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Interest rate cuts, increases in the M2 money supply, structural deficits, and geopolitical tensions typically drive Bitcoin’s price higher.
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Non-farm payroll data for November was higher than expected. However, the data also revealed an accompanying uptick in unemployment, which could pressure the Federal Reserve to cut interest rates later this month.
According to analysts, the likely interest rate cuts may spur investor appetite for Bitcoin (BTC).
A total of 227,000 new jobs were added for November, beating expectations of 220,000, as unemployment rose to 4.2%. In a statement to Cointelegraph, Zach Pandl, head of research at Grayscale Investments, wrote:
“Today’s jobs report likely solidifies the case for another Fed rate cut at its upcoming meeting. All else equal, lower official interest rates tend to weigh on the value of the Dollar and benefit other currencies including Bitcoin.”
“Despite the retreat from above $100k yesterday, Grayscale Research thinks the crypto rally can extend into the New Year,“ Pandl continued.
The Grayscale researcher’s prediction was echoed by other analysts, who likewise said the numbers would likely cause the Federal Reserve to cut rates.
Current unemployment rate. Source: Daniel Zhao, Glassdoor
Related: Bitcoin is a competitor to gold, not the US dollar, reiterates Fed’s Powell
All eyes on the Federal Reserve
On Dec. 2, the CME FedWatch prediction tool forecast a 74.5% chance that the Fed would lower interest rates by 0.25% following its Dec. 17-18 meeting.
The odds of an interest rate cut grew following remarks from Federal Reserve Governor Christopher Waller indicating support for a December reduction.
“I believe that monetary policy is still restrictive,” Waller said.
“I expect rate cuts to continue over the next year until we approach a more neutral setting of the policy rate,” the Fed Governor continued.
In November, the price of Bitcoin tumbled by nearly 3% after Fed Chair Jerome Powell told the media, “The economy is not sending any signals that we need to be in a hurry to lower rates.”
Jamie Coutts, the chief crypto analyst at Real Vision, recently predicted that the Federal Reserve would increase the M2 Money Supply — a measure of the total money supply currently in circulation — by approximately $20 trillion in 2025.
The analyst said the increased liquidity may attract $2 trillion in capital to the Bitcoin markets and pointed to historical data showing that Bitcoin tends to absorb approximately 10% of the newly created money supply when M2 increases.
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This article first appeared at Cointelegraph.com News
