How the U.S. jobs report can shake up the Bitcoin and cryptocurrency markets

This week, with important economic information from the American labor market drawing attention, the crypto world is in a state of high alert.

The lack of significant market impact factors such as the Q2 earnings report and the upcoming employment reports could disproportionately affect financial markets, including the volatile sector like Bitcoin and other digital assets.

A week focused on the labor market

Currently, America is in "Job Week", where a series of important employment data will be released. Due to the recent holiday, many key reports have been delayed, increasing their potential impact. The report on the Job Openings and Labor Turnover Survey (JOLTS) for July, along with the report on private sector job numbers from Automatic Data Processing (ADP) for August, will be released this week. Next will be the report on weekly Unemployment Claims on Thursday and the monthly Employment Situation report from the U.S. Bureau of Labor Statistics (BLS) on Friday.

For the crypto world, often viewed as a high-risk asset with great rewards, these reports are not just mere economic information. They provide direct insight into the health of the economy in America and, more importantly, influence the monetary policy decisions of the Federal Reserve (Fed).

The role of the Fed and its connection to the crypto world

The Fed's actions are closely tied to the state of the labor market. With employment data showing a cooling trend—both ADP and BLS are expected to report a modest increase of about +75K new jobs—the Fed is likely to proceed with its rate cut plan. Lower interest rates typically lead to more liquidity in the financial system, as borrowing becomes cheaper and yields on safe assets like bonds decrease. This may encourage investors to seek higher yields in riskier assets, including the crypto world.

A weaker-than-expected jobs report can therefore be seen as a positive signal for the crypto world. It will reinforce expectations for interest rate cuts, which has historically been a positive signal for Bitcoin and other digital assets. Conversely, a surprisingly strong report, while a positive sign for the broader economy, may dampen enthusiasm for the upcoming interest rate cuts and could potentially lead to a short-term decline in cryptocurrency prices.

Main drivers to watch

The main driving factor to monitor is the relationship between job growth and monetary policy. The Fed is having to carefully consider how to cool inflation without causing a serious economic downturn. Employment data provides crucial feedback on the effectiveness of their policies. If the labor market shows significant signs of weakness, this could prompt the Fed to act more aggressively with interest rate cuts, a move that would be widely interpreted as favorable for the crypto world.

Market volatility and investor sentiment

Job data is just one part of the bigger picture, but it is an important part. The market sentiment is currently tense, with pre-market futures contracts indicating a downturn and bond yields on the rise. The 30-year bond yield has increased to +4.99%, a level not seen since July, while the 10-year bond yield has returned to +4.30%. This indicates a shift in investors' risk appetite towards more traditional, "safer" assets.

A positive surprise in the employment reports—even an increase of +110K jobs—may not be enough to deter the Fed from its plan to cut interest rates. Because the overall trend remains a labor market shortfall, due to the number of retiring workers. However, any unexpected deviation from these expectations could trigger short-term volatility in both traditional and crypto world markets.

In summary, during the week, cryptocurrency investors will closely monitor every new data point from the labor market. JOLTS, ADP, Weekly Jobless Claims, and the BLS Employment Situation report will provide clues about the Fed's next move. Given the current macroeconomic environment, a weak jobs week could indeed be the news that drives the next rally of Bitcoin and the broader crypto world.

Mr. Giáo