Bitcoin and Ether prices remain stable as traders await the release of the US Jobs Report to determine the timing of the next Fed rate hike. The report that is expected to be released on September 21 may be of assistance to the decision-making process regarding the subsequent increase in interest rates by the Federal Reserve (Fed).
Nonfarm payrolls (NFP) will be released on Friday, and major cryptocurrencies are trading in predefined ranges ahead of the critical U.S. jobs data, which may help decide the extent of the next rate increase by the Federal Reserve (Fed).
The report, which was previously largely ignored by the cryptocurrency market, has gained prominence this year due to the fact that it reveals the state of the labor market and wage growth in the world’s largest economy and helps the Fed determine the amount of liquidity tightening – or how much money to withdraw from the economy – that is required to cool inflation. Bitcoin and Ether prices remain stable as traders focus their attention on the US Jobs Report, which is gaining in significance.
The labor market will be more tight, which will result in greater inflation, and the Federal Reserve will become more hawkish, which means they will be more in favor of tightening monetary policy. This year has been difficult for risk assets, such as cryptocurrencies, which are dependent on low-cost liquidity. This is mostly due to the rate-hike cycle being implemented by the Federal Reserve. This year, the Federal Reserve has increased the benchmark interest rate by 225 basis points. (The difference between one percentage point and one basis point is one tenth of a point.)
The data for August, which is scheduled to be revealed on Friday at 12:30 UTC, might play a role in determining whether or not the Fed will deliver a third increase of 75 basis points later this month or will instead settle for a smaller increase of 50 basis points. Reuters reports that the economy likely added 300,000 jobs in August, following an increase of 528,000 jobs in July, while the unemployment rate stayed unchanged at 3.5%. After a gain of 5.2% in the month of July, analysts anticipate a growth of 5.3% year over year in average weekly earnings.
“Rather than looking to the broader rate path, or the terminal rate, markets are back to trading the FOMC odds for September 21 — whether they will hike 50 bps or 75 bps,” Crypto Fund QCP Capital said in a market update. “The terminal rate” refers to the rate at which interest rates are expected to remain stable.
The market update that was mentioned earlier this week was shared on Telegram earlier in the week. It made reference to the Federal Open Markets Committee, also known as FOMC, which is responsible for determining the interest rate.
The markets are already pricing in a 90% possibility of a 75 basis point increase, which appears to be a high degree of confidence considering that the NFP and inflation numbers for August have not yet been released. The possibility exists that traders will cut their wagers in response to a “major miss” in the jobs data.
A lower probability of a rate hike of 75 basis points will almost surely be detrimental to the currency and beneficial to cryptocurrencies. Statistics compiled by ING indicate that the “long” (buy) dollar position is currently the most common one. As a consequence of this, an unfavorable report can bring about a significant decline in the value of the dollar. When compared to the value of the US dollar, the price of
bitcoin (BTC) and ether (ETH) tend to fluctuate in the other way.
We find ourselves in a somewhat peculiar circumstance in which negative news equals positive news for the market. According to Matthew Dibb, COO of Stack Funds and co-founder of Stack Funds, “If we see a surprise drop in NFP, it’s feasible that rates won’t be increased as far or as fast, driving speculative assets such as BTC higher.”
Even if a rate increase of 50 basis points is still considered monetary tightening, markets that have been pummeled by high inflation and three consecutive rate hikes of 75 basis points may find some solace in the possibility of a lesser move.
The analysts at ING feel that if NFP prints at 250,000 or higher, the case can be made for a 50 basis point hike, and if the data exceeds 350,000, the case can be made for a 75 basis point increase. This is because the probability move in favor of a 75 basis point increase if the data is higher.
In a market update that was issued on August 26, ING analysts stated, “Should the economy add substantially more jobs, say 350k+, and the wage number shows a second consecutive 0.5% month-on-month gain, or higher, then it might tilt the argument in favor of 75b bps.”
A five-day consolidation between $19,500 and $20,600 for Bitcoin’s price has continued as of press time, with the cryptocurrency trading at $20,000. Statistics provided by CoinDesk indicate that trading activity for Ether, the second-largest cryptocurrency in terms of market value, was virtually unchanged below $1,600.