The cryptocurrency market has been range-bound since the Bitcoin ETF was approved. The main reason for the difficulty in rising is economic indicators that are dampening investor sentiment. In the same case, a Bloomberg report highlights liquidity issues that have recently been at the top of investors' concerns, suggesting that the year ahead could be very volatile. However, there are some positive signs for the market, and sentiment remains mixed.
JP Morgan hints at a volatile year ahead
Bloomberg earlier reported that volatile markets are expected to pose the biggest daily challenge for the second year in a row, according to JPMorgan's annual survey of institutional investors. The most important issue regarding market structure is access to liquidity, which is more important than data costs or regulatory changes.
US jobs report suggests growth is much faster than expected
According to Deloitte, the U.S. saw a surprising and unexpected jump in hiring in January. Current data suggests that job growth is much faster than expected. Additionally, the majority of job growth from June to November 2023 occurred in the leisure and hospitality healthcare sector, after being hit hard by the pandemic. However, employment growth in January was minimal in the leisure and services industry and moderate in the health care sector. Instead, other sectors of the economy, such as manufacturing, retail, government, and professional services, contributed most of the employment growth. Unsurprisingly, given the strength of the job market, revenues also grew rapidly.
Fed signals delay in rate cuts and rising interest rates will weigh on crypto market
The Federal Open Market Committee has decided to maintain the target range for the federal funds rate at 5.25% to 5.5%. The move was in line with broader market expectations, as investors had priced in a nearly 96% chance that the Fed would keep interest rates unchanged, according to the CME FedWatch tool. However, the disappointing follow-up to the interest rate decision was the Fed's comments suggesting that it may take some time to cut rates. Expectations of an early interest rate cut kept markets floating around the world, but sentiment turned bearish after the Fed said it needed to evaluate all data points before cutting rates.
The Federal Reserve's interest rate decisions have long been a key metric used by investors to evaluate investments. Lower interest rates often reduce the value of government securities and make assets such as cryptocurrencies more attractive.
Wall Street remains bullish on the stock market
According to a report from Yahoo Finance, various securities and financial companies have taken a bullish view on the stock market. The move came despite concerns about delays in lowering interest rates by the US Federal Reserve. However, a report from Yahoo Finance shows that positive economic news should not be interpreted as “bad” just because it may signal an impending rate hike by the Federal Reserve. Rather, positive economic news indicates that business activity is increasing, which is great for the stock market. And that's usually good news for investors in the long run.
Global layoffs indicate labor market uncertainty
Global job cuts that began in 2023 will continue into 2024. Holding back already severe market sentiment, the layoffs are impacting nearly every sector, from technology to financial markets.
It was just yesterday. Snap Inc, the creator of the SNAP token, has announced layoffs. Snap's decision to reduce its workforce by 10% was made in conjunction with other global companies. Big tech companies such as Alphabet and Amazon announced job cuts in January. The financial sector is grappling with similar issues, with Deutsche Bank announcing job cuts last week. In response to the same lawsuit, banking giant Citi announced it would cut about 20,000 employees. The job cuts at both banks came after they announced disappointing earnings for the quarter. Earlier, investment banking giant BlackRock also announced it would lay off 3% of its workforce.
Even crypto and Web3 companies are bracing for the effects of the same uncertainty. One example is Polygon Labs' decision to reduce its workforce by approximately 19%. However, the company clarified that the job cuts were not for financial reasons, but to improve business performance.
Where will the head of the crypto market post this?
Crypto markets typically track larger financial markets. Historically, volatile and uncertain financial markets are not good news for the crypto asset space. Cryptocurrency markets perform best in stable market conditions where investor appetite for riskier assets is high.
CoinGape previously reported that various institutions are betting that the price of OG crypto will rise in the future. This includes Bitwise's prediction that the price of Bitcoin will exceed his $80,000 mark in 2024. According to Coinbase, institutional investment in Bitcoin will remain the main focus for at least the first half of 2024.
However, if a broader global market downturn were to occur, the ripple effects would be felt in the crypto market as well. This can come in the form of either a reduction in trading volume or a slowing of the upward price trend.
