Bitcoin on recovery path while stocks decline on jobs data, Fed minutes

Bitcoin recovered losses from earlier in the week while stocks struggled to maintain their fourth quarter momentum. Analysts say uncertainty from the Federal Reserve on the pace of rate cuts in 2024 and optimism about the timeline for approval of a bitcoin exchange-traded fund are to blame.

Bitcoin (BTC) was trading 1.5% higher over the past 24 hours Thursday morning, rebounding from the decline that saw the cryptocurrency drop as much as 8% Wednesday. Ether (ETH) was also back in the green, gaining about 2% Thursday.

The Nasdaq Composite headed for its fifth straight day of losses Thursday at the start of the trading session while the S&P 500 traded sideways. The Nasdaq Composite is now down 2.3% since the start of the year and the S&P 500 has lost 0.8%.

The Dow Jones Industrial Average is fairing slighting better, gaining 0.3% Thursday morning and positioning it flat since the first trading day of 2024.

It’s hardly the January effect investors have been hoping for. Analysts attribute the decline to hesitation from the Fed about how many rate cuts might come in 2024 and when they could start, as demonstrated by the December Federal Open Market Committee minutes released Wednesday.

Committee members signaled that three cuts could happen this year, but they remain uncertain and will determine next steps based “on how the economy evolves,” the minutes read. Fed Funds Futures still call for six 25 basis point cuts in 2024 starting in March, according to data from CME Group.

Wednesday’s Job Openings and Labor Turnover Survey (JOLTS) results also gave traders pause. The ratio of job openings to unemployed workers remained at 1.4x in November versus the average of 0.7x since December 2000, according to data from the Bureau of Labor Statistics.

“The ratio of job openings to unemployed workers is almost back to the immediately pre-pandemic ratio, but it is still high (statistically speaking) relative to history,” Jessica Rabe, co-founder of DataTrek Research, said.

“JOLTS data may give [Fed Chair Jerome Powell] and the FOMC some pause when considering the absolute number of potential rate cuts this year,” Rabe added. “As much as the US labor market continues to cool, labor demand still far exceeds the supply of available workers.”

ETF speculation continues to move bitcoin

Bitcoin’s Wednesday decline coincided with a report from financial services firm Matrixport which questioned the likelihood of an ETF getting the green light this month. Matrixport analysts said the US Securities and Exchange Commission decision makers, which are “dominated by Democrats,” would not vote in favor of a spot bitcoin product.

“My report is not based on issuer, nor on SEC insider comments,” Matrixport head of research Markus Thielen wrote on X Wednesday. “Obviously this is massively out of consensus.”

Bloomberg Intelligence ETF analysts Eric Balchunas and James Seyffart are still calling for a 90% likelihood of the SEC approving spot bitcoin ETFs before Jan. 10.

A denial at this point would “overturn a lot of reporting, a lot of effort, a lot of work and a lot of signaling from the staff,” Balchunas added.

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