Cryptocurrency market players around the world are nervously waiting for the release of US payroll data on Friday as job market numbers are expected to hold the key to the extent of interest rate cuts by the US Federal Reserve this month.
According to experts, this could trigger which way digital currency prices will move.
A 50 basis points cut is expected to lead to a breakout in leading cryptocurrencies such as Bitcoin and Ethereum, while a lower 25 basis points cut will bring prices of the digital assets under tremendous pressure, market experts told Arabian Business.
The global cryptocurrency market cap is on the verge of hitting the $2 trillion mark on Friday, hovering around $1.99 trillion, a 0.44 percent decrease over the previous day.
Leading cryptocurrency Bitcoin was trading a shade up – 0.12 percent – at $56,790, while Ethereum prices were a shade lower at $2,400.17 than their previous closing in the morning trading hours on Friday.
“The extent of the Federal Reserve’s rate cut will directly impact the cryptocurrency market.
“If the rate cuts are larger than expected, it could boost cryptocurrency prices, as loose monetary policy generally favours risk assets,” Ryan Lee, Chief Analyst at Bitget Research, told Arabian Business.
Lee, however, said if the rate cuts are smaller than expected, cryptocurrency prices could come under pressure.
Economists divided over job numbers in August
A number of economists expect that 165,000 jobs were added in August, up from 114,000 in the previous month, while a section of them worry that August could have seen the lowest number of new job additions in the market in several months.
The non-farm employment data, to be released today, is crucial for the Federal Reserve’s policy decisions.
Lee said that if August’s employment data falls below 100,000, it could increase the likelihood of a 50 basis point rate cut by the Federal Reserve, which would raise concerns about a “hard landing” for the US economy.
As part of a preliminary annual benchmark revision to the non-farm payroll data, the US Bureau of Labor Statistics indicated that actual job growth from April 2023 to March of this year was nearly 30 percent lower than the initially reported 2.9 million.
Economists believe this suggests that the US economy might have been weaker than the overall data initially showed.
Fed rate impact on cryptocurrency prices
Currently, the market believes there is nearly a 70 percent chance that the Federal Reserve will cut rates by 25 basis points and only a 30 percent chance of a 50 basis point cut in September.
The Bitget Research chief analyst said if the Federal Reserve cuts rates by more than 25 basis points in September, the US dollar index is expected to decline, which could push cryptocurrency prices higher.
However, if the rate cut is just as expected at 25 basis points, the positive impact on the cryptocurrency market might be reduced, he said.
Shivam Thakral, CEO of BuyUcoin, India’s second longest-running digital asset exchange, said the cryptocurrency community is still cautiously optimistic about a higher rate cut.
“Given that September has historically been a difficult month for Bitcoin, with an average value depletion rate of 6.56 percent, the potential for a [higher] Federal Reserve interest rate cut could change the narrative,” Thakral told Arabian Business.
He said a higher rate cut will potentially boost liquidity and enhance Bitcoin’s status as a store of value.
“The [US] Bureau of Labor Statistics September 6 jobs report is expected to have a big impact on the cryptocurrency market.
“Historically, such reports have swayed market sentiment,” Thakral said.
The BuyUcoin chief executive said the Fed’s interest rate cut and jobs report can make Bitcoin and other major cryptocurrencies boost and continue their upward trajectory, potentially reaching new highs.
Amidst the suspense over the latest payroll numbers and the potential rate cut, the cryptocurrency market has been seeing high volatility in the last few sessions, with the total crypto market volume over the last 24 hours reaching $62.45 billion.
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