Bitcoin Rises as Weak Jobs Data Eases Fed Pressure, but Growth Worries Linger

Bitcoin (BTC) climbed over 5% on the day to $61,800 as of 14:09UTC, before giving up some of its gains to trade at around $61,600 level, up about 3%, while Ether (ETH) climbed above $1,700, also up more than 5% over the past 24 hours. The gains helped push the total cryptocurrency market value up 2.3% over the past 24 hours to $2.13tn.

US stocks also opened higher after the data, though the rally later lost momentum as investors weighed whether the softer payrolls number was simply supportive for rate-sensitive assets or a sign that the US economy is losing steam. By 16:20UTC, the S&P 500 was down 0.2% on the day, the Nasdaq Composite had fallen 0.8%, while the Dow Jones Industrial Average was still up 0.8%.

The US economy added 57,000 jobs in June, about half of the 113,000 economists had expected, according to the Bureau of Labor Statistics (BLS). The agency also lowered its estimates for April and May hiring by a combined 74,000 jobs.

The weaker-than-expected jobs report led investors to reduce expectations that the Federal Reserve will raise interest rates at its July meeting. According to CME FedWatch, the probability of a rate hike fell to 19.8% on 2 Jul, down from 28.9% a day earlier. Prediction market Polymarket also showed traders expecting the Fed to hold rates steady, with an 89% probability of no change at the July meeting.

A lower chance of higher interest rates is generally seen as positive for crypto and other risk assets because lower rates make borrowing cheaper and can encourage investors to put money into riskier assets. A weaker job market can also make the Fed less likely to raise rates if it wants to avoid putting more pressure on the economy.

The Federal Reserve currently targets its benchmark interest rate in a range of 3.5% to 3.75%.

The data

The unemployment rate stayed at 4.2%, while the portion of Americans working or looking for work fell to 61.5%, the lowest level since March 2021. 

The report also showed hiring continued to slow across the economy. Professional and business services added 36,000 jobs in June, while social assistance gained 25,000 and healthcare added 22,000. Meanwhile, leisure and hospitality lost 61,000 jobs. 

Fabian Dori, chief investment officer at Sygnum Bank, said the softer payrolls data left room for different market interpretations. "A weaker jobs report can ease pressure on the Fed to raise rates, but that does not necessarily mean a clear boost for crypto," Dori said in a note to Sandmark, adding that investors are also weighing on whether the slowdown in hiring pointed to a broader growth problem.

What it means for the Fed

The new data gives Fed officials another factor to consider before their July meeting. While inflation remains above the Fed's 2% target, slower job growth could make policymakers more cautious about raising interest rates.

The jobs report also came one day after newly installed Federal Reserve Chair Kevin Warsh said the central bank is reviewing how it measures inflation.

While speaking at the European Central Bank's annual forum in Sintra, Portugal, Warsh said the Fed hopes to use more real-time data to better understand the economy and make decisions. 

"We're no longer going to have to rely solely on data that we get from government agencies with mismeasurement problems that have surveys that are no longer relevant," Warsh said. "If we do our jobs, we'll be here a year from now, and we'll say we've discovered data that helps us make better decisions, and we live up to our promise."