• Unemployment rate goes up to 3.6% as Bitcoin breaks 20k
• Markets favour 25bps instead of 50bps for upcoming FOMC meeting on 22nd March
• DXY retreats to 104.8, which sees an uplift on major currencies inc EUR and GBP
Bitcoin Breaks $20,000
Bitcoin has broken the $20,000 mark following Non-Farm Payroll (NFP) and unemployment data, as markets favoured a 25 basis point reduction from the Federal Reserve’s next meeting instead of 50 basis points. The unemployment rate has gone up to 3.6%, while the US dollar index (DXY) retreated back to 104.8, leading to an uplift in major currencies such as the Euro and Pound Sterling.
Non-Farm Payroll & Unemployment Data
The NFP report showed that 311k jobs were created in February compared to estimates of 205k, pushing the unemployment rate up slightly from 3.4% to 3.6%. This news was met with positive sentiment among investors who are now expecting a 25 basis point reduction at the upcoming FOMC meeting on 22nd March with a terminal rate of 5.50%.
Implications Of Lower Interest Rates
Lower interest rates usually lead to more borrowing and spending by businesses and consumers, thus increasing economic activity and inflationary pressures in the short-term. This could lead to an increase in demand for Bitcoin as a hedge against inflation due its limited supply and fixed monetary policy. Furthermore, lower interest rates also make it cheaper for individuals and companies to borrow money for investments or other activities which could potentially benefit cryptocurrencies in general.
The news saw Bitcoin break the $20k level immediately after the release of NFP data, while other major cryptocurrencies such as Ethereum also experienced strong gains over recent days due to increased optimism surrounding crypto markets in general. Other assets such as stocks and commodities have also seen significant rallies lately due their correlation with riskier assets such as cryptocurrencies which are often seen as safe havens during times of economic uncertainty or geopolitical unrest.
Overall, it appears that markets are increasingly favouring lower interest rates which could be beneficial for many asset classes including cryptocurrencies like Bitcoin over both the short and long term horizons given their ability to act as store-of-value investments during periods of high volatility or uncertainty in traditional financial markets. Lower interest rates may also lead to more borrowing by companies and individuals which could benefit cryptocurrency projects if they decide to invest in them instead of traditional assets like stocks or bonds going forward