Could US Nonfarm Payrolls provide directional cues Bitcoin needs?

Bitcoin price is likely to see an additional spike in volatility as the United States Nonfarm Payrolls (NFP) number for August is set to be released on September 1. This event, in conjunction with others, will be a key data set that the US Federal Reserve will use to make interest rate decisions in September. 

Also read: US Core PCE within market expectations in July, Bitcoin price likely to begin recovery

Key macroeconomic events that could affect Bitcoin price

According to forecasts, the total number of jobs added in August is around 170,000, which is a decline compared to July’s 187,000. This event is critical and can induce volatility in both the traditional and crypto markets should it deviate far from the forecasts.

Here are three possible outcomes for the US NFP numbers, which will be released on September 1 at 12:30 GMT. 

The US Dollar is the common denominator in both markets. Hence, the effect of the NFP event on the Greenback needs to be understood first. 

1. NFP comes in hotter than expectations: This would indicate that the interest rate hikes have not held down job creation and indicate a higher probability of interest rate hikes from the Fed. A higher interest rate discourages borrowing and investment and encourages lending. Hence, investors are likely to sell risk-on assets like stocks or Bitcoin.
2. NFP comes in equal to expectation: Such a result could lead to lower expectations of future rate hikes. In this case, the stocks and crypto markets are likely to rally while the US Dollar faces a sell-off.
3. NFP comes in lower than expectations: This move would likely have a bullish effect on risk-on assets, but investors need to wait for interest rate decisions to get a better understanding.

Other factors affecting Bitcoin price moves

US Core PCE Inflation

In addition to the NFP data release, investors should watch out for the Core Personal Consumption Expenditure (PCE) price index, which has met the 4.2% expectation for the annual rate. Also known as Core PCE inflation, it is the Fed’s favored inflation gauge. Although Fed Chair Jerome Powell’s opening speech at the Jackson Hole Symposium gave away July numbers, the after-meeting press release said, “the data point for July 2023 is an estimate based on consumer price index and producer price index data.”

So, this event, while key, is unlikely to play an important role this month. 

ADP Employment Change

The private sector employment published by Automatic Data Processing (ADP) on August 30 came in below the expectation of 195,000. ADP noted the private sector added 177,000 in August as opposed to the revised July numbers, which stand at 324,000.

Spike in Bitcoin and stock market correlation

Due to the sudden spike in Bitcoin’s correlation to stock market indices over the last month, there is a chance for the pioneer crypto to follow the stock market. Hence, any and all macroeconomic events that affect the US stock market is likely to affect cryptos as well.

Grayscale’s victory against SEC and upcoming ETF decisions 

Bitcoin price saw a brief comeback in volatility on August 29 after Grayscale’s victory against the US Securities and Exchange Commission (SEC). This caused BTC to climb 8% in a matter of minutes. As mentioned in a previous publication, the SEC is set to make a decision for seven spot Bitcoin ETFs in the next five days. If this new investment vehicle is approved, it could trigger a FOMO-driven rally that propels Bitcoin price to $40,000 and disregards the macroeconomic event.

Read more: Spot Bitcoin ETF has a 75% chance of approval in 2023, analysts say

Conclusion

Yes, the US NFP could provide another spike in volatility for Bitcoin price, but it is unlikely that this push will last for a large enough period for traders to take a punt on a directional trade. As a result, the macroeconomic data will have an effect that is nothing but ephemeral. 

Still, the Fed could resort to either keeping the interest rates higher for longer or, worse, announcing another 25 basis point hike when it meets on September 19-20. The latter scenario is not outside the realm of possibility, and if it were to manifest, investors would notice both the stock and crypto markets heading south.