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Crypto Investors Cautious Despite Positive U.S. Jobs Report

3 mins
Updated by Ryan Boltman
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In Brief

  • Bitcoin broke out from a previous bearish run, while ADA rose 2% after U.S. Nonfarm Payrolls Report revealed slower wage growth and lower unemployment.
  • While the signs are good that the Fed may slow its interest rates and mark a turnaround for risky assets, crypto investors remained unconvinced.
  • Cryptos will likely follow track stocks closely in 2023, barring bullish or bearish crypto-specific developments like the approval of an ETF or the collapse of another crypto company.
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Bitcoin broke even after a bearish run in the last 24 hours, but remained mostly flat, as the Dec. 2022 U.S. Nonfarm Payrolls Report revealed slow wage growth unlikely to reduce interest rate hikes in the short term.

On a bearish day, Bitcoin rose to break even at $16,791 after trading between $16,500 and $17,500 for most of the previous month. ADA rose 1.91% to $0.2716, while Ethereum was more or less flat at $1,251.

BTC/USD | Source: CoinGecko

The Nasdaq rose 1% in premarket trading, while the Dow Jones Industrial climbed 370 points after the report was released. The S&P 500 rose 1.1%.

Nonfarm Jobs Report Reveals Strong Job Growth, Weak Earnings

The U.S. Nonfarm Payrolls report revealed 223,000 jobs created in Dec. 2022, higher than the 203,000 estimate and down from 263,000 in Nov. 2022. Unemployment in Dec. 2022 fell to 3.5% from the revised figure of 3.6% in Nov. 2022, beating the widely-accepted 3.7% estimate. A lower unemployment rate means that job demand and supply are leveling out.

U.S. Unemployment Rate
Source: YCharts

Average hourly earnings came in at 0.3%, 0.1% lower than analysts’ estimate of 0.4%, which should be good news for the Federal Reserve since slower wage growth validates its tightening thesis.

U.S. Hourly Wages
Source: YCharts

Hourly earnings were also up 4.6% compared to one year ago. Services wages rose more than goods wages in Dec. 2022, with leisure and hospitality adding 67,000 jobs.

The number of people looking for work increased by 0.1% to 62.3%, putting marginally lower pressure on wage growth.

The U.S. Bureau of Labor Statistics releases the job report on the first Friday of every month. The jobs report reveals job increases in the United States, excluding farm workers, government employees, and employees of private households.

Fed Message Unlikely to Change

Despite the slower wage growth and lower unemployment, Michael Schumacher of Wells Fargo suggests that the Federal Reserve is unlikely to alter course at its next Open Markets Committee meeting.

The Federal Reserve’s dual mandates to maintain price stability and ensure full employment saw it increase the federal funds rate by 0.75% four times in 2022 alone as inflation ran red hot. Most recently, it slowed its increases to 50 basis points in Dec. 2022.

“I don’t think it really changes the Fed’s view of the world that much. It’s positive for the Fed because it doesn’t seem like earnings are going up parabolically anymore. But I don’t think it changes the discussion at the upcoming meeting,” Schumacher told CNBC.

Additionally, this slowdown is a mild respite from the relative strength of the U.S. Labor Market in the last two years, making the Fed unlikely to slacken the intensity of its tightening policy.

he underwhelming crypto market response to the job report reflects that crypto traders do not yet see anything to write home about. For most of 2022, cryptocurrency prices have tracked the response of risk assets to macro news.

One factor that is likely to see cryptos return to previous volatility is positive news surrounding U.S. crypto regulation or the approval of a spot exchange-traded fund (ETF).

Grayscale Investments has so far been unsuccessful in converting its Bitcoin Trust into a spot Bitcoin ETF to allow the Trust’s share price to more accurately reflect the value of the underlying Bitcoin.

Wider adoption of crypto payments in 2023 through innovations like Bitcoin’s Lightning Network could also prove bullish, as recent reports revealed a growth in its use for payments in 2022. MicroStrategy’s Michael Saylor has already announced that developments are underway to create enterprise-grade Lightning Network web plugins for businesses to easily monetize user engagement.

For Be[In]Crypto’s latest Bitcoin (BTC) analysis, click here.

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David Thomas
David Thomas graduated from the University of Kwa-Zulu Natal in Durban, South Africa, with an Honors degree in electronic engineering. He worked as an engineer for eight years, developing software for industrial processes at South African automation specialist Autotronix (Pty) Ltd., mining control systems for AngloGold Ashanti, and consumer products at Inhep Digital Security, a domestic security company wholly owned by Swedish conglomerate Assa Abloy. He has experience writing software in C,...