Bitcoin Retreats as Strong Jobs Data Leaves Door Open for November Rate Hikes

After pushing higher through the weak, crypto came under bearish pressure on Friday as markets reacted nervously to stronger-than-expected employment figures. 

Markets now look towards this week’s US CPI results to provide a clear indication of whether the Fed will continue to aggressively hike interest rates.

Elsewhere European Union officials confirmed that the legal text for a brand new set of cryptocurrency rules had been finalized, and we discuss the performance of cryptos throughout Q3.

• Crypto retreats as stronger-than-expected US employment data is released
• Europe goes full steam ahead on crypto regulation
• Ethereum leads as cryptos outperform stocks and bonds in Q3

Crypto falls as stronger-than-expected US employment data is released

After pushing to $20,400 in the week, Bitcoin and the cryptocurrency markets came under bearish pressure on Friday as the US released better-than-expected employment data. 

The Non-Farm Payroll, which is the number of additional jobs in the US excluding farm workers, showed that the labor market had remained buoyant throughout September. Although stronger-than-expected employment data is typically bullish, both equity and crypto markets reacted bearishly. 

The addition of 263K additional jobs came in higher than the 250K expected, which left many concerned that it leaves the Federal Reserve open to implement another round of interest rate hikes at the next FOMC meeting in November. 

The Fed Chair, Jerome Powell, has, in the past, suggested that weakening employment data would provide an early indication that previous interest rate hikes were beginning to weaken the US economy and, therefore, reduce inflation.

Unfortunately, the results on Friday indicate this is not yet the case. Therefore, market analysts believe it is unlikely the Fed will relent on its plans to aggressively control the rising cost of goods and services. 

As US jobs data was released, Bitcoin immediately fell 2% and closed the day down over 2.5%. The world’s largest cryptocurrency continued to fall throughout the weekend. 

Sharp declines were also witnessed in the equity markets where the S&P 500 and NASDAQ 100 closed 2.8% and 3.8% down on the day respectively. 

One of the only cryptos to buck the bearish trend was XRP, which posted an 18% increase for the week. While the majority of cryptos traded sideways or lower, XRP soared higher as anticipation regarding Ripple’s lawsuit heightened.

All markets now look toward the release of US CPI results on October 13th, which will provide a clear indication of what the Fed will do regarding its next interest rate decision. 

US Non Farm Payroll figures from October 2021 to September 2022.

After 2 years of planning, Europe finalises crypto rules

On Wednesday, officials from the European Union confirmed that the wording for landmark crypto legislation had been agreed upon. The new legislation, which has been 2 years in the making, confirmed how Europe plans to deal with crypto regulation. 

According to a letter from the committee chair, Edita Hrda, the full legal text for the Markets in Crypto Assets Regulation (MiCA) has now been approved. 

One of the most important revelations from the new legislation is that anyone wishing to create or issue a cryptocurrency will be required by law to publish a “crypto-asset white paper.” The white paper will contain all of the necessary details of the crypto project. 

Meanwhile, stablecoin issuers will undergo specific capital checks to ensure that enough reserves are held to back the value of issued tokens. 

The legal text will now be passed to the European Parliament, which will publish it in the Official Journal of the European Union. This could mean that the new rules officially take effect as early as 2024.

The finalisation of the new crypto rules was warmly welcomed by members of the cryptocurrency community, however, some were quick to note that it still left uncertainty regarding sectors including NFTs and DeFi. 

According to a European Crypto Initiative (EUCI) co-founder, Marina Markezic, “it creates a brand new set of rules for crypto projects—ones that will change crypto’s current position as an ‘underdog’ and make it a fully-fledged participant in the financial services space. At the same time, we also believe that the industry should still remain able to innovate without any undue burdens.”

Ethereum leads as cryptos outperform stocks and bonds in Q3

According to a report published by Bloomberg, cryptocurrencies outperformed both stocks and bonds in Q3 of 2022. Above all others, Ethereum secured the most stable returns.

Increased monetary tightening and, therefore, a lack of liquidity, continue to weigh heavy on all markets, but leading cryptocurrencies, including Bitcoin and Ethereum, have managed to perform better in the third quarter of the year. 

While the NASDAQ Composite lost 4.96% of its value during Q3. Global bonds didn’t fare any better and according to a report released by the Bank of America, bonds are on track for their worst year since 1949.  

In comparison, Bitcoin lost a modest 0.23% and Ethereum gained an impressive 26.30%.

Many experts put Ethereum’s success down to the seamless implementation of the Merge, which has potentially made the coin more attractive to institutional investors. The transition from Proof-of-Work to Proof-of-Stake has made the blockchain much more ESG friendly, and more in line with the strong regulatory push toward greener blockchain networks.

In addition, Senior Market Analyst Edward Moya of Oanda Corp, said “chaos in fiat currencies is starting to make crypto look more attractive.” Moya acknowledged that “Bitcoin’s modest weakness is rather impressive given the panic selling occurring across a wide range of risky assets.”

The total cryptocurrency market cap swung between $1.18 trillion and $871 billion during the months of July, August, and September. 

Percentage change in the price of Ethereum in comparison to Bitcoin and the Nasdaq Composite.

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