Financial markets largely remained on the sidelines on Thursday after the latest U.S. unemployment claims data came in at 229,000, well above economists’ expectations of 220,000.
At the close, stocks were mixed, with the Dow up 0.20%, the S&P flat, and the Nasdaq down 0.09%.
After trading between $70,095 and $71,651 on Thursday, less than 5% below its all-time high, Bitcoin has rebounded slightly and is trading at $70,771 at press time, down 0.6% over the 24-hour period.
Altcoins fell in the afternoon sell-off, with more declines than gains among the top 200 tokens by market cap. HIghstreet (HIGH) bucked the trend with a 14.9% gain, followed by Livepeer (LPT) with an 11% gain and ConstitutionDAO (PEOPLE) with a 9.1% gain. Dog (DOG) was the biggest loser, down 10%, while Bitget Token (BGB) fell 9.9% and Echelon Prime (PRIME) fell 9.3%.
The current overall market value of cryptocurrencies is $2.61 trillion, with Bitcoin accounting for 53.2% of the market.
The market is waiting for non-agricultural data
While some pointed to the data as another sign that the Federal Reserve could cut interest rates as early as September, most were waiting for tomorrow’s nonfarm payrolls report (NFP), considered a key indicator of the health of the U.S. economy.
This comes after the U.S. ADP report showed private sector payrolls increased by 152,000 in May, below the forecast of 175,000, suggesting a cooling labor market.
A nonfarm payrolls report that is in line with or below expectations "could reinforce the perception of an economic slowdown, which could lead to increased market volatility. Investors may expect further monetary easing from the Federal Reserve, which could affect both the stock market and the cryptocurrency market."
Thursday's rate cut in Europe also had an impact on the market. The European Central Bank implemented its first rate cut in five years, lowering the interest rate to 3.75%. The move is intended to stimulate economic growth. In theory, rate cuts could weaken the euro, which could lead to increased demand for risky assets such as Bitcoin. Increased liquidity from monetary easing could also support risky assets including cryptocurrencies.
Wall Street is now pricing in a 70% chance of a rate cut in September, up from 50% a week ago.
The impact of non-farm data on prices
Looking ahead to tomorrow’s non-farm payrolls report, lower interest rates and increased liquidity often drive investors toward alternative assets like Bitcoin. A positive reaction in the stock market could spill over into the cryptocurrency market, potentially helping Bitcoin secure a weekly close above $70,000. Conversely, if the non-farm payrolls beat expectations by a wide margin, it could signal a stronger economy, potentially raising concerns about tighter monetary policy. This could put downward pressure on Bitcoin as investors turn to traditional assets.
The NFP report is an important data point that provides insight into future interest rate trends. As long as economic growth slows but does not tighten, it has the potential to push U.S. interest rates lower, acting as a tailwind for cryptocurrencies.
So far, we cannot say that the slowdown in economic growth is too severe, for example, the service sector is performing well, as evidenced by the latest PMI business survey. Fed Chairman Powell has said that if unemployment rises and inflation remains high, he will be inclined to cut interest rates (e.g. give priority to the employment part), so investors are pricing in a "Fed put option" when growth data is weak (but not too weak), and Friday's employment data may well be the next major data point in this narrative.
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