US Employment Data's Surprising 'Strong Performance'...Will Bitcoin's Rally Be Halted?

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

US employment data significantly exceeded market expectations, putting pressure on the cryptocurrency market, including Bitcoin (BTC). As signs emerged that the labor market remains robust despite inflationary pressures from the US-Iran war, analysis suggested that expectations for a Federal Reserve (Fed) interest rate cut could further weaken.

According to CoinGape, a cryptocurrency specialized media outlet, on May 8, non-farm payrolls increased by 115,000 in data from the US Bureau of Labor Statistics. This figure significantly surpassed market expectations of 65,000. US non-farm payrolls 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 from the US-Iran war, these employment figures demonstrated the health of the US labor market. Strong employment data was interpreted as a factor that strengthens the Fed's justification for maintaining interest rates for the time being.

Immediately after the release of the employment data, Bitcoin fell from a high near $80,200. CoinGape explained that these indicators are generally bearish factors for Bitcoin and the overall cryptocurrency market. The reason is that if the labor market remains stable and the war has a greater impact on prices, the Fed is more likely to maintain a freeze on interest rates rather than cutting them.

The possibility of interest rate hikes 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 risk assets could be shaken.

Bitcoin was also affected by the expiration of cryptocurrency options 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 data and option expiration increased market volatility.

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

Last week, at its April Federal Open Market Committee (FOMC) meeting, the Fed also signaled its intention to maintain a wait-and-see stance due to uncertainties surrounding the impact of the US-Iran war. CoinGape reported that the Fed changed its wording regarding inflation assessment from “somewhat elevated” to “elevated.”

The emergence of Kevin Warsh, who is being mentioned as a candidate for the next Fed chair, also led to predictions that it would be difficult to significantly alter the path of interest rate cuts. 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 data pushed the early interest rate cut scenario, which the cryptocurrency market had hoped for, further away.

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