The highly anticipated jobs report revealed that the labor market is still tight, which could keep the Federal Reserve on course to raise rates aggressively. The cryptocurrency market dropped along with stocks as a result.
According to Coin Metrics, the cost of one bitcoin dropped by 3.3% to $19,380.74. To reach $1,322.40, ether fell 2.7%.According to the Labor Department’s report released on Friday, the U.S. economy added 263,000 jobs in September, less than the 275,000 jobs predicted by the Dow Jones, and the unemployment rate decreased from 3.7% to 3.5%.
According to Yung-Yu Ma, chief investment strategist at BMO Wealth Management, “the jobs report points to no change of tune on the horizon for the Fed, so we continue to expect firm interest rates which also adds pressure to crypto markets.”
The relationship between cryptocurrencies and stocks has weakened recently but is still strong.
Crypto appears to be at a crucial technical crossroads right now where it appears to be attempting to carve out a bottom but feeling heavy, he continued. “Given rising interest rates and a risk-off attitude, I still think it breaks to the downside more frequently than not, but so far it’s been a surprising effort to hold the line,”
Due to the Federal Reserve’s unwavering commitment to reducing inflation, the market has been stuck in a good news is bad news holding pattern. While investors are hoping for a pause or a pivot, the Fed may continue with its aggressive rate hike plan despite the new data showing strength in the U.S. economy, which would put pressure on stocks and hurt cryptocurrency.
The fear of rate hikes has affected cryptocurrency the most this year, according to Callie Cox, a U.S. investment analyst at eToro. It makes sense because many cryptocurrency projects don’t generate cashflows, so investors buy them for potential rather than for actual value. The value of a dollar in the future decreases as rates rise.
Cox also emphasized the durability of crypto assets in the second half of the year, noting that bitcoin and ether haven’t fallen to new lows in the same way that stocks have with the rise in bond yields. Since hitting its yearly lows in June, the price of bitcoin has been tightly ranged between $18,000 and $25,000.
Cox remarked, “To me, that’s progress in this bear market.” Cryptocurrency prices may be indicating that rate anxiety is about to change. The strength of cryptocurrencies is another reliable sign of market froth. The brutal growth selloff appears to have finally eliminated all the weak hands.
She continued, “Bitcoin is also far below its highs too.” Stability, however, is a positive development.