Bitcoin and Gold in Their Strongest Week of the Year: This Risk Could End the Rally of Up to 7.5%

Following weak employment data from the US and strengthening expectations for a interest rate cut, Bitcoin (BTC), stocks, and gold are experiencing one of the strongest combined growth weeks of the year.

Recent data from the US economy has created significant volatility in the markets. July’s non-farm payrolls surprised investors by showing a decrease of 23,000, contrary to the expectation of an 85,000 increase. This unexpected scenario weakened the possibility of a Federal Reserve (Fed) rate hike while renewing hopes for an interest rate cut. This signal of an economic slowdown has become a driving force for both risky assets and safe havens.

Bitcoin and Traditional Assets Rising Simultaneously

According to Santiment data, markets are recording one of the most remarkable weekly performances of the year. Over the last four days, Bitcoin (BTC) gained 4.6% in value, while the leading US stock index, the S&P 500, rose by 2.9%. The largest increase occurred in gold, with a jump of 7.5%. This simultaneous rally seen in the charts shows that different asset classes are being pushed higher by the same macroeconomic tailwinds.

Weak Dollar and Rate Cut Expectations Drive Demand

The shock decline in employment data caused bond yields to retreat and the dollar to weaken globally. The dollar’s loss of value directly increased demand for assets priced in dollars, such as Bitcoin and gold. Investors are focused on increased liquidity, expecting the Fed to follow a looser monetary policy.

Although the current picture presents a bull market outlook, some risks remain on the table. A tightening labor market could lead to a drop in production and, consequently, trigger inflation again. Since this situation could limit the Fed’s room for maneuver regarding rate cuts, the sustainability of the rally seems largely dependent on inflation data remaining stable.