Spot ETFs Alone Won’t Cut It: The Macroenvironment’s Role In Bitcoin’s Rally

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The recent surge in Bitcoin prices, defying earlier expectations, has intrigued both cryptocurrency enthusiasts and financial experts. While the narrative around the impending launch of Bitcoin spot exchange-traded funds (ETFs) has garnered significant attention, a new report from QCP Capital suggests that macroeconomic factors are the primary driving force behind the rally. 

The report also highlights the impact of recent job data on the Federal Reserve’s stance, leading to a 95% probability of unchanged interest rates in December.

Source: QCP Capital

The Rise Of Bitcoin: A Macroeconomic Tale

Contrary to the popular belief that Bitcoin’s rally is solely attributed to the anticipation of spot ETFs, experts like Greg Magadini of QCP Market and CTF Capital argue that broader macroeconomic forces are at play.

Bitcoin’s ability to maintain its price around the $35,000 mark has been pivotal in this regard. This stability was achieved after the release of crucial job data, which, in turn, influenced the Federal Reserve’s monetary policy decisions.

Last week’s payroll data brought a mixed bag of news. While the jobless rate rose to 3.9%, wage growth experienced a softer-than-expected growth rate. Job creation in October also slowed to 150,000, following an impressive gain of 297,000 jobs in September.

These labor market dynamics have created an interesting dynamic in the broader financial landscape. The Federal Reserve, which had been contemplating raising interest rates, is now reconsidering its stance due to the uncertain economic indicators.

BTCUSD trading at $34,862 on the 24-hour chart. TradingView.com

Federal Reserve’s Revised Odds

The CME FedWatch tool now indicates that traders have assigned a 90.2% probability to the Federal Reserve maintaining its current interest rates in December. This marks a significant shift from the 80% probability before the release of the payroll data. The reasons behind this change are twofold.

Firstly, a smaller than expected Treasury Q1 supply estimate combined with a dovish Federal Open Market Committee (FOMC) statement have sent bond yields plummeting.

Secondly, this drop in bond yields has, in turn, ignited a surge in risk assets, including cryptocurrencies.

Source: CME Group

The Link Between Jobs And Bitcoin

The nexus between job market data and Bitcoin may not be immediately apparent, but it is significant. The Fed’s decision on interest rates has a substantial influence on the financial markets, including currencies. A stable interest rate environment can be favorable for risk assets, as it can encourage investment. 

Hence, the recent job data, which seems to have restrained the central bank from raising rates, has resulted in a positive development for Bitcoin and other cryptocurrencies.

At the time of writing, the current Bitcoin price, according to CoinGecko, stands at $34,920, with a 24-hour gain of 0.2% and a seven-day rise of 1.9%. The coming weeks will undoubtedly be pivotal as market participants eagerly await the Fed’s next move and the evolving macroeconomic landscape.

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