The labor market is strong, will Bitcoin price follow?
Bitcoin's struggle to close above $70K amid strong labor market data and investor concerns over monetary policy tightening.
Henry Russell
3 min read
Bitcoin's struggle to close above $70K amid strong labor market data and investor concerns over monetary policy tightening.
Henry Russell
Bitcoin faces potential price pressure due to the labor market data that was posted today in the United States. The nonfarm payrolls report released on June 7 highlights changes in employment numbers, excluding the farming sector, and has significant implications for investor behavior and monetary policy.
Stronger-than-expected nonfarm payrolls figures could prompt investors to anticipate more stringent monetary policies, which may lead to reduced risk appetite and impact Bitcoin prices. Analysts from Bitfinex suggest that if nonfarm payrolls exceed expectations substantially, it could signal a stronger economy, thereby increasing fears of tighter monetary policy. This scenario might cause a shift away from Bitcoin toward more traditional assets.
The U.S. economy added 272,000 jobs in May, surpassing the projected 182,000. However, the unemployment rate rose to 4%, marking the first increase to this level since January 2022. The labor force participation rate dropped slightly to 62.5%, with 408,000 fewer people reported as employed.
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In parallel macroeconomic developments, the European Union made a notable move by cutting interest rates, following a similar action by Canada. The European Central Bank (ECB) reduced its benchmark lending rate from 4% to 3.75%, marking its first rate cut in five years. Analysts at Bitfinex noted that this rate cut could potentially increase liquidity in the market, thereby boosting demand for alternative assets like Bitcoin.
Bitcoin's daily trading remained relatively flat, though it saw a 0.8% dip in the hour leading up to 1:00 p.m. UTC, trading at $71,186 as per CoinMarketCap data. Nonetheless, positive inflows into U.S. spot Bitcoin exchange-traded funds (ETFs) may help Bitcoin close the week above $70,000.
This week, U.S. spot Bitcoin ETFs accumulated over $1.54 billion in net inflows. If these inflows continue at the current pace, ETFs are projected to control approximately 3.74% of Bitcoin's supply annually, according to Dune data. On June 5, U.S. Bitcoin ETFs saw collective inflows of $488.1 million, while June 4 marked the second-highest inflow day with $886.6 million.
BlackRock's iShares Bitcoin Trust and the Grayscale Bitcoin Trust reported substantial inflows, indicating positive institutional sentiment towards Bitcoin. Despite these inflows, Google Trends data show a decline in search interest for Bitcoin and related terms compared to 2021, suggesting that retail investor participation remains low.
The strong U.S. labor market data, with nonfarm payrolls exceeding expectations, could lead to tighter monetary policies, potentially putting downward pressure on Bitcoin. However, significant ETF inflows and favorable macroeconomic conditions, such as the ECB's rate cut, could support Bitcoin in maintaining its position above $70,000. Investors will continue to monitor these developments closely as they navigate the cryptocurrency market's volatility.
