On Thursday, Bitcoin demonstrated recovery after the U.S. labor statistics exemplified the sustained growth of the U.S. economy. The leading cryptocurrency was at $64,350.14 and was down 1.01% over the previous 24 hours, but was up 0.62% for the hour after the unemployment statistics were released. With the recovery, the perception is investors are looking at more diverse economic statistics rather than reacting to the stronger unemployment statistics.
This recovery also followed the conclusion of the June 17 U.S. Federal Reserve interest rate policy meeting. The Federal Reserve decided to keep interest rates the same. This was the expected outcome of the meeting; however, officials were still hawkish on the inflation and future interest rate policies, which immediately negatively affected risk appetite in the financial markets. This contributed to the most recent Bitcoin price consolidation and volatility.
The most recent U.S. Department of Labor statistics on June 13 showed that the unemployment rate for first-time jobless claims decreased to 226,000. This was a decrease of 4,000 claims against the previous week’s total of 230,000, and was in line with the market’s estimates. There were expectations that claims would increase again, but the decrease shows that the labor market is resilient and that layoffs remain limited.
It is more common for Bitcoin and other risk assets to drop when employment numbers are above expectations. A stronger labor market means that the Fed has less of a reason to cut rates, meaning that the cost to borrow stays high. This means that the dollar stays strong and interest rates drive demand and the market away from speculative assets, including crypto.
The last employment report actually showed evidence of a subtle slowdown. The number of continuing claims, which indicates the number of unemployed individuals who receive unemployment benefits, increased by 24k which brings the total to 1.81 million for the week ending on June 6. Also, the 4 week average of continuing claims increased to 1.788 million, meaning that the recently unemployed are taking longer to become employed.
This mixed picture of the labor market likely explains Bitcoin’s rise in the face of robust job data. While improving initial claims show economic stability, deteriorating continuing claims show labor market conditions are softening. In this case it is reasonable to assume that the Fed will ease monetary policy before inflation decreases.
Market sentiment was also driven in the positive direction with the recent fall in oil prices. The fall of oil prices likely decreases inflation. The future PCE data will show inflation declining to the Fed’s target, and this may increase expectations for the Fed to cut rates in the future.
Currently, it seems Bitcoin is experiencing a tug-of-war between confident economic fundamentals and optimism for looser monetary policy later in the year. As the market examines labor statistics, inflation, and the Federal Reserve’s next moves, Bitcoin traders are also looking at the same macroeconomics as the rest of the market.
