Poor jobs data is raising fears for the US economy. While the Fed is likely to cut rates by a quarter point this month, it may be too late. Bitcoin and Ethereum fell 4.2% and 5.3% respectively on Friday.
Poor economic data is rekindling fears about the weakness of the US economy — and markets aren't liking it.
The Nasdaq and S&P 500 fell 2.6% and 1.6%, respectively, on Friday, while Bitcoin and Ethereum fell 4.4% and 5.8%, revisiting prices last seen during the Aug. 5 global financial panic. Bitcoin is now at $53,700.
Thursday's US jobs report showed just 99,000 new jobs were added in August – below expectations of 144,000 and below July's 111,000 job additions.
“More ominous reasons are given” for the data, writes Noel Acheson, former head of market insights for Genesis Global Trading, in his 'Crypto Is Macro Now'. Newsletter.
“There is no positive spin on the two main reasons given for letting people go – cost-cutting and macroeconomic conditions (means divergence) implying lower earnings expectations,” Acheson added.
Jobs data is important to investors because it indicates the health of the economy.
New jobs and lower unemployment translate to more dynamic economic activity, but declining jobs and rising unemployment rates are warnings that the economy is slowing down.
Huge rate reduction
Federal Reserve Chair Jerome Powell announced on August 23 that the time has come for the US central bank to cut interest rates – making money easier for individuals and companies, which will improve the economy.
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Like most risk-on assets, Bitcoin performs well when interest rates are low, so lowering rates in a relatively healthy economy can be positive for crypto prices.
But for some, in light of disappointing jobs news, a rate cut in September may be too little too late to avoid a recession.
“If the data indicates that bigger cuts are needed, I will support that,” Fed Governor Christopher Waller said Said On Friday.
“I will be a big advocate of front-loading rate hikes in 2022 when inflation accelerates, and I will be an advocate of front-loading rate cuts if that's appropriate,” he added.
Friday, FedWatch data Briefly shown The market price will fall with a 52% odds of an aggressive 50 basis points on September 18 instead of the usual 25. A basis point is equal to one hundredth of a percentage point.
At the time of writing, the odds of a rate cut are 0.5% fell Back down to 27%.
“50 [basis point] A cut could send the wrong message to markets and the economy. It can send an urgent message and, you know, it can be a self-fulfilling prophecy,” George Lagarias, chief economist at consulting firm Forvis Mazars, said. Said CNBC.
In other words, while rate cuts are positive for crypto, a large rate cut made out of a sense of urgency — to avoid a recession — can trigger a large market selloff.
Matt Haugan, Chief Investment Officer at crypto investment firm Bitwise, has been posted The US central bank is unlikely to take drastic action in X.
“0.5% is radical for the Fed,” writes Haugan. “In the last 40 years there has been only one instance of a 0.5% decrease during non-emergency. I struggle to see. However, going into a rate cut cycle is good.
Tom Carreras writes about markets for DL ​​News. Got a tip about the US economy and Bitcoin? arrive at [email protected]
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