5 min read Bitcoin is rising on Friday, extending gains from yesterday and a strong start to October as investors look past an elevated U.S. dollar and high Treasury yields ahead of today’s non-farm payroll report.
The largest cryptocurrency is trading 2.7% higher over the past 24 hours to 86k and 2.2% higher across the past seven days. Altcoins are also on the front foot, with Ethereum trading 1.7% higher and XRP up 2.6% over the past day.
Bitcoin has kicked off October, which is typically a strong month for the cryptocurrency, on a positive note, extending gains from an impressive performance through September.
Bitcoin rallied more than 6% last month, typically one of the weaker months for crypto. The cryptocurrency has now booked three consecutive months of gains and is just 1% lower year-to-date.
Bitcoin has rallied in 10 of the past 15 Octobers, with average gains of 27%. Last October, Bitcoin rallied to its record high of $126.6K before turning lower across the rest of the month.
High Yields and a Strong Dollar Remain Headwinds
Despite recent gains, the fundamental backdrop remains complicated for Bitcoin.
Elevated Treasury yields and a strong U.S. dollar are limiting the upside. The U.S. 10-year Treasury yield rose to 5.34% yesterday, its highest level since 2002, while the dollar is trading around a 17-month high.
High “risk-free” Treasury yields increase the opportunity cost of holding riskier assets such as crypto, while a stronger dollar can also weigh on Bitcoin.
However, expectations surrounding further Federal Reserve rate hikes have cooled after core PCE data this week came in softer than expected.
NFP Could Decide Bitcoin’s Next Move
Against this backdrop, attention now turns to the U.S. non-farm payroll report, which is expected to show that 90,000 jobs were added in September, down from 162,000 in August.
The unemployment rate is expected to remain unchanged at 4.1%, while average hourly earnings are forecast to rise 0.3% month-on-month.
Leading indicators are pointing to a potentially stronger report. The U.S. ISM manufacturing employment subcomponent rose to 52.7 from 51.2. ADP payrolls increased by 90,000, well ahead of the 70,000 forecast, while the 4-week moving average of initial jobless claims fell to 200,000 from 207,000.
These indicators suggest that non-farm payrolls could come in stronger than expected. However, job vacancies were lower than forecast at 7.08 million, so last month’s strong NFP figure could be revised down.
A stronger NFP report could see markets increase Fed rate hike expectations, lifting Treasury yields and the U.S. dollar further. That would reinforce the existing headwind for Bitcoin and other risk assets such as U.S. equities.
Conversely, if headline payrolls come in below expectations, combined with this week’s cooler-than-expected inflation data, markets could dial back October rate hike expectations further.
Lower yields and a weaker dollar would then provide a more supportive backdrop for Bitcoin and other risk assets, potentially allowing BTC to look towards 90k and the Nasdaq to retest record highs.
The key question is therefore whether Friday’s jobs data reinforces the yield and dollar headwind, or provides the Fed with further evidence that monetary policy can become less restrictive.
This makes the NFP report particularly important for Bitcoin because the market is already balancing two opposing forces: strong seasonal momentum and lower October Fed rate hike expectations, against elevated yields and a strong dollar on the other.
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