Despite the uncertainty in traditional markets, Bitcoin’s resilience may be supported by the anticipation of the launch of a spot ETF in the United States.
Bitcoin (BTC) price fell moderately early this morning, mirroring a larger trend in Asian markets following the release of strong US Nonfarm Payrolls (NFP) data late Friday. The optimistic job data have put doubt on the probability of an early rate cut by the Federal Reserve, influencing market mood and affecting many asset classes, including the leading cryptocurrency.
Asian Markets and Bitcoin’s Response
According to CoinDesk data, Bitcoin price traded at $43,600 as of 4:32 UTC, indicating a 0.8% decline. However, at the time of writing, the cryptocurrency has recovered slightly, currently trading at $43,956. Meanwhile, most Asian equity indices, including Hong Kong’s Hang Seng, traded in the red, with the latter experiencing a 2% decline due to a regulatory crackdown on gaming.
The NFP data exceeded expectations, revealing that the US economy added 216,000 jobs in December, surpassing the anticipated 170,000 and November’s downwardly revised 173,000. The jobless rate held steady at 3.7%, and average hourly earnings increased by 4.1% year-on-year, outperforming the consensus estimate of 3.9%.
Other data figures from the report show that average hourly earnings increased by 0.4% in December, exceeding expectations of 0.3%. On a year-over-year basis, average hourly wages increased by 4.1%, beating predictions of 3.9% and surpassing November’s 4.0%.
Despite the positive employment figures, doubts have surfaced regarding the Federal Reserve’s willingness to implement early rate cuts, leading to a reassessment of market expectations. Traders had initially priced in a high probability of a rate cut by the Federal Reserve in March, with the CME Fed Watch tool showing a 60% chance post-NFP data.
This is a notable shift from late December when traders had fully expected such a move, with odds surpassing 75%. Traders in the swap market are now projecting approximately five 25-basis point rate cuts in 2024, compared to the previously anticipated six or seven cuts.
Treasury Yields and Bitcoin Price
The 10-year Treasury yield, which is considered a risk-free rate, has increased by 15 basis points to 4.05% since Friday. This surge reflects traders’ revision of dovish Fed forecasts and the likely delay of the anticipated rate cut. The yield had earlier declined by about 80 basis points to 3.86% in the fourth quarter of 2023, which boosted risk assets like Bitcoin.
Notably, the rise in wage gains to +4.1% year-over-year has raised concerns among market participants. This figure exceeds current inflation rates, and there are worries about a potential wage-price spiral, a persistent element of inflation psychology. Analysts suggest that this may prompt the Federal Reserve to maintain flexibility in its policy decisions.
Despite the uncertainty in traditional markets, Bitcoin’s resilience may be supported by the anticipation of the launch of a spot Exchange-Traded Fund (ETF) in the United States. Analysts believe that the US Securities and Exchange Commission (SEC) is likely to approve one or more spot ETFs by January 10. The improved charter between the SEC and top applicants have increased the possibilities of approval.