Bitcoin (BTC) posted moderate losses early Monday, with Asian stocks hit harder as positive U.S. jobs data (NFP) on Friday dampened expectations of imminent interest rate cuts by the Federal Reserve.
At 4:32 UTC, the leading cryptocurrency by market value was changing hands at $43,600, down 0.8% on the day, CoinDesk data shows. Most Asian stock indexes were lower, with Hong Kong's Hang Seng trading 2% lower due to a regulatory crackdown on gambling.
NFP data released Friday showed the U.S. economy added 216,000 jobs in December, beating expectations of 170,000 and above November's downwardly revised 173,000. The unemployment rate remained steady at 3.7%, while average hourly wages rose 4.1% year-over-year, compared to the consensus estimate of 3.9%.
Since the payroll data, doubts have grown that the Fed will cut the key lending rate as early as March. The CME Fed Watch tool shows that traders now estimate a 60 percent chance of a rate cut in March after fully committing to such a move in late December. The rate was over 75% before the wage and salary report was published.
According to the FT, traders in the swaps market are now expecting around five 25 basis point rate cuts this year, rather than six or seven similarly sized rate cuts set before the payrolls data was released.
The 10-year Treasury yield, the so-called risk-free rate, has risen 15 basis points to 4.05% since Friday, also a sign that traders are reassessing the Fed's dovish expectations or the possibility of a delay in the Fed's rate cut Central Bank. The benchmark yield fell nearly 80 basis points to 3.86% in the final three months of 2023, providing tailwinds to risk assets including Bitcoin amid expectations of aggressive interest rate cuts from the Fed and fewer-than-expected bond issuances from the U.S. Treasury.
“The most intriguing aspect was the increase in wage growth, which was +4.1% year-on-year. This value is significantly above the current inflation rates. “Historically, wage-price spirals tend to be persistent elements of inflation psychology that will likely force the Fed to remain flexible in its policy decisions going forward,” Greg Magadini, director of derivatives at Amberdata, said in the weekly newsletter.
A continued rise in yields poses a downside risk for risk assets, although anticipation of spot ETF launches in the US could cushion Bitcoin against negative moves in the bond market.
The U.S. Securities and Exchange Commission is widely expected to approve one or more spot ETFs by Jan. 10. According to some analysts, this move has already been priced in over the past three months and the cryptocurrency could see a sell-the-fact price drop following approval.