Bitcoin experienced a minor increase this morning in response to weaker-than-expected weekly initial jobless claims. The price rose from under $26,500 to briefly surpass $26,800.
The number of claims rose to 261,000 last week, up from the previous week’s 233,000, marking the second-highest reading this year.
Although 261,000 initial claims in a week may not be considered a disastrous figure, it indicates a slowdown in the momentum of the robust US labor market observed until now.
The latest jobless claims report, released on Thursday, follows other recent US data releases that have shown signs of weakness in the labor market. For example, the official jobs market report for May unexpectedly revealed an increase in the unemployment rate from 3.5% to 3.7%. Additionally, the three-month average of monthly job openings, as indicated by the JOLTs report, has been declining.
A softening labor market can be seen as positive news for the US Federal Reserve’s efforts to combat high inflation. Historically, an overly tight labor market has been associated with inflationary pressures.
If the labor market continues to weaken in the upcoming months, it could imply that the Fed might not need to raise interest rates to control inflation and may even consider the possibility of rate cuts.
This scenario could be favorable for Bitcoin, as looser financial conditions have historically driven up the prices of risk assets like cryptocurrencies and growth stocks.
Bitcoin Reverses Upside as SEC Chair Gensler Lambasts Crypto Industry
Bitcoin’s brief rally above $26,800 was short-lived as the cryptocurrency has now dropped back to the $26,500 range, erasing most of its earlier gains. The drop followed a speech by SEC Chairman Gary Gensler, where he discussed the agency’s decision to sue Coinbase and Binance earlier in the week.
During his speech, Gensler emphasized that having additional utility does not exempt a cryptocurrency from being classified as an investment contract. He also criticized the crypto industry for knowingly taking enforcement risks as a part of their business strategy.
Crypto traders are now eagerly awaiting a speech from Coinbase CEO Brian Armstrong, scheduled later in the day at the same conference.
Where Next for the BTC Price?
In the upcoming weeks, Bitcoin could potentially maintain a negative bias as investors carefully consider the rapidly changing regulatory environment in the US and the shifting macroeconomic landscape. The cryptocurrency has recently fallen below its 100-Day Moving Average and remains within a downward trend channel, indicating a strong possibility of retesting recent lows near the significant long-term support level in the mid-$25,000 range
The upcoming release of the US Consumer and Producer Price Index data next week, coinciding with the Federal Reserve’s monetary policy announcement, presents a significant risk event that could impact Bitcoin. Currently, money markets anticipate the likelihood of an additional interest rate hike by the Fed, expected to take place in July, resulting in a range of 5.25-5.5% from the existing 5.0-5.25%.
However, if the year-on-year Consumer Price Index (CPI) drops significantly to 4.1% from its previous level of 4.9%, expectations for another rate hike could diminish. This shift in expectations has the potential to act as a catalyst to propel Bitcoin out of its recent bearish trend channel.