A Crypto Beginner’s Guide to Off-Farm Payrolls and Its Effects on BTC

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The non-farm payroll announcement is scheduled for January 6 at 1:30 p.m. GMT. Expectations are hovering around 200K compared to 263K the previous month. If the NFP number is higher than expected, investors can expect a short-term selloff in Bitcoin price.

Bitcoin (BTC) price and general crypto markets have been highly correlated with stock markets since the COVID-19 crash in March 2020. Since then, macro news has affected Bitcoin, Ethereum and others altcoins, as well as the Non-Farm Payrolls (NFP) Monthly release is one such significant event, with the December release set to be released on January 6 at 13:30 GMT.

What is the non-agricultural payroll?

Non-farm payrolls, also known as NFP, is a measure of the number of workers who were employed in the previous month in the United States (US). The statistic is provided by the Bureau of Labor Statistics (BLS) and excludes occupations such as farm workers, government employees, private households, landlords and non-profit employees.

Why is the NFP important?

According to the BLS, the number of non-farm payrolls consists of jobs that directly or indirectly contribute about 80% of the gross domestic product (GDP) of the United States. Therefore, the NFP provides an important assessment of the employment landscape and, in turn, provides insight into current market conditions.

Moreover, NFPs are also closely watched by the US central bank, the Federal Reserve (Fed), to assess their monetary policy. The Fed has a dual mandate to keep jobs and inflation figures at healthy levels for the economy. Therefore, the measure of jobs created or lost will set the tone for the Fed’s next interest rate hike decision.

Here are some quick examples.

Instance 1: If the NFP data for December is higher than the previous month, it indicates that more jobs have been added. This is a positive development and will indicate a stronger economy, allowing the US dollar to strengthen.

A stronger US dollar is generally negative for the stock market. Therefore, a higher nonfarm payrolls number that exceeds expectations usually results in a temporary blow to the stock market. Since crypto markets have been highly correlated to traditional markets lately, this will likely cause a similar effect on the price of Bitcoin.

Instance 2: If the NFP numbers are lower than expected, this may lead to a weaker US Dollar, which will inadvertently cause the stock and crypto markets (including BTC) to rally.

View crypto vs NFP

Taking a look at the big picture of non-farm payroll data against the price of Bitcoin, this provides a generalized view of what has happened so far and what to expect next. .

The chart below shows that Bitcoin price has almost always fallen when actual NFP data is above expectations or forecasts. The only exceptions can be seen in August and December 2022, where BTC experienced a short-term upside despite weak NFP numbers.

BTC/USD 4-hour chart against NFP

Expectations from the December NFP report and ADP

On January 6, the December non-farm payrolls figures will be announced at 1:30 p.m. GMT and the forecast hovers around 200,000. data (ADP) in the United States, which were released on Thursday.

The ADP tracks the level of non-farm private employment and is released typically two days before the BLS releases the NFP figures – although this week the data came out on Thursday due to the shortened week of New Year’s Eve celebrations. An. Therefore, market participants can use ADP to get a basic understanding of what to expect from the non-farm payroll.

According to ADP figures published on January 5, private sector employment increased by 235,000 last month against 150,000 expected. Given that the ADP numbers beat expectations, investors are expecting a similar trend for the NFP.

So, a higher than expected number will be better for the US Dollar, which will negatively impact the equity and cryptocurrency markets.

The price of Bitcoin could fall

Bitcoin price is struggling to overcome the resistance level at $16,836, which is the highest volume level since November 5. Interestingly, it also coincides with the midpoint of the broader range that BTC has put in place, ranging from $15,443 to $18,230.

Given that the Relative Strength Index (RSI) is already coming back from the overbought zone, the chances of the bulls making a comeback are slim. Additionally, strong NFP numbers will lead to a selloff for BTC.

A breakdown of the psychological level of $16,000 could likely lead to a sweep of the lows equal to $15,443.

BTC/USDT 12-hour chart

If the massive sell-off prompted by the announcement of the NFP numbers is followed by a rapid build-up in buying pressure and a rally, things could favor the bulls. If such a situation occurs, the RSI should bounce off the midpoint at 50.

In such an event, Bitcoin price could bounce off the $16,624 support level and trigger another rise to $17,306 and even $18,401.

Also Read: Ethereum Price Could Drop 12% Before Hit $1,300

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