The trio of softer-than-expected economic reports released on Wednesday has sparked renewed speculation about potential interest rate cuts by the Federal Reserve. This comes as the U.S. economy shows signs of losing steam, a development closely watched by crypto enthusiasts speculating on its impact on Bitcoin.
Weak Economic Signals
Wednesday’s data parade started with the lackluster ADP private payroll report, which recorded a mere 37,000 new jobs in May—far short of the 115,000 predicted by analysts and a significant drop from April’s already tepid 60,000. It’s the lowest figure since March 2023, highlighting persistent labor market woes. President Trump weighed in on Truth Social, urging Fed Chair Jerome Powell to lower rates, echoing sentiments from some corners of the market.
The ISM Services report followed, clocking in at 49.9, just shy of the 50-mark that indicates economic contraction. This marks the first time in a year that the sector has dipped into contraction territory, a signal many investors find unsettling. Adding to the growing chorus of concern was the Federal Reserve’s Beige Book, which painted a picture of slight economic decline and a pessimistic outlook in several districts.
Impact on Fed Policy and Bitcoin
These reports have sent shockwaves through the bond market, with the 10-year U.S. Treasury note yield plummeting to 4.36%, its lowest in a month. As a result, expectations for a Fed rate cut in July have climbed to 29% from 22% just a week ago. Looking further ahead, the probability of one or more rate cuts by September has risen sharply to 76% from 58%. As explored in our recent coverage, Bitcoin price about to ‘blast’ higher as Fed rate cut odds jump to 60%, this could have significant implications for the cryptocurrency market.
But how does this all play into Bitcoin’s narrative? The conventional wisdom that Bitcoin needs an accommodative Fed may be losing its luster. The leading cryptocurrency surged nearly 50% from mid-April to a record high just two weeks ago, defying the Fed’s hawkish stance. Still, a softer monetary policy might offer some tailwind, even if Bitcoin currently remains indifferent, trading quietly around the $105,000 mark.
Labor Market and Inflation Concerns
The upcoming government jobs report, due out Friday, looms large. A disappointing figure could strengthen the case for a summer rate cut, potentially shifting interest rate dynamics from a headwind to a tailwind for risk assets, including Bitcoin. Economists expect 130,000 new jobs for May, with unemployment steady at 4.2%.
Marc Ostwald, chief economist at ADM Investor Services International, shared his insights with CoinDesk. “The ADP report does signal a genuine slowdown in labor demand, especially at SMEs which modestly shed jobs—important since they typically account for around two-thirds of job growth,” he noted. Ostwald pointed to policy uncertainty and immigration clampdowns as key factors contributing to labor market stress, potentially exacerbating inflationary pressures due to increased competition for a shrinking labor pool.
Uncertain Road Ahead
The broader question remains: how enduring is this economic slowdown? Ostwald cautions that the longer it persists, the higher the risk of significant layoffs, which could weigh heavily on wage growth and shift job security concerns to the forefront for employees. This uncertainty casts a shadow over any potential Fed rate cuts and their ability to stimulate growth. For more insights on how these developments could affect the crypto market, see our Crypto Daybook Americas: All Eyes on Jobs, Fed as Bitcoin Prepares for Breakout Rally.
As investors and analysts alike await Friday’s job report, Bitcoin’s resilience amid economic turbulence raises intriguing questions about its role as a hedge against macroeconomic volatility. Will it continue to chart its own course, or succumb to the gravitational pull of traditional market dynamics? As always in the crypto world, expect the unexpected.
Source
This article is based on: Trio of Soft Economic Reports Boost Fed Rate Cut Odds, but What About Bitcoin?
Further Reading
Deepen your understanding with these related articles:
- Stagflationary Data Puts Pressure on Bitcoin, Stocks
- Bitcoin eyes gains as macro data makes US recession 2025 ‘base case’
- Bitcoin Traders Brace for ‘Sell in May and Go Away’ as Seasonality Favors Bears
Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
