that higher interest rates would dampen demand for riskier assets.
Bitcoin rally losses track after U.S. jobs report
The Labor Department reported that the United States economy added 528,000 jobs in July. The gains made early Friday in bitcoin (BTC) appeared to reverse after the reports. This is more than double the figure predicted by economists.
According to the report, the Federal Reserve is more likely to take action to control inflation, which has been marked at a four-decade high. The prices of risky assets like equities and cryptocurrencies tend to fall when the Fed takes a hawkish stance.
The employment numbers were followed by a slow week in crypto, although it contained indications of rising institutional adoption. Brevan Howard launched the world’s largest cryptocurrency hedge fund, with more than $1 billion in assets under management. BlackRock has teamed up with Coinbase to provide cryptocurrencies directly to institutional investors.
On Thursday, shares in Coinbase rose 10% after leaping almost 40% intraday. Chicago Mercantile Exchange, a derivatives exchange, announced Thursday that it would start offering bitcoin and ether euro futures contracts on August 29, pending regulatory approval.
Bitcoin, the most valuable cryptocurrency by market value, appeared unaffected by the good news this week. It has been trading between $22,900 and $24,500 over the last seven days and fell 3% in that period.
Ether was down 3.4% this week amid worries about the Ethereum network’s impending Merge. The Merge is scheduled to occur in September. The transition to a proof-of-stake network will have a variety of effects, including reduced energy consumption, the conversion of ether into a deflationary asset, and a possible road map to a more scalable future through sharding.
On Friday, bitcoin rose 4.2%, bringing it to $23,467. The cryptocurrency then reduced the rise by half. Bitcoin has been in a tight range of about $19,000 to $25,000 since mid-June as a result of its second wave of selling pressure.
That was not a good jobs report for risk assets […] That could worsen any slump further down the road, which is why we’re seeing risk assets sinking and Bitcoin is very much among them. It’s still a little higher on the day, but it’s given back a fair bit of its earlier gains.
Crypto analyst
U.S. labor market defies recession fears
Cryptocurrencies have been closely correlated with risk assets for months, displaying a high degree of sameness with the NASDAQ 100 in particular. They’ve battled to stay above water as expectations for Federal Reserve rate hikes increased amid stubbornly high inflation, but they’re presently on their feet.
The number of unemployed persons was revised up to 398,000. The unemployment rate dropped to 3.5 percent, which is the lowest since 1950. Wages increased, and the labor force participation rate fell.
According to crypto experts, the Federal Reserve is more concerned with recessionary situations than previously thought. The appeal of alternative assets will likely continue to decline as central bankers proceed with successive rate hikes and drive interest rates even higher.
The closely watched employment report from the Labor Department, issued on Friday, revealed that businesses are continuing to increase wages rapidly while generally keeping employees longer. The strong labor market resilience may free the Federal Reserve to continue increasing interest rates vigorously.
The U.S. economy might be in a recession, but that doesn’t seem to have stopped employers from hiring new people. In fact, the July jobs report showed that employers continued to hire at a strong pace, even more than economists had predicted. This gives the Federal Reserve confidence that it needs to keep fighting inflation aggressively.
The labor market has now recovered all COVID-19 jobs lost, but government employment still has a deficit of 597,000 positions. Employment is now about 32,000 jobs greater than it was in February 2020. In comparison, it took around 2-1/2 years to restore all of the employment lost than in the 2007-2009 Great Recession, which was at least six years.
Even with July’s significant job gains, the labor market is showing signs of strain. Businesses in the housing, finance, technology, and retail sectors are eliminating employees. Still, payroll growth is expected to moderate considerably this year, with 10.7 million openings at the end of June and 1.8 unemployed persons for every opening.
Bottom line
Following the report, stocks on Wall Street were in negative territory. The dollar rose against a basket of currencies. Treasury yields fell. The S&P 500 fell 0.2 percent in traditional stock markets, while the Nasdaq composite declined 0.5%. The Dow Jones Industrial Average ended up 0.2 percent.
Given the report’s strength, bitcoin investors anticipate that the Federal Open Market Committee – the Federal Reserve’s monetary-policy panel – will continue to raise interest rates at a rapid pace, which may negatively affect asset prices.
