Could this key metric signal more bad news for the Bitcoin price?

Crypto investors are keeping a close eye on the signals that could see the US Federal Reserve begin to ease back on its monetary tightening policies.

| More on:
A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The Bitcoin price edges higher today but remains down from Friday
  • Strong US labour growth figures released on Friday spurred concerns of more hawkish tightening from the US Federal Reserve
  • Cryptos and other risk assets sold off on the report’s release

The Bitcoin (CRYPTO: BTC) price dipped over the weekend, falling as low as US$22,911 after trading for as high as US$23,467 on Friday.

The world's top crypto has regained some of the weekend's losses, up just over 1% since this time yesterday. One BTC currently trades for US$23,331.

Bitcoin price pressured by strong US labour report

The Bitcoin price came under selling pressure following the release of July's job report by the United States Labor Department.

That report showed the world's biggest economy added 528,000 jobs last month, far exceeding consensus estimates of 250,000 new jobs.

In June, the US added 398,000 new jobs.

The jobs growth saw the US unemployment rate fall to 3.5% in July, compared to expectations of 3.6%. This brings the US unemployment rate back to the half-century highs it was at in the months immediately before the pandemic shuttered much of the world in early 2020.

Why is this good news bad?

Strong employment growth in the US is, of course, largely a good thing.

However, the strength saw the Bitcoin price retrace alongside other risk assets, with the tech-heavy NASDAQ closing 0.5% lower on Friday.

That's because investors have been hoping recent interest rate rises by the US Federal Reserve and other global central banks, including the RBA, would already show some impact on tamping down inflation.

But the US jobs report stoked fears that the Fed will need to continue on its tightening path for some time yet before taking a more dovish approach, which would broadly benefit growth shares and cryptos.

Discussing the hit to the Bitcoin price, markets analyst at Oanda Craig Erlam said (courtesy of Bloomberg):

That was not a good jobs report for risk assets. That could worsen any slump further down the road, which is why we're seeing risk assets sinking and Bitcoin is very much among them. It's still a little higher on the day, but it's given back a fair bit of its earlier gains.

Head of research at Valkyrie Investments Josh Olszewics said, "The Fed is likely less concerned with recessionary conditions and more focused on their dual mandate of inflation and unemployment."

Adding that the Fed is "likely to continue with successive rate hikes", Olszewicz said this will impact the demand for alternative assets.

And that, as we know, will throw up headwinds for the Bitcoin price.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin. The Motley Fool Australia has positions in and has recommended Bitcoin. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Cryptocurrencies

A man holding a mobile phone walks past some buildings
Cryptocurrencies

The Betashares Crypto Innovators ETF (CRYP) is up 37% in a month. Is it too late to buy?

Looking at the CRYP ETF? Here's my take on whether it's too late to buy.

Read more »

Bitcoin ETF digital illustration.
ETFs

Why is the BetaShares Crypto Innovators ETF (CRYP) surging on Thursday?

Some massive Bitcoin news is lifting this ETF today.

Read more »

A woman holds a bitcoin token in her hand as she smiles at the camera in the background.
Cryptocurrencies

Bitcoin ETF approved. When is it coming to Australia?

Crypto bulls will be celebrating this milestone moment.

Read more »

person dancing in bitcoin spectacles wearing a gold outfit with hands up.
Cryptocurrencies

Bitcoin price rockets to 21-month highs. Here's why

The Bitcoin price is now up more than 174% in 12 months.

Read more »

BTC spelt out on wooden blocks with a red sign going down.
Cryptocurrencies

Bitcoin price sinks from 21-month high as ETF rumours swirl

What's going on with this cryptocurrency this week?

Read more »

person dancing in bitcoin spectacles wearing a gold outfit with hands up.
Cryptocurrencies

Up 145% in a year, the Bitcoin price just smashed through 18-month highs!

After a horror year in 2022, the Bitcoin price has come roaring back in 2023.

Read more »

Two investors look at a graphic showing a bitcoin in the centre
Cryptocurrencies

Why did the Bitcoin price just hit a 17-month high?

The long-standing cryptocurrency is finding its feet to reclaim a price not seen since May 2022.

Read more »

ETF written in gold with dollar signs on coin.
ETFs

This ASX ETF is up 21% in April so far

How on earth has this ETF smashed the market by a factor of 10?

Read more »