Written by: Forbes

Translated by: AididiaoJP, Foresight News

This week, Bitcoin staged a strong rebound from recent lows, with prices returning above 60,000 dollars. Previously, after U.S. President Trump returned to the White House, Bitcoin fell to a low not seen in years, with the market even warning of a potential "Ponzi scheme" collapse.

Since the beginning of this year, Bitcoin's performance has been sluggish, with prices down more than half from the year's peak. Although the world's largest asset management firm BlackRock is quietly positioning for the next phase of Bitcoin and cryptocurrency revolution, the latest data on the U.S. economy has brought unfavorable signals to the crypto market.

Just as some cryptocurrencies were predicted to potentially surge 50 times, creating "generational wealth," the June employment report was released in the U.S., falling far short of expectations.

The report shows that the U.S. economy added only 57,000 jobs last month, significantly lower than the Dow Jones economists' expectations of 115,000. However, the unemployment rate fell from the expected 4.3% to 4.2%. Nic Puckrin, founder of Coin Bureau and former Goldman Sachs analyst, analyzed in an email: "On the surface, the data seems to indicate that the labor market is rock solid, but the actual job additions are far below expectations, and the labor participation rate dropped by 0.3 percentage points. This may simply be because many people have given up looking for work, making the data appear not so bad."

For the new Federal Reserve, which prioritizes curbing inflation, wage growth data is more critical than overall employment numbers. Average hourly wages accelerated year-on-year to 3.5%, which is bad news for those expecting a shift to easing policy. Strong wage growth will continue to fuel the inflation monster — which is exactly what Chairman Kevin Waller is most concerned about. As long as wage increases remain high, expectations for interest rate hikes in 2026 will be hard to eliminate.

After the employment report was released, Bitcoin prices continued to rise, briefly touching 63,000 dollars. Traders are now focusing on the July Consumer Price Index (CPI) data to gauge how the Fed under new Chairman Waller will adjust its interest rate policy.

Analysts at Bitfinex noted: "The June CPI data to be released on July 14 will be a key turning point. The inflation rate in May was as high as 4.2%, while the market expects the Fed to maintain interest rates in the 3.5%-3.75% range during the meeting on July 28-29. Waller's previous remarks leaning towards easing have relieved some pressure on risk assets."

A team led by ING analyst James Knightley wrote in a report that the July CPI is expected to show a month-on-month decline in overall prices, mainly due to the sharp drop in gasoline prices. "This may further drive market expectations that the Fed will maintain interest rates unchanged for an extended period this year rather than raising them."

In recent weeks, oil prices have plummeted, falling back to levels seen before the outbreak of the U.S.-Iraq war. Traders believe that the oil supply surplus helps relieve inflationary pressures and prompts the Fed to lower borrowing costs. Trade Nation senior market analyst David Morrison stated: "Bitcoin continues to rebound; lower borrowing costs often improve liquidity and support risk-sensitive assets like Bitcoin."

Morrison added: "Weak employment data has eased market concerns about multiple rate hikes from the Fed this year, leading to a weaker dollar and a general rise in risk assets, improving sentiment in the Bitcoin market."

However, some believe that this employment report is not bad news for Bitcoin. Some investors are betting that the Fed will shift to easing in the second half of the year, supporting the 'devaluation' trade of the dollar, including gold and Bitcoin. Stephen Coltman, macro head at 21Shares, said: "The market originally expected strong employment data, but the actual results fell far short of expectations, accompanied by significant downward revisions to previous data. The pricing for additional tightening by the Fed this year has become increasingly unreasonable. Inflation expectations have significantly receded, and current policies are becoming increasingly restrictive. This paves the way for a shift to easing in the second half of the year, positively impacting 'devaluation' trades like precious metals and cryptocurrencies that have been weighed down by the Fed's hawkish stance this year."

The current market pricing indicates that the Fed may raise interest rates only once this year (by 25 basis points), but Waller's statements this week at the global central bank governors' meeting have prompted investors to lower their bets on monetary tightening.

Waller stated at the annual conference for international policymakers and economists held by the European Central Bank in Portugal: "Inflation expectations in the first four weeks of this period have decreased, and inflation risks are lowering." He did not specify whether the Fed would raise rates at the next meeting at the end of July, but the market currently believes there is an 82% probability of maintaining interest rates unchanged.

Looking ahead, Bitcoin prices will remain highly sensitive to upcoming U.S. economic data, especially employment, inflation reports, and Fed policy expectations. Simon-Peter Massabni, head of business development at XS.com, pointed out: "If economic data continues to show resilience, expectations for rate cuts will weaken, and a stronger dollar will put additional pressure on cryptocurrencies. Conversely, if data points to a significant slowdown, expectations for monetary easing will return, giving Bitcoin a chance to recover some lost ground. In my view, the relationship between Fed policy and Bitcoin has never been as important as it is today."

Massabni believes that the three core variables that will determine Bitcoin's trajectory in the coming months are: the flow of institutional ETF funds, geopolitical developments, and Fed rate expectations. "If these factors gradually improve, the current sell-off may ultimately be seen as a long-term buying opportunity rather than the beginning of a bear market. Conversely, if pressures persist, high volatility will continue until the market finds a solid price bottom."