As the new year commences, Bitcoin finds buyers at $42,670, while altcoins largely avoid significant losses. The market anticipates increased volatility in the days ahead due to a busy agenda following a long holiday break, which is expected to bring substantial macroeconomic developments.
Recent discussions have highlighted key events expected this week, but Friday deserves special attention as it could usher in a night of heightened volatility after the market break. The U.S. Bureau of Labor Statistics is set to release the non-farm employment report on January 5, 2024, which could impact market expectations.
The Federal Reserve’s optimistic statements at the end of 2024 have led markets to anticipate possible interest rate cuts for the year. However, if the upcoming employment data falls short of expectations, it could introduce a new phase of uncertainty, at least on the macroeconomic front.
Inflation is approaching 2% again, while wage increases remain moderate. The stability in oil prices offers hope, but the Fed desires more unemployment and a weakening job market to support their fight against inflation.
Caution against excessive optimism may be prudent, as New York Fed President Bill Dudley warns of risks associated with premature policy easing by the Fed or financial markets, which could stimulate the economy and hinder the Fed’s ability to reduce interest rates as quickly as the market anticipates.
Market reactions to the Fed’s optimism have been premature, translating into expectations of significant short-term interest rate cuts for 2024. Meanwhile, the Chief Investment Officer of the California State Teachers’ Retirement System predicts single-digit returns in risk markets for the election year. This Friday’s wage growth and employment data will be closely monitored by crypto investors, potentially amplifying the impact of any negative developments, especially after the recent approval of a spot Bitcoin ETF.