Bitcoin and other risk assets could stand to benefit from a weakening job market and increasing unemployment in the United States, the world’s largest economy.
The unemployment rate in the United States increased to 4.1%, surpassing the previously anticipated 4.0%, and reaching its highest level since December 2021.
The U.S. economy added 206,000 jobs in June. While this is above the expected 191,000, it is considerably lower compared to the 272,000 jobs added in May, which was subsequently revised to 218,000, according to the nonfarm payroll data published by the Bureau of Labor Statistics on July 5.
A weakening labor market in the United States could be a positive catalyst for Bitcoin’s (BTC) price, according to Jag Kooner, the head of derivatives at Bitfinex. Kooner told Cointelegraph.
“If the NFP report shows weaker-than-expected job growth, it could increase expectations for future rate cuts, which might bolster Bitcoin prices as investors seek alternative assets in anticipation of a looser monetary policy.”
The price of Bitcoin has remained trapped in a downtrend for over a month, falling below the significant $60,000 mark.
Bitcoin falls below $54,000 to a four-month low
Bitcoin's price dropped by over 10.5% in the 24 hours leading up to 1:04 pm UTC on July 5, reaching a more than four-month low of $53,550. According to Bitstamp data, the last time Bitcoin traded at this level was in February 2024.
While some traders worry that the bull cycle has ended, other analysts, like the popular analyst Rekt Capital, view the current correction as consistent with past Bitcoin corrections.
The analyst wrote in a July 4 X post:
“This pullback is -21% deep & 45 days long. In this cycle, average retrace depth is -22% & average retrace duration is 42 days. In terms of retrace depth, this is almost an average retrace. In terms of retrace duration, this is an above-average pullback.”
What about Bitcoin ETF flows?
Institutional inflows from the United States spot Bitcoin exchange-traded funds (ETFs) have also been lagging behind.
The U.S. ETFs are headed to log their third consecutive week of net negative inflows, with over $315 million worth of cumulative net outflows so far this week, according to Dune data.
Bitcoin ETF flows could potentially see an uptick, if the weakening labor market can drive expectations of a potential interest rate cut, according to Kooner. He said:
“Bitcoin ETF flows might see an uptick if market participants believe that economic uncertainty will drive the Fed towards eventual rate cuts, enhancing the appeal of Bitcoin as an inflation hedge. However, significant inflows would depend on broader market sentiment and risk appetite.”
However, Kooner also notes that there has recently been a lack of inflows and “dip-buying” purchases.