Job Market Surge and Interest Rate Cuts: Dual Forces Impacting Bitcoin Value
Summary:
The global job market surge, particularly in the United States, might pressure the price of Bitcoin, as stronger than expected non-farm payrolls lead investors to foresee potential monetary policy tightening, hence reducing interest in risk-assets like Bitcoin. Meanwhile, the European Central Bank's interest rate cut could provide more liquidity to Bitcoin, with weakened Euro potentially boosting demand for alternative assets. Despite Bitcoin's mostly flat performance, potential positive US Bitcoin ETF inflows could help push the cryptocurrency above the $70,000 mark by the week's close.
The surge in the international job market, particularly in the United States, could potentially affect the value of Bitcoin. As recorded on June 7, the non-farm payrolls report - a document showing the alterations in overall employment last month, excluding agricultural employment - revealed higher than expected figures. Investors might therefore foresee a tightening in monetary policies, thereby reducing their interest in risk-prone assets like Bitcoin. This could potentially result in Bitcoin's weekly close falling beneath $70,000, suggest analysts at Bitfinex. They warn of a downward push on Bitcoin due to investor rebalancing in favor of more traditional assets if non-farm payrolls continue to exceed their projected benchmarks. Yet, non-farm payroll data showed a strong upward trend with over 272,000 new jobs, far above the earlier estimate of 182,000.
In another noteworthy macroeconomic development, the European Union followed Canada's lead this week in cutting interest rates, making it the second major economy to do so. The European Central Bank (ECB) dropped its principal lending interest rate from 4% to 3.75%, in anticipation of upcoming EU-wide elections, marking the bank's first interest rate slash in half a decade. This move could potentially infuse more liquidity into Bitcoin, says Bitfinex's analysis team. The analysts observed that a weakened euro could potentially boost the demand for alternative assets like Bitcoin and the added money flow from such easing of money could support risk-assets like cryptocurrencies.
Bitcoin's performance today was relatively static, with a slight 0.8% dip prior to 1:00 p.m. UTC, clocking in at $71,186 according to CoinMarketCap's data. One encouraging indication for Bitcoin involves potential cash inflows from US Bitcoin ETFs, which could press Bitcoin to conclude the week above the critical $70,000 benchmark. To date, American spot Bitcoin ETFs have pooled over $1.54 billion in net inflows. With the continuing influx, these ETFs are poised to gather 3.74% of Bitcoin's total supply each year, as Dune's data suggests.
On June 5, US Bitcoin ETFs reported collective inflows amounting to $488.1 million, and hit a record high of $886.6 million on June 4, identified as the second-highest inflow day. By the middle of February, Bitcoin ETFs represented approximately 75% of new investments into Bitcoin - the largest cryptocurrency worldwide - pushing it beyond the $50,000 mark.
Published At
6/7/2024 4:23:49 PM
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