US Employment Figures, Surprise 'Strong Performance'...Will Bitcoin's Rise Be Halted?

▲ Bitcoin (BTC), US Dollar (USD)/ChatGPT generated image

US employment figures significantly exceeded market expectations, putting a burden on the cryptocurrency market, including Bitcoin (BTC). With signals that the labor market remains robust despite inflationary pressures from the US-Iran conflict, analyses suggest that expectations for a Federal Reserve (Fed) interest rate cut could weaken further.

According to CoinGape, a cryptocurrency specialized media outlet, on May 8th, non-farm employment increased by 115,000 according to data from the US Bureau of Labor Statistics. This figure significantly surpassed the market expectation of 65,000. US non-farm employment also increased by 178,000 in March, exceeding 100,000 for two consecutive months.

The unemployment rate remained at 4.3%, consistent with market expectations. CoinGape reported that despite inflationary pressures stemming from the US-Iran conflict, these employment figures demonstrated the health of the US labor market. Strong employment data was interpreted as a factor strengthening the Fed's justification to maintain interest rates for the time being.

Immediately after the release of the employment figures, Bitcoin retreated from its high near $80,200. CoinGape explained that these figures are generally a bearish factor for Bitcoin and the overall cryptocurrency market. The reason is that if the labor market remains stable and the conflict has a greater impact on prices, the likelihood of the Fed maintaining a freeze rather than cutting rates increases.

The possibility of an interest rate hike was also mentioned in the original text. CoinGape reported that the Fed could not rule out the possibility of raising interest rates if inflation concerns grow. The explanation is that if strong employment and high price burdens appear simultaneously, investor sentiment for risky assets could be shaken.

Bitcoin was also affected by the cryptocurrency options expiry on that day. CoinGape reported that $2 billion worth of Bitcoin and Ethereum (ETH) options expired that day, and Bitcoin's max pain price was around $79,500. The overlap of employment figures and options expiry led to increased market volatility.

Expectations for an interest rate cut quickly weakened. According to Polymarket data, the probability that the Fed will not cut rates even once this year rose to 56% this week. Conversely, the probability of at least one cut decreased further to 19%. This means traders are betting more cautiously on a Fed dovish pivot after the strong employment data release.

The Fed also signaled its intention to maintain a wait-and-see stance in last week's April Federal Open Market Committee (FOMC) meeting, citing uncertainties surrounding the impact of the US-Iran conflict. CoinGape reported that the Fed changed its wording regarding price assessment from "somewhat elevated" to "elevated."

The emergence of Kevin Warsh, mentioned as a candidate for the next Fed chair, also led to a forecast that it would be difficult to significantly alter the interest rate cut path. This is because Fed Chair Jerome Powell is expected to remain on the board, and Fed officials such as Lorie Logan, Beth Hammack, and Neel Kashkari are currently leaning more towards hikes than cuts. Strong employment figures further pushed away the early interest rate cut scenario that the cryptocurrency market had hoped for.

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