Chris Ratcliffe/Bloomberg via Getty Images
The crypto market fell with shares after the much-anticipated jobs report showed the job market is still tight and could keep the Federal Reserve on course to aggressively raise rates.
Bitcoin’s price fell 3.3% to $19,380.74, according to Coin Metrics. Ether fell 2.7% to $1,322.40.
On Friday, the Labor Department reported that the US economy added 263k jobs in September compared to the Dow Jones estimate of 275k and that the unemployment rate fell to 3.5% from 3.7% the previous month.
“The job report suggests there is no sign of a change in sentiment for the Fed, so we expect interest rates to stay fixed, which is also adding pressure on crypto markets,” said Yung-Yu Ma, chief investment strategist at BMO Wealth Management.
The correlation of cryptocurrencies with stocks has weakened over the past few weeks but remains high.
“Crypto seems to be at a key technical point here where it looks like it’s trying to carve out a bottom but is feeling heavy,” he added. “I still think it’s most likely to break to the downside given rising interest rates and risk-off sentiment, but so far it’s a surprise attempt to hold the line.”
The market was in a good news is bad news hold, with the Federal Reserve’s laser focused on cutting inflation. While the new data shows strength in the US economy, it could make the Fed more likely to continue its aggressive rate hike plan (while investors hope for a pause or a pivot), putting pressure on stocks and weighing on crypto.
“Crypto has been the hardest hit by rate hike fears this year,” said Callie Cox, US investment analyst at eToro. “It makes sense — many crypto projects don’t have cash flows, so people are investing in them for what they could be, not necessarily for the value they currently offer. When interest rates rise, the future value of a dollar falls.”
Cox also highlighted the resilience of crypto assets in the second half of the year, noting that while stocks have made new lows as bond yields have risen, bitcoin and ether have not done the same. Bitcoin has traded in a tight range between $18,000 and $25,000 since falling to yearly lows in June.
“To me, that’s progress in this bear market,” Cox said. “Crypto prices may be telling us that interest rate fears may be at an inflection point. Crypto strength is also a good indicator of foaming in the market. It seems like the brutal growth sell-off has finally washed out any weak hands.”
“Bitcoin is also well below its highs,” she added. “But stability is a step in the right direction.”