July 14, 2024
A downturn in the US labor market could raise bitcoin prices.
Bitcoin News

A downturn in the US labor market could raise bitcoin prices

The world’s largest economy, the United States, may gain from a weaker labor market and growing unemployment rates for riskier assets like bitcoin. 

The unemployment rate in the United States increased to 4.1%, above the projected 4.0% and the highest since December 2021. According to nonfarm payroll data released by the Bureau of Labor Statistics on July 5, the U.S. economy added 206,000 jobs in June, surpassing the 191,000 forecast but falling short of the 272,000 jobs added in May, which was later revised to 218,000.

The U.S. job market’s decline may act as a boost to the price of bitcoin. “If the NFP report shows weaker-than-expected job growth, it could increase expectations for future rate cuts, which might bolster Bitcoin prices as investors seek alternative assets in anticipation of a looser monetary policy,” said Bitfinex head of derivatives Jag Kooner.

The Latest Price Drop for Bitcoin

For more than a month, the price of Bitcoin has been declining, dropping below the noteworthy $60,000 threshold. According to Bitstamp data, the price of Bitcoin fell by more than 10.5% in a single day on July 5, hitting a four-month low of $53,550. In February 2024, Bitcoin last traded at this level.

Source: TradingView

Although some investors fear that the bull market has ended, other analysts see the present downturn in Bitcoin as normal given previous dips. In a July 4 X post, well-known analyst Rekt Capital stated: “This pullback is -21% deep & 45 days long.” The average retrace depth in this cycle is -22%, and the average retrace time is 42 days. This retrace is around average in terms of depth. This retracement is longer than usual in terms of time. 

Source: Rekt Capital

Bitcoin ETF Flows Are Difficult

Additionally, there has been a delay in institutional inflows from U.S. spot Bitcoin exchange-traded funds (ETFs). According to Dune statistics, U.S. ETFs are set to record their third straight week of net negative inflows, with net outflows totaling more than $315 million thus far this week.

Source: Dune

According to Kooner, if expectations of a likely interest rate decrease are stoked by the worsening job market, Bitcoin ETF flows may experience an upsurge. “Bitcoin ETF flows may see an uptick if market participants believe that the Fed will eventually cut rates due to economic uncertainty, which would increase the appeal of Bitcoin as an inflation hedge,” he stated. Significant inflows, nevertheless, would rely on risk tolerance and general market sentiment.” However, Kooner also highlights a dearth of recent influxes and “dip-buying” transactions. 

Conclusion 

Although the current status of the U.S. job market presents difficulties, investors navigating economic uncertainty may also find chances for Bitcoin.

Image by fabrikasimf on Freepik

Disclosure Statement: Miami Crypto does not take any external funding, or support to bring crypto news to the readers. We do not have any conflicts of interest while writing news stories on Miami Crypto.

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