Impact of Weakening Job Market in the United States on Bitcoin and Risk Assets

The scenario of a weakening job market and growing unemployment in the United States, the largest global economy, could potentially benefit Bitcoin and other risky assets.

US Unemployment Rate Rise

The latest figures reveal that the unemployment rate in the United States has risen to 4.1%, exceeding the earlier projection of 4.0% and marking the highest level since December 2021.

Job Growth Statistics

In June, the US economy saw an addition of 206,000 jobs, surpassing the anticipated 191,000. However, this number is notably lower than the 272,000 jobs that were added in May. The May data, originally reported at 272,000, was subsequently adjusted to 218,000 according to the nonfarm payroll data released by the Bureau of Labor Statistics on July 5.

Potential Impact on Bitcoin

Notably, a softening labor market in the US could serve as a positive driver for Bitcoin's price, as indicated by Jag Kooner, the head of derivatives at Bitfinex, in an interview with Cointelegraph. Kooner highlighted that a weaker-than-expected job growth report might raise expectations for future rate cuts. Consequently, this could boost Bitcoin prices as investors seek alternative assets in anticipation of a more relaxed monetary policy.

Bitcoin Price Trend

Bitcoin has been experiencing a downward trend for over a month now, dipping below the significant $60,000 level.

Bitcoin Price Plummet

On July 5, Bitcoin witnessed a price drop of more than 10.5% within a 24-hour period, hitting a four-month low of $53,550. According to Bitstamp data, the last time Bitcoin traded at this level was in February 2024.

Analysts' Views

While some traders express concerns that the bull cycle may have concluded, analysts like Rekt Capital view the current correction in line with historical Bitcoin corrections. Rekt Capital, in a post on July 4, noted that the current pullback, although deep at -21% and lasting 45 days, falls within the average range for retraces in this cycle.

Institutional Investment Trends

Moreover, institutional inflows from US spot Bitcoin exchange-traded funds (ETFs) have been trailing behind. These US ETFs are poised to register their third successive week of net negative inflows, totaling over $315 million in cumulative net outflows for the week.

Potential Bitcoin ETF Flows

There could be a potential uptick in Bitcoin ETF flows if the weakening job market fuels expectations of an interest rate cut, cited Kooner. However, the magnitude of inflows would depend on broader market sentiment and risk appetite.

Market Outlook

Kooner also observed a recent scarcity of inflows and 'dip-buying' acquisitions in the market, indicating cautious investor behavior.