Wednesday was another trading session full of losses for all types of cryptocurrencies. Several macroeconomic news items from the previous day continued to push down sentiment, as did rising bond yields. As a result, more than a few investors were strictly in sell mode.
There were a great many red numbers next to the names of altcoins, both major and minor. Meme token Shiba Inu (SHIB -1.55%) was trading down by more than 4% from 1 p.m. ET to late afternoon, and Litecoin (LTC -0.34%) had sunk by 3%. Joining them on the downward march were utility cryptos Cardano (ADA -5.47%) and Solana (SOL -0.39%), which were heading south at rates of nearly 9% and slightly over 5%, respectively.
Of jobs and bond yields
As usual, these coins and tokens were taking a cue from perennial crypto leader Bitcoin, and that wasn’t a good thing. After hitting the vaunted $100,000 level last month, Bitcoin has been rather wobbly ever since. It had quite the bull run last year, and like any asset that has grown relatively expensive, it can be vulnerable when unfavorable news breaks.
On Tuesday, the federal government’s Bureau of Labor Statistics published the November job openings figure. It tallied 8.1 million, representing a modest but notable rise from the October number of 7.8 million.
All things being equal, a rise in job openings means increased economic activity, i.e., higher spending throughout the economy. That’s positive news for any asset class, right?
Not necessarily. Cryptocurrencies are sensitive to developments in the macroeconomy in a somewhat counterintuitive way. As they are seen by some as a hedge against the “mainstream” financial system, what’s considered good for the broader economy might be taken as detrimental to coins and tokens.
Crypto investors worry that a hot economy could lead to a rise in inflation. As we’ve seen over the past few years, ballooning inflation leads central bankers to lift interest rates in an effort to cool things down. Higher interest rates boost the attractiveness of securities like bonds, draining money from riskier assets such as cryptocurrencies.
That seems to be playing out since news broke of the Bureau’s latest jobs data. The yield of the benchmark 10-year U.S. Treasury note has risen significantly as investors digested the figures.
Sell signs?
I don’t feel this will trigger an aggressive and sustained sell-off of cryptocurrencies. Demand remains strong for all manner of coins and tokens, and the market as a whole feels resilient. It’ll take quite a bit more than an uptick in job openings to put pressure on this market, and unless we get a major negative development in the near future, I don’t see it taking a serious tumble.
Eric Volkman has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin, Cardano, and Solana. The Motley Fool has a disclosure policy.
