Bitcoin (BTC) recorded moderate losses of 0.8% at the beginning of Monday’s trading before modestly rebounding to trade at $44,025.

Unemployment figures came in at 3.7%, while hourly wage growth increased by 4.1% every year, exceeding the consensus estimate of 3.9%. Strong U.S. non-farm payroll data released on Friday led to a reevaluation of expectations for early interest rate cuts by the Federal Reserve.

The conflicting data has increased doubts about the Federal Reserve’s intention to lower interest rates early in the year, possibly in March. The markets are currently pricing in approximately five interest rate cuts of 25 basis points this year, instead of the six or seven similar cuts that were priced in before the recent labor market data. This negative pressure is affecting markets, especially cryptocurrencies and stocks.

The yield on the 10-year U.S. Treasury bond has risen by 15 basis points to 4.05% since Friday, indicating a reassessment and repricing of cautious Federal Reserve expectations or the possibility of a delay in interest rate cuts.

The benchmark yield has dropped by about 80 basis points to 3.86% in the last three months of 2023, providing strong support for risky assets like Bitcoin and the crypto market.

In my view, the most significant aspect of the data is the rise in wage gains, reaching +4.1% every year, significantly surpassing current inflation rates. Historically, the relationship between wages and prices tends to continue in the psychology of inflation, likely compelling the Federal Reserve to maintain a cautious tone in its future policy decisions.

I believe the ongoing rise in yields poses a downside risk to risk assets such as Bitcoin and cryptocurrencies, despite the expectation that the launch of instant exchange-traded funds (ETFs) in the United States may protect Bitcoin from negative movements in the short and medium-term.

From my perspective, the U.S. Securities and Exchange Commission (SEC) may approve one or more instant ETFs by January 10. This move has been priced into the crypto market over the past three months, and the cryptocurrency could experience a price drop after approval, contrary to expectations, as a reaction to profit-taking from early pricing of approvals this week.

I believe the regulatory body will use the January 10 deadline to announce its decision on multiple Spot Bitcoin ETF applications simultaneously. Nearly a dozen applicants are awaiting this decision, having prepared initial capital and actively marketed their Spot BTC ETF product.

Analysis by XS.com