Bitcoin could see deeper correction after payroll data release: Bitfinex head of derivatives

Source: Crypto Briefing

Bitcoin (BTC) slumped 5% in the last 24 hours, reaching the sub-$57,000 price level for a brief period. This could be related to the cautious optimism that the FOMC minutes released this week showed to the market, signaling a wait-and-see approach from the Fed. Jag Kooner, Head of Derivatives at Bitfinex, added that the NFP numbers coming out tomorrow could lead BTC to stabilize or go for a deeper correction in the worst-case scenario.

“The cautious tone of the Fed minutes, indicating a wait for more definitive economic data before rate cuts, could help to bring stability to Bitcoin prices or at worst result in a slight decline,” shared Kooner with Crypto Briefing. “Investors may also perceive the lack of immediate rate cuts as a sign of sustained economic uncertainty, potentially dampening risk appetite for volatile assets like bitcoin.”

Notably, the minutes acknowledged that the US economy is slowing and that “price pressures were diminishing,” which supports a narrative of moderating inflation. This maintains the Fed’s approach of optimism towards a downward trajectory in inflation but without recognizing this as sufficient to justify immediate rate reductions, highlighted Kooner.

Furthermore, the Non-Farm Payrolls (NFP) numbers are coming out tomorrow, and the market expects a decline in job growth from 272,000 in May to 200,000 in June. The unemployment rate will stay at 4% if those numbers come true.

“In terms of labor market health, a reduction in job growth suggests a cooling labor market, aligning with the Fed’s observations of slowing economic activity. However, a steady unemployment rate indicates that while job creation is slowing, the overall employment situation remains stable.” 

Therefore, the NFP report leaves the door open for two scenarios. The first is the one where job growth comes weaker than expected, it could increase expectations for future rate cuts, which might bolster Bitcoin prices as investors seek alternative assets in anticipation of a looser monetary policy. Conversely, the second scenario consists of Bitcoin suffering downward pressure if the job market appears more resilient, explained Kooner.

“In terms of wage growth, with the Fed noting slowing wage growth in the minutes, the NFP report’s wage data will be scrutinized. The consensus forecast is for hourly wages to slow down to 0.3 percent in June from 0.4 percent in May. Any significant uptick could put upward pressure on inflation and negatively influence the market’s inflation outlook and the Fed’s future policy decisions,” he added.

Consequently, this affects the net flows of spot Bitcoin exchange-traded funds (ETFs). These crypto products might see an uptick if market participants believe that economic uncertainty will drive the Fed towards eventual rate cuts, enhancing the appeal of Bitcoin as an inflation hedge. 

“However, significant inflows would depend on broader market sentiment and risk appetite. Currently however, we’ve recently seen quite underwhelming flows and a lack of dip-buying,” concluded Kooner.

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Author: Gino Matos