This week is chock-full of US economic news that could impact the portfolios of crypto market participants. From jobs data to information from Federal Reserve policymakers and sentiment reports, markets could be bracing for a volatile week.
Meanwhile, Bitcoin (BTC) remains below $100,000. Despite the bullish outlook, traders and investors should be prepared to adjust their trading and investment strategies around these macroeconomic data.
Cryptocurrency market waits for 5 US economic data
The following US macro data could cause volatility in crypto markets this week.
ADP Jobs Report
The ADP National Employment Report, which tracks U.S. private nonfarm employment, will be released on Wednesday. Based on payroll data from 400,000 U.S. businesses, employment growth in December expected to be 130K, down from 146K in November.
In November, ADP data showed that year-on-year wage growth for those keeping their jobs increased for the first time in more than two years. The higher-than-expected December figures would signal a stronger labor market, which could boost the dollar.
Stronger jobs data could also affect Bitcoin and cryptocurrencies. Positive employment figures could improve consumer confidence, leading to more spending and investment, including Bitcoin. Some investors may view Bitcoin as an inflation-proof asset.
However, strong jobs data could prompt the Federal Reserve to raise interest rates to prevent the economy from overheating. Higher interest rates make non-yielding assets like Bitcoin less attractive, which could push investors into traditional assets.
FOMC minutes
Markets will be watching Wednesday’s Federal Open Market Committee (FOMC) minutes, which are some of the most important US economic data of the week. These will be the minutes for the Fed meeting on December 17-18, with speakers including Thomas Barkin, Jeffrey Schmid and Patrick Harker.
What Fed policymakers say could help the market better understand the Fed’s interest rate outlook. The Federal Reserve previously signaled fewer interest rate cuts this year in the face of persistent inflation and a resilient economy.
“Globally, the December FOMC minutes will dominate discussions, as the Fed strikes a cautious tone for 2025, with just two rate cuts anticipated, reflecting a transition from previous optimism. This, along with Trump’s policy announcements, could keep markets on alert,” said user X comment.
First unemployment benefit report
On Thursday, the weekly unemployment claims report will provide more details on the US labor market. Ending January 3, initial unemployment claims fell to K211, the lowest level in eight months. This follows a drop in unemployment filings after Christmas and ends a year of low layoffs, reflecting the recent resilience of the US economy.
Unemployment claims have fallen steadily in recent weeks, after reaching their highest level in more than a year in October. While initial claims are falling, continuing claims are rising. This shows that employers are retaining workers, but those who have lost their jobs are facing challenges finding new jobs.
Between slow hiring momentum and low layoffs, the general sentiment is that this trend could continue into early 2025. This is until businesses get a grip on how President-elect Donald Trump’s policies will affect the economy.
Declines in weekly unemployment claims typically signal a stronger labor market and greater economic stability. Fewer applications indicate that more people have jobs and income. This optimistic outlook could boost investor confidence, potentially increasing interest in assets like Bitcoin.
Consumer psychology
The US Consumer Sentiment Index, especially the preliminary report released by the University of Michigan, reflects consumer confidence and optimism regarding the economy. Positive reading on Friday could lead to increased optimism across financial markets, including cryptocurrency markets. This could lead to higher demand for Bitcoin as investors look for assets with growth potential.
Similarly, if consumer sentiment is good, this could indicate that consumers are more willing to spend and take risks. This positive outlook could translate into an increase in risk appetite among investors, which could lead them to allocate more funds to cryptocurrencies such as Bitcoin.
However, information about inflation expectations that is often included in consumer sentiment data cannot be ignored. Therefore, Wednesday’s FOMC minutes will be very important. If consumers anticipate higher inflation, they may seek alternative stores of value to protect their assets. Bitcoin, often referred to as “digital gold,” could benefit from growing interest as an inflation hedge.
US jobs report and unemployment rate
The US jobs report and unemployment rate, due out on Friday, are key indicators of the health of the economy. The jobs report is expected to show an addition of 155K new jobs, down from 227K in the previous month, while the unemployment rate is expected to remain unchanged at 4.2%.
Strong job growth and falling unemployment rates typically boost investor confidence and market optimism. This positive sentiment could extend to the cryptocurrency market, attracting interest in assets like Bitcoin.
Employment data also affects investors’ risk appetite. A strong report signaling a stable labor market could encourage risk-taking, potentially increasing demand for riskier assets, including cryptocurrencies. Conversely, weak data could prompt more cautious action, affecting cryptocurrency demand.
Changes in the job market and unemployment rate can affect inflation expectations. If jobs data points to strong economic growth and rising wages, it could raise concerns about inflation. In such cases, investors may view Bitcoin as an inflation hedge, increasing interest in the cryptocurrency.
