Article by: Forbes
Compiled by AididiaoJP, Foresight News
Bitcoin strongly rebounded from its recent low this week, regaining above $60,000. Previously, after former U.S. President Trump returned to the White House, Bitcoin fell to levels not seen in years, with some market participants even warning that a "Ponzi scheme" might be on the verge of collapse.
This year, Bitcoin has underperformed, with its price more than halving from its early-year high. Although BlackRock, the world’s largest asset manager, is quietly positioning itself for the next phase of the Bitcoin and cryptocurrency revolution, recent U.S. economic data has sent negative signals to the crypto market.
Just as certain cryptocurrencies were predicted to surge 50-fold, creating "generational wealth," the U.S. June employment report was released, far below expectations.
The report showed that 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 from the expected 4.3% to 4.2%. In an email analysis, Nic Puckrin, founder of Coin Bureau and former Goldman Sachs analyst, said: “While the surface data suggests an unshakable labor market, the actual job growth was far below expectations, and the labor force participation rate declined by 0.3 percentage points. This may simply reflect that many people have given up looking for work, making the numbers appear less bad.”
For the new Fed, whose primary mission is to curb inflation, wage growth data is more critical than overall employment figures. Average hourly wages accelerated year-over-year to 3.5%, delivering bad news to those hoping for a policy pivot toward easing. Strong wage growth will continue to fuel the inflation beast—the very scenario Fed Chair Kevin Warsh fears most. As long as wage increases remain elevated, expectations of rate hikes in 2026 will be difficult to dispel.
After the jobs report was released, Bitcoin's price rebounded steadily, briefly touching $63,000. Traders are now turning their attention to the July Consumer Price Index (CPI) data to gauge how the Federal Reserve, under new Chair Walsh, may adjust its interest rate policy.
Bitfinex exchange analysts noted: "The June CPI data released on July 14 will be a critical turning point. May's inflation rate reached 4.2%, while the market expects the Federal Reserve to maintain interest rates in the 3.5%-3.75% range at its July 28-29 meeting. Wash's previously dovish remarks have 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 monthly decline in overall prices, primarily due to a sharp drop in gasoline prices. “This could further bolster market expectations that the Fed will keep rates unchanged for the remainder of the year, rather than raising them.”
Over the past few weeks, oil prices have dropped sharply, falling back to levels seen before the outbreak of the U.S.-Iran war. Traders believe that an oversupply of oil has helped ease inflationary pressures and prompted the Federal Reserve to lower borrowing costs. David Morrison, Senior Market Analyst at Trade Nation, said: "Bitcoin's sustained rebound reflects how lower borrowing costs typically improve liquidity and support risk-sensitive assets like Bitcoin."
Morrison added: "Weak employment data eased market concerns about multiple Fed rate hikes this year, leading to a weaker dollar and broad gains in risk assets, improving sentiment in the Bitcoin market."
However, some believe this jobs report is not bad news for Bitcoin. Certain investors are betting that the Fed will shift toward easing in the second half of the year, supporting "depreciation" trades such as gold and Bitcoin. Stephen Coltman, Head of Macro at 21Shares, said: “The market expected strong employment data, but the report came in significantly weaker than anticipated, accompanied by notable downward revisions to prior data. The pricing in of additional Fed tightening this year now appears increasingly unreasonable. Inflation expectations have fallen sharply, and current policy is becoming increasingly restrictive. This paves the way for a policy pivot toward easing in the second half of the year, benefiting 'depreciation' 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 raise rates only once this year (by 25 basis points), but Walsh’s remarks this week at the global central bank meeting have caused investors to reduce their bets on monetary tightening.
Wash said at the European Central Bank’s annual meeting for international policymakers and economists in Portugal: “Inflation expectations over the first four weeks of this period have declined, and inflation risks are easing.” He did not indicate whether interest rates would be raised at the next meeting in late July; the market currently assigns an 82% probability to holding rates steady.
Looking ahead, Bitcoin’s price will remain highly sensitive to upcoming U.S. economic data, particularly employment and inflation reports, as well as expectations around Federal Reserve policy. 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 further pressure on cryptocurrencies. Conversely, if the data points to a significant slowdown, expectations for monetary easing could return, giving Bitcoin an opportunity to recover some of its losses. In my view, the relationship between Federal Reserve policy and Bitcoin has never been more important than it is today.”
Massabni believes the three key variables that will determine Bitcoin’s trajectory over the coming months are: institutional ETF fund flows, geopolitical developments, and Federal Reserve interest rate expectations. “If these factors gradually improve, the current sell-off may ultimately be viewed as a long-term buying opportunity rather than the start of a bear market. Conversely, if pressures persist, high volatility will continue until the market finds a solid price bottom.”