Employment data stirs the market: why is encryption fluctuation intensifying?

Question

The US employment report for September was released yesterday, and the contradictory combination of “cold and hot” data is reshaping market expectations.

How to view the data?

Non-farm payrolls increased by 119K, far exceeding the expected 51K—employment seems to be booming. However, the unemployment rate jumped from 4.3% to 4.4%, and wage growth was only 0.2% month-on-month. This strange combination of “strong hiring but rising unemployment rate” has completely puzzled traders.

It should be noted that these two indicators usually move in opposite directions. Their simultaneous appearance now indicates that either the statistical data has been distorted due to government shutdowns and delays, or the market is presenting a challenge to the Federal Reserve.

Why does cryptocurrency matter?

Will the Federal Reserve lower interest rates at the December meeting? This data has become crucial. The market originally anticipated a 50% chance of a rate cut in December, but this expectation has been slashed to 20%. Overnight, the probability of a rate cut has been halved.

What does this mean? The Federal Reserve may hold steady, or even maintain high interest rates. In a high interest rate environment, risk assets (including cryptocurrencies) will be sold off - as investors prefer to put their money into government bonds to earn interest, rather than trading cryptocurrencies.

How is the crypto community reacting?

BTC dropped 4.65% in the short term after the report was released. Interestingly, some sharp-eyed whales are actually buying the dip.

Barstool Sports founder Dave Portnoy panicked and spent $1 million to buy XRP, shouting “when blood is flowing in the streets is the time to buy.” Such bottom-fishing actions by high-profile investors often signal a potential reversal in market sentiment.

There are other variables

Japan's Yields Surge: The yield on Japan's 10-year government bonds has surpassed 1.7% (the highest since 2008), leading to a global capital return to Japan, pushing up U.S. bond yields, tightening liquidity, and hitting cryptocurrencies first.
Regulatory Favor: Pi Network has just achieved full compliance with the EU MiCA framework, which means it can now be listed on European exchanges. After the announcement, $PI surged 5%, and trading volume skyrocketed by 120%. Regulatory recognition is gradually increasing institutional acceptance of crypto assets.
Political Variables: Trump has indicated that he has locked in a candidate for the Federal Reserve Chair, potentially replacing Powell. Once the leadership changes, the policy tone may shift from hawkish to relatively dovish, which could be beneficial for cryptocurrencies in the long run.

Bottom Line

In the short term, the “bad news” of employment data will continue to suppress cryptocurrency (as it implies a delay in interest rate cuts). However, in the medium term, high unemployment rates will eventually force the Federal Reserve to shift towards easing, which will be the real opportunity. The current sell-off may be creating a bottom.