Key Takeaways
Why is Bitcoin rallying despite weak macro data?
Bitcoin is up 5.41% this month, driven by rate-cut expectations on a soft labor market, not hard economic prints.
Does this mean a solid bull market?
U.S. economic uncertainty, the federal shutdown, and blind optimism are keeping volatility high, making the rally choppy for traders.
Risk assets are flexing on pure “expectations” again. In under 72 hours, the total crypto market cap has jumped roughly $250 billion, with blue-chip high-caps blasting past key resistance levels, fueling a risk-on sentiment.
Zoom out, though, and the macro FUD is far from over.
The U.S. economy is slipping deeper into post-shutdown uncertainty. Payroll processing company ADP reports that U.S. companies cut 32,000 jobs in September, bringing private employment down to 134.526 million.
Source: adpemploymentreport.com
Put simply, the U.S. labor market is weakening.
Challenger, Gray & Christmas, the global outplacement firm, reported that planned layoffs by U.S. employers in Q3 totaled 202,118, marking the highest Q3 tally since 2020, when 497,215 job cuts were recorded.
On the back of this data, traders are rotating into risk assets, “pricing in” a slower economy as a catalyst for another rate cut. But does this undercut the narrative of Bitcoin [BTC] moving purely on “blind optimism”?
Federal shutdown blocks key economic signals
The shutdown has markets navigating in the dark.
The suspension of operations at key agencies, including the Bureau of Labor Statistics (BLS), has created a major blind spot for risk assets. With the BLS offline, crucial U.S. economic signals are now on hold.
This includes the monthly jobs report, originally scheduled for the 3rd of October, as well as other critical inflation data, like the Consumer Price Index (CPI) and Producer Price Index (PPI), expected around mid-October.
Source: Polymarket
Notably, that uncertainty has pushed odds of an October rate cut to 90%.
As a result, Bitcoin is up 5.41% this month. However, this rally isn’t backed by hard data, but by bullish rate-cut “expectations” fueled by a weakening labor market, leaving a blind spot on the true state of the U.S. economy.
Institutional Bitcoin flows bet big on the economic paradox
The Kobeissi Letter called the U.S. economic setup “broken.”
“We’re 26 days from the next Fed meeting with tomorrow’s suspended jobs report being the final one before their next meeting.”
It further stated,
“So, the Fed is cutting rates into rising inflation due to a weak labor market, but we can no longer receive KEY labor market data. And, when we do receive the data, it is revised down 2 times before it’s considered “accurate.” The system is broken.”
Simply put, the market is “blindly” pricing in a rate cut based on a weak labor market, while largely ignoring inflation. Case in point, U.S. inflation jumped to 2.9% in August, marking the highest level in seven months.
However, with the federal shutdown, inflation data is on the back burner. For Bitcoin, the setup is straight-up bullish, with institutions piling in. Notably, $1.3 billion has flowed into BTC ETFs, backing this paradox.
But does it really signal a bull market? The U.S. economy is still mired in uncertainty, volatility is still running wild, and blind optimism is carrying Bitcoin’s momentum, keeping the ride choppy for traders.