Bitcoin (BTC) prices will drop as traders pare bets on a March Fed rate cut

Bitcoin (BTC) After posting modest losses early on Monday, Asian shares took a big hit as Friday's upbeat US non-farm payrolls (NFP) data fueled expectations of early rate cuts by the Federal Reserve.

At 4:32 UTC, the leading cryptocurrency by market value traded at $43,600, representing a 0.8% drop on the day, CoinDesk data showed. Most Asian stock indexes traded in the red, with Hong Kong's Hang Seng trading 2% lower amid a regulatory crackdown on gaming.

NFP data released on Friday showed the US economy added 216,000 jobs in December, beating expectations by 170,000 and November's downwardly revised 173,000. The unemployment rate was steady at 3.7%, while average hourly earnings rose 4.1% year over year against the consensus estimate of 3.9%.

Doubts have grown since the payrolls data that the central bank will cut the benchmark funds rate, the benchmark borrowing cost, in early March. The CME Fed Watch tool now shows traders the possibility of a 60% rate cut in March, having been fully fired on such a move in late December. The discrepancies were over 75% over the wage report.

Traders in the swaps market expect roughly five 25-basis-point rate cuts this year instead of six or seven similarly sized rate cuts, per FT, ahead of payrolls data.

The 10-year Treasury yield, known as the risk-free rate, rose 15 basis points to 4.05% from Friday, a sign that traders are reassessing bearish central bank expectations or the possibility of the central bank delaying a rate cut. The benchmark yield fell nearly 80 basis points to 3.86% in the final three months of 2023, providing a drag on risk assets including bitcoin, thanks to expectations for aggressive Fed rate cuts and lower-than-expected bond issuance from the US Treasury. .

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“The most interesting aspect was the rise in wage gains, which stood at +4.1% year-on-year (Y/Y). This figure significantly exceeds current inflation rates. Historically, wage-price spirals have been a persistent component of inflationary psychology, allowing for flexibility in policy decisions going forward. will force the Fed to maintain,” Greg Magadini, director of derivatives at AmberData, said in a weekly newsletter.

The continued rise in yields presents downside risk to risk assets, although the prospect of spot ETF issuance in the US could cushion Bitcoin against adverse moves in the bond market.

The US Securities and Exchange Commission is widely expected to approve one or more spot ETFs by January 10. According to some analysts, this move has been priced in over the past three months, and the cryptocurrency could see a price drop to “sell the truth”. Consent follows.

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