Written by: Forbes
Compiled by: AididiaoJP, Foresight News
Bitcoin staged a strong rebound this week from recent lows, pushing its price back above $60,000. Earlier, following former President Donald Trump's return to the White House, Bitcoin had plunged to multi-year lows, with markets even warning of a potential collapse for the "ponzi scheme".
Bitcoin has performed poorly this year, with its price more than halving from the year's high. Although the world's largest asset manager, BlackRock, is quietly positioning for the next phase of the Bitcoin and cryptocurrency revolution, the latest U.S. economic data has sent unfavorable signals to the crypto market.
Just as some cryptocurrencies were predicted to potentially surge 50x and create "generational wealth," the U.S. June jobs report was released, falling far short of expectations.
The report showed the U.S. economy added only 57,000 jobs last month, significantly below the 115,000 expected by economists surveyed by Dow Jones. However, the unemployment rate fell to 4.2% from an expected 4.3%. Nic Puckrin, founder of Coin Bureau and former Goldman Sachs analyst, noted in an email: "Surface data suggests an impenetrable labor market, but the actual new jobs fell short of expectations, and the labor force participation rate dropped by 0.3 percentage points. This might simply be because many people have given up looking for work, making the data look less severe."
For the new Federal Reserve, whose primary task is to curb inflation, wage growth data is more critical than overall employment figures. The acceleration of average hourly earnings year-on-year to 3.5% is bad news for those expecting a policy pivot towards easing. Strong wage growth will continue to fuel the inflation beast—precisely what Fed Chair Kevin Warsh fears most. As long as wage gains remain high, expectations for a rate hike in 2026 will be hard to dispel.
Following the jobs report, Bitcoin's price continued to recover, briefly touching $63,000. Traders are now turning their attention to the July Consumer Price Index (CPI) data to gauge how the Fed under new Chair Warsh will adjust interest rate policy.
Analysts at Bitfinex exchange pointed out: "The June CPI data released on July 14th will be a key inflection point. May's inflation rate was as high as 4.2%, while the market expects the Fed to maintain rates in the 3.5%-3.75% range at its July 28-29 meeting. Warsh's previously dovish remarks have already provided some relief for risk assets."
A team led by ING analyst James Knightley wrote in a report that the July CPI is expected to show a month-on-month decline in overall prices, largely thanks to plummeting gasoline prices. "This could further fuel market expectations that the Fed will keep rates unchanged for an extended period this year, rather than hiking."
Oil prices have fallen sharply in recent weeks, returning to levels seen before the US-Iran war. Traders believe that an oil supply glut will help ease inflation pressures and prompt the Fed to lower borrowing costs. David Morrison, Senior Market Analyst at Trade Nation, said: "Bitcoin's sustained rebound is partly due to the prospect of lower borrowing costs, which tend to improve liquidity and support risk-sensitive assets like Bitcoin."
Morrison added: "Weak jobs data has eased market fears of multiple Fed rate hikes this year, leading to a weaker dollar, a broad rise in risk assets, and improved sentiment in the Bitcoin market."
However, some also believe the jobs report is not bad news for Bitcoin. Some investors are betting the Fed will pivot to easing in the second half of the year, supporting 'devaluation' trades involving assets like gold and Bitcoin. Stephen Coltman, Macro Head at 21Shares, said: "The market expected strong jobs data, but the results fell significantly short, accompanied by notable downward revisions to prior data. The pricing for additional Fed tightening this year is looking increasingly unreasonable. Inflation expectations have fallen sharply, and current policy is becoming more restrictive. This paves the way for a policy pivot towards easing in the second half, which is favorable for 'devaluation' trades like precious metals and cryptocurrencies, which have been weighed down by the Fed's hawkish stance this year."
Current market pricing suggests the Fed may only raise rates once this year (25 basis points), but Warsh's remarks this week at the global central bankers' conference have already led investors to scale back bets on monetary tightening.
Speaking at the annual conference for international policymakers and economists hosted by the European Central Bank in Portugal, Warsh said: "Inflation expectations over the first four weeks of this period have declined, and inflation risks are diminishing." He did not explicitly state whether a rate hike would occur at the next meeting in late July, with markets currently pricing an 82% probability of rates remaining unchanged.
Looking ahead, Bitcoin's price will remain highly sensitive to upcoming U.S. economic data, particularly employment and inflation reports, as well as Fed policy expectations. Simon-Peter Massabni, Head of Business Development at XS.com, noted: "If economic data continues to show resilience, expectations for rate cuts will weaken, and a stronger dollar will add extra pressure on cryptocurrencies. Conversely, if data points to a significant slowdown and expectations for monetary easing return, Bitcoin has a chance to recoup some losses. In my view, the relationship between Fed policy and Bitcoin has never been more important than it is today."
Massabni believes the three core variables determining Bitcoin's trajectory in the coming months are: institutional ETF fund flows, geopolitical developments, and Fed rate expectations. "If these factors gradually improve, the current sell-off may ultimately be seen as a long-term buying opportunity rather than the start of a bear market. Conversely, if pressure persists unresolved, high volatility will continue until the market finds a solid price floor."
