The latest American jobs report is out, and it’s stirring the pot. Employers added 114,000 jobs in July, but the unemployment rate jumped to 4.3%.
This spike has got folks thinking the Fed might cut interest rates at their next meeting. And if that happens, Bitcoin could get a nice boost.
Jag Kooner, Head of Derivatives at Bitfinex, says the numbers show some strength, but there’s still a fear of a recession because of high lending rates and rising unemployment.
Jag points out that the 4.3% unemployment rate could trigger the Sahm Rule, which usually signals a recession. However, he did add that this rule might not be as reliable after the pandemic due to the unusual labor market.
Economic uncertainty plagues Americans
Increased participation in the labor force, especially by immigrants, and a mismatch between job seekers and available jobs are adding to the unemployment issue.
There’s also the inverted yield curve, another sign of a possible recession, making the economic outlook even murkier. Despite an increase in layoffs, they’re still low historically.
The Fed has been keeping interest rates high to fight persistent inflation. But now, there’s growing talk about a possible rate cut as economic signs soften.
If the unemployment numbers support the Fed’s view that inflation is under control, we might see a rate cut in September.
This would be good news for Bitcoin, making a strong bullish case.
For August, the market might face low liquidity, partly due to the summer season. Jag mentions that massive buy walls are forming at low ranges for several altcoins, and Bitcoin is expected to trade between $61K and $70K.
This range could be a prime zone for accumulation. Jag believes a rate cut in September will boost market confidence and increase liquidity, leading to more ETF inflows as investors take advantage of the improved environment for risk assets.
Right now, there’s a lot of confidence in the market. Even potentially negative news like the Mt. Gox distribution, the German government selling, and recent significant on-chain movements haven’t managed to push Bitcoin’s price down significantly.
Jag emphasizes the importance of watching any remarks from Fed Chair Jerome Powell on inflation data or economic growth trends. If he talks about persistent inflation or slow economic growth, it could change expectations for future rate cuts or hikes.
Powell has told us that a rate cut “could be on the table” for the September meeting, raising market expectations for a cut. According to CME FedWatch data, financial markets are now almost certain there will be a rate cut in September.
But Powell continues to stress that any decision will depend on data, especially inflation trends. The Fed wants more proof that inflation is moving back to their 2% target before they cut rates.
