Thoughts on the data released by TMR and what is the good/bad scenario for BTC price?
Markets are currently in the middle of an important regime change which is historically the most volatile juncture for macro assets. A suddenly weakening US economy with slowing inflation shifted the macro narrative from “higher for longer” to “are we heading into a recession”, and the market is now almost singularly focused on job data over everything else. We are starting the post-holiday week on a soft note, with yesterday’s Challenger job survey reporting a +193% jump in job cuts in August vs July, with the monthly announcements at the highest since 2009 (excluding COVID).
The reaction to NFP will be nuanced and dependent on details. The ideal case for equities and BTC will be for a number that is just weak enough, but not so weak to induce imminent recession concerns so that the Fed can still be seen as ahead of or ‘on time’ with the economic trajectory.
However, stronger-than-expected NFP, or high average hourly earnings will take the current 35bp Sep implied cuts (50% of 50) likely back down towards 25bp, which would disappoint risk assets, rally the USD, and hurt crypto prices. Similarly, much weaker-than-expected payrolls will raise alarm bells that the economy is already at or close to a recession, which could be the worst-case outcome as all risk assets, including crypto, will be sold off aggressively in a true risk-off manner.
As such, we think the risk-reward is for weaker equity and crypto prices out of the number, by probability and current market positioning (after the strong August equity rally). The data must be ‘just right’ for risk prices to continue levitating in an extension of the goldilocks scenario.