Bitcoin’s Reaction to Softening US Labor Market and SEC’s Crypto Crackdown

Dusk-lit city skyline, symbolic Bitcoin coin showing growth, financial charts in the background, subtle Impressionist style, juxtaposition of weak labor market 'crumbling buildings' with thriving cryptocurrency 'rising towers', tension between warmth and coolness reflecting market uncertainty, mysterious mood capturing complex regulatory and economic dynamics.

The cryptocurrency market experienced a slight surge earlier as Bitcoin rose from under $26,500 to over $26,800, following weaker-than-expected weekly initial jobless claims. With 261,000 claims filed last week, up from 233,000 a week earlier, it appears that the momentum of the US labor market is starting to wane. Moreover, last week’s official jobs market report revealed a surprise increase in the unemployment rate from 3.5% to 3.7%.

A softening labor market is actually favorable for the US Federal Reserve in its fight against high inflation, given that a tight labor market has historically been viewed as inflationary. If the labor market continues to weaken over the coming months, it may imply that the Fed will not need to raise interest rates any further to address inflation and could even consider rate cuts. This development could potentially benefit Bitcoin, as easier financial conditions have typically boosted the price of risk assets like cryptocurrencies and growth stocks.

However, Bitcoin’s short-lived increase was followed by a drop to the $26,500 area, erasing most of its gains for the day after SEC Chairman Gary Gensler criticized the crypto industry in a speech. He explained the regulatory decisions behind suing Coinbase and Binance this week, stating that although some cryptocurrencies have additional utility, it doesn’t exempt them from being considered investment contracts. He also expressed concerns about companies taking risks of enforcement as the cost of doing business and not making changes to comply with securities laws.

Crypto traders now eagerly await a speech from Coinbase CEO Brian Armstrong, where further insights may be shared. The constantly evolving regulatory landscape in the US, coupled with a shifting macroeconomic environment, may keep Bitcoin trading with a negative bias over the coming weeks. Bitcoin has recently broken south of its 100-Day Moving Average, and it remains enclosed within a downwards trend channel, which might indicate a retest of recent lows around key long-term support in the mid-$25,000s.

Looking ahead, next week brings the release of US Consumer and Producer Price Index data, as well as the Federal Reserve’s latest monetary policy announcement. Money markets currently anticipate one more interest rate hike from the Fed, likely in July. However, if the Year-on-Year CPI drops to 4.1% from 4.9% as expected, this could result in a reduction of expectations for another rate hike, potentially serving as a catalyst to lift Bitcoin out of its recent bearish trend channel.

Source: Cryptonews

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