Bitcoin (btc) Stocks posted moderate losses early Monday, with Asian shares taking a bigger hit as upbeat US nonfarm payrolls data on Friday dampened expectations of early interest rate cuts by the Federal Reserve.
At 4:32 UTC, the leading cryptocurrency by market cap was trading at $43,600, representing a 0.8% decline on the day, CoinDesk data shows. Most Asian stock indexes traded in the red, with Hong Kong's Hang Seng down 2% amid a regulatory crackdown on gaming.
Nonfarm payrolls data released Friday showed the U.S. economy created 216,000 jobs in December, beating expectations of 170,000 and above November's downwardly revised reading of 173,000. The unemployment rate held steady at 3.7%, while average hourly earnings rose 4.1% year-on-year versus the consensus estimate of 3.9%.
Since the jobs data was released, doubts have increased that the Fed will cut the federal funds rate, the benchmark cost of borrowing, as early as March. CME's Fed Watch tool shows that traders now estimate a 60% chance of a rate cut in March, having fully internalized such a move in late December. The odds remained above 75% before the payroll report.
Swaps market traders now expect roughly five 25 basis point rate cuts this year rather than the six or seven similar rate cuts priced in before the payrolls data, per the Financial Times.
The 10-year Treasury yield, the so-called risk-free rate, has risen 15 basis points to 4.05% since Friday, also a sign that traders are reevaluating the Fed's dovish outlook or the possibility that the central bank will delay a rate cut. The benchmark yield fell by about 80 basis points to 3.86% in the last three months of 2023, providing a boost to risk assets, including Bitcoin, thanks to expectations of strong federal interest rate cuts and lower-than-expected bond issuance by the US Treasury. . .
“The most interesting aspect is the rise in wage gains, which amounted to +4.1% year over year (Y/Y).” This figure significantly exceeds current inflation rates. “Historically, wage and price spirals tend to be persistent elements in the psychology of inflation, which will likely force the Fed to remain flexible in its policy decisions in the future,” Greg Magadini, director of derivatives at Amperdata, said in the weekly newsletter. the future”.
The continued rise in yields represents a downside risk to risk assets, although the anticipation of the launch of spot ETFs in the US may protect Bitcoin from negative movements in the bond market.
The SEC is widely expected to approve one or more spot ETFs by January 10. According to some analysts, the move has been priced in over the past three months, and the cryptocurrency could see a decline in its “sale reality” price. After approval.
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