Bitcoin Price Shakes Off Fed Jitter Following Hot Labor Market Reading

The price of Bitcoin bounced back Friday following stronger-than-expected jobs data in the U.S., which could potentially compel the Federal Reserve to delay cutting interest rates.

The Labor Department said that the unemployment rate increased slightly to 4% in May, but that job growth had also accelerated amid the most restrictive interest rates in more than 20 years. Economists forecast that employers would add 180,000 nonfarm payroll positions, but the report indicated that 272,000 jobs were added to the U.S. economy last month.

Immediately following the report’s release, Bitcoin dipped to $70,700 from around $71,800, according to CoinGecko data. However, the asset’s price has edged up to $71,050, as of this writing, showing a minor 0.4% decline over the past 24 hours.

Federal Reserve Chairman Jerome Powell said earlier this month that inflation had come down substantially from a multi-decade high in 2022, despite the strength of the labor market. Previously, policymakers believed some softening there may be necessary to bring inflation down to their target of 2%, with lower job demand easing upward pressure on wages.

“Job growth was remarkably strong in May,” Grayscale’s Head of Research Zach Pandl told Decrypt in a statement, adding that it “likely further trims the odds of Fed rate cuts this year.”

Still, Pandl believes that the Fed will cut rates in the intermediate term, following a loosening of monetary policy from the Bank of Canada and the European Central Bank over the past week. According to the CME Group’s FedWatch Tool, the prospect of the Fed holding interest rates steady through year’s end increased from 5.5% to 11.3% after the report’s release.

Still, the market sees a 50% chance that the Fed cuts rates in September, which would likely accelerate economic growth through reduced borrowing costs.

Higher interest rates typically weigh on the value of so-called risk assets, including stocks and crypto, as the payouts for holding cash or U.S. Treasuries become relatively more attractive. Despite the report’s implications or the Fed’s potential delay to cutting rates, Pandl believes “Bitcoin will retest its all-time high in the coming months.”

Meanwhile, CoinShares Head of Research James Butterfill said on Twitter (aka X) that Bitcoin “has become highly sensitive to interest rate expectations.” In 2022, macroeconomic data—and associated jitters—could send Bitcoin swinging around 10% in any direction on a given day.

Shifting expectations on rate cuts in April dented Bitcoin’s price alongside rising geopolitical tensions in the Middle East. Regardless, the Fed will telegraph its next move during its June policy meeting next week.

Edited by Andrew Hayward