Federal Reserve’s Next Move: Impact on Bitcoin and Market Volatility

Intricate cityscape with a futuristic stock exchange, artistic watercolor style, dusk lighting, calming tones: serene vibe. Featuring Bitcoin symbol illuminated on a skyscraper, traders analyzing data, reflections of thriving employment numbers, subtle shadow of a debt ceiling & low VIX over the city.

A recent Bureau of Labor Statistics report revealed another month of thriving employment data, sparking discussions about the Federal Reserve’s next moves when it meets later this month. Currently, odds show a 67% chance that the Federal Reserve will maintain current rates, with a 33% chance that the Fed decides to hike 25 basis points, according to the CME’s FedWatch tool.

Bitcoin (BTC) managed to reclaim the $27,000 level, holding onto it throughout Friday trading. Daily Price Action’s Justin Bennett has noted that the selloff earlier in the week means the $27,500-$27,650 area switches back to resistance, while the $26,500 support region is re-exposed.

Following the jobs report release, the odds of no hike for the Fed were at 72%, compared to a 27% chance of a 25 basis point hike. Fed Governor Philip Jefferson and Philadelphia Fed President Patrick Harker had previously voiced their support for no rate hike in June. However, Harker mentioned that the jobs report “may change my mind.” Despite the strong report, the unemployment rate increased slightly.

Last month, the economy added 339,000 jobs, surpassing expectations of 195,000. The unemployment rate rose to 3.7%, above the expected 3.5%. While markets may focus on job statistics, their role in determining inflation and interest rates’ trajectory remains questionable.

The jobs report is not the only macroeconomic factor affecting the overall market mood as we approach the weekend. The Senate recently passed a debt ceiling deal, barely ahead of the June 5 deadline. The package, negotiated by House Speaker Kevin McCarthy and President Joe Biden, suspends the debt ceiling into early 2025 and advances the Mountain Valley Pipeline, as well as changes work requirements for federal food aid.

Furthermore, the VIX, an index used to gauge overall market volatility, is at a 52-week low. The lower the VIX gets, the cheaper options prices become, while higher VIX levels result in more expensive options prices. A so-called “normal” VIX is 21, and at the time of publication, it had dropped to 14. This decline in volatility, along with the macroeconomic events mentioned above, may have significant implications for the market as we move forward.

Source: Blockworks

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