These data and related situations may affect the cryptocurrency market in the following ways:
• Impact on interest rate cut expectations and capital flow: A decrease in initial unemployment claims indicates a certain resilience in the labor market, which may lead the market to lower its expectations for a rate cut by the Federal Reserve in September. Previously, Powell hinted at the possibility of a rate cut to address risks in the labor market; if rate cut expectations weaken, funds that were ready to flow into risk assets due to anticipated rate cuts may pause their positioning, which is unfavorable for attracting incremental capital to the cryptocurrency market in the short term. If the market ultimately determines that rate cuts will be delayed or reduced in magnitude, capital may be more inclined to stay in traditional stable assets, suppressing the activity in the cryptocurrency market.
• Easing recession concerns stabilizes coin prices: Low layoff levels combined with a decrease in initial unemployment claims can alleviate market concerns about a recession in the U.S. When concerns about an economic recession diminish, the demand for cryptocurrencies as a safe haven will weaken, but the overall panic in the financial markets may ease, potentially preventing rapid declines in coin prices due to panic, which is beneficial for stabilizing the prices of mainstream cryptocurrencies like Bitcoin.
• Indirect impact of dollar fluctuations: The Federal Reserve's interest rate decisions often influence the strength of the dollar. If changes in rate cut expectations lead to fluctuations in the dollar's movement, it may indirectly impact cryptocurrencies. Typically, a stronger dollar puts cryptocurrencies under selling pressure; conversely, a weaker dollar can sometimes provide upward momentum for cryptocurrencies, as some investors may turn to them to hedge against dollar depreciation.
• Impact on market sentiment and confidence: Sentiment in the cryptocurrency market is easily influenced by key U.S. economic data and Federal Reserve movements. Fluctuations in U.S. employment data and the complex judgment scenarios regarding rate cuts can increase market uncertainty, leading investors to be cautious, which subsequently reduces trading activity.
