US Job Data Crushes 50 bps Fed Rate Cut Hopes, Bitcoin to Dip?

The recent U.S. labor market data has cast doubt on expectations for a potential 50-basis-point interest rate cut from the Federal Reserve. This has sent ripples across financial markets, including the crypto market. Moreover, Bitcoin (BTC) is expected to bear the brunt of this sentiment with another downtrend.

US Job Data and Its Impact on Fed Rate Cuts

September’s nonfarm payrolls report revealed that the U.S. economy added 254,000 jobs, surpassing Wall Street’s projections. Additionally, the unemployment rate dropped to 4.1%, down from the previous month’s 4.2%. This decline came in below market expectations, which had predicted the unemployment rate to remain steady.

These stronger-than-expected employment numbers indicate that the U.S. labor market remains resilient, and the continued strength could hinder any immediate dovish moves from the Federal Reserve. The Fed has been closely monitoring labor market data as it determines its next course of action in its ongoing efforts to control inflation while balancing economic growth.

Many analysts were hoping for signs of economic cooling, which could have prompted a bps Fed rate cut at its upcoming policy meeting. However, the robust job growth and lower unemployment rate now suggest that the Fed may maintain its current hawkish stance.

A 50 basis point rate cut, which some had hoped for, seems less likely as this data signals that the economy is still operating with high demand for labor. For the crypto market, this has led to a negative sentiment, as the sector is particularly sensitive to changes in interest rate expectations.

TRADERS ADD TO BETS THAT FED WILL STICK TO 25 BPS RATE CUTS IN BOTH NOV AND DEC AFTER STRONG JOBS DATA

— *Walter Bloomberg (@DeItaone) October 4, 2024

Now, traders are rapidly withdrawing their bets on a November fed rate cut of over 25 bps. This indicates that a 75 bps cut is also out of question, putting Bank of America’s (BofA) recent prediction in jeopardy.

What’s Next for Bitcoin Price?

Higher interest rates often dampen investor appetite for riskier assets. Thus, with the prospect of a rate cut diminishing, Bitcoin and other cryptocurrencies could face additional downward pressure in the short term.

Historically, a weakening labor market, combined with cooling job growth, has often supported Bitcoin price, as lower rates tend to spur risk-on sentiment among investors. However, with labor demand remaining high, speculation is rising that the Fed may stay on a path of tighter monetary policy, putting more pressure on the crypto market.

On the contrary, Bitcoin price is holding steady with significant gains despite the US labor market report. At press time, the BTC price traded at $61,604.72, gaining 2.02%. Furthermore, it even peaked at $61,914.99 but failed to sustain that level.