Bitcoin and other risk assets might gain from a weakening job market and rising unemployment in the United States, the world’s largest economy.
The U.S. unemployment rate rose to 4.1%, exceeding the anticipated 4.0%, marking its highest level since December 2021. In June, the U.S. economy added 206,000 jobs, surpassing the expected 191,000 but significantly lower than the revised 218,000 jobs added in May, according to the Bureau of Labor Statistics’ nonfarm payroll data released on July 5.
BTC/USD, YTD chart. Source: TradingView
A weakening labor market in the U.S. could positively impact Bitcoin’s price, according to Jag Kooner, head of derivatives at Bitfinex.
“If the NFP report shows weaker-than-expected job growth, it could increase expectations for future rate cuts, which might bolster Bitcoin prices as investors seek alternative assets in anticipation of a looser monetary policy”.
Bitcoin’s Price Struggles
Bitcoin’s price has been in a downtrend for over a month, falling below the significant $60,000 mark. On July 5, Bitcoin dropped over 10.5% within 24 hours, reaching a more than four-month low of $53,550. According to Bitstamp data, the last time Bitcoin traded at this level was in February 2024.
BTC/USD, 1-week chart. Source: Rekt Capital
While some traders worry that the bull cycle has ended, analysts like Rekt Capital see the current correction as consistent with past Bitcoin corrections. Rekt Capital noted in a July 4 post,
“This pullback is -21% deep & 45 days long. In this cycle, average retrace depth is -22% & average retrace duration is 42 days. In terms of retrace depth, this is almost an average retrace. In terms of retrace duration, this is an above-average pullback.”
Bitcoin ETF Flows Lagging
Institutional inflows from U.S. spot Bitcoin exchange-traded funds (ETFs) have been lagging. The U.S. ETFs are set to log their third consecutive week of net negative inflows, with over $315 million worth of cumulative net outflows so far this week, according to Dune data.
Bitcoin ETF net weekly flows. Source: Dune
Kooner suggests that Bitcoin ETF flows might see an uptick if the weakening labor market drives expectations of potential interest rate cuts.
“Bitcoin ETF flows might see an uptick if market participants believe that economic uncertainty will drive the Fed towards eventual rate cuts, enhancing the appeal of Bitcoin as an inflation hedge. However, significant inflows would depend on broader market sentiment and risk appetite,” Kooner said.
Despite these possibilities, Kooner also notes a recent lack of inflows and “dip-buying” purchases.
