What the U.S. August Jobs Report Means for Crypto

The Jobs Report. The first major economic data since fed chair Jerome Powell's speech at Jackson Hole last week is out this morning. The unemployment rate was at 3.8% above the 3.5% forecasted stock index futures tied higher. But the crypto markets are a little moved as we just saw joining us now to discuss the crypto markets is bit wise crypto analyst, Brian Rasmussen. Welcome to the show, Ryan. Hi. Thank you so much for having me looking forward to it. Thanks for being here on this wonderful Friday morning. All right, let's talk about that jobs report. The August Jobs Report came out. Uh just before we started the show, it showed that the US economy added 187,000 new jobs in August, which was more than expected. I just talked about that unemployment rate rose to 3.8%. Uh What's your reaction to this data and how might it affect the crypto markets? Nothing really happened as the data came out. Yeah. Yeah. Crypto markets, you know, aren't really moving on this data? I think that does make sense to me on the fringes. It matters because as you said, it, it's, it's one of the factors that Jerome Powell is paying attention to when the fed sets interest rate policy, they want to see a slowing job market, they want to see how that affects inflation and then take that into account when they're setting the interest rate policy. I think some of the the traditional markets reacting to this news, uh kind of looking at it as a potential sign that the rate hikes might be pausing later on this year, which is obviously good for risk assets that could have a positive tailwind for Bitcoin for crypto prices as a whole. But I think largely speaking, this type of macro data doesn't really matter as much for crypto now as it did maybe a year or two years ago. And I think what's really driving crypto prices in the in the price of Bitcoin now or the regulatory developments and the technological developments. So the developments like the gray scale and Bitcoin or I'm sorry, gray scale and sec case around the spot. Bitcoin ETF is having more of an impact on markets than say macro data like the jobs report, tell me about what's changed for you. Um If we look at the crypto markets last year, um and this year, why is it um I guess so far so divided from the macro data that we're seeing come out. Yeah, it's a, it's a great question. I, I think when 2020 came around when COVID came around, we saw this convergence of all risk assets including crypto really be driven by the the rate policy and the macro environment. We've seen that fall over the past couple of years, we've seen correlations come down since there's spikes in 2020 between crypto and traditional assets like the S and P. We're seeing a a deceleration of changes in interest rate and fiscal policy which really allows crypto to kind of decouple from traditional assets. So I think the deceleration in the rate of changes and the dramatic rate of changes in interest rates is really allowing crypto to kind of separate itself from the broader traditional market. And so that's really exciting a lot of investors that we speak to look at crypto as a uncorrelated asset to traditional assets. We've had a lot of questions over the past two years, why are, is so much higher than they have been historically? And right now over the past few months, we've seen them really come down to an uncorrelated level when you look at Bitcoin and say the S and P. So it's, it's really a function of there being a slowdown in the dramatic change in fiscal policy and interest rate policy. And that's allowing crypto to kind of be driven by those those real factors that matter like techno technological developments, regulatory developments, uh and user adoption of crypto. All right, let's talk about some of those regulatory developments or maybe lack thereof. I think you can look at the story in two different ways. The SEC deferred, uh, decisions on seven spot. Bitcoin ETF, uh, applications including bit wise and Black Rocks. That information came out yesterday. At the same time, this week gray scale won their case against the SEC and the SE is going to have to take another look at their ETF, uh, application. What's your outlook here? Yeah, it's, it's been a roller coaster this week when it comes to the spot, Bitcoin ETF and the regulatory development. Certainly, uh my outlook is pretty positive, I would say for the, the potential for a spot, Bitcoin ETF, I can't talk about any of our particular filings uh specifically at bit wise. But in general, I think we're really seeing a, a policy shift uh coming in in a few months from the SEC as it relates to how it approaches crypto, obviously a really, really great ruling for the broader crypto market. Uh and when it comes to uh the prospectus for spot Bitcoin ETF in the US Court of appeals decision against the SEC with its case, uh with gray scale, uh you know, 33 judges on a panel at the US Court of Appeals kind of coming out in very strong words, in favor of gray scale kind of, you know, speaking against the SEC decision, certainly, uh bodes well for the prospect of a spot, Bitcoin ETF, I don't think the delay that happened yesterday for all of the ETF filings was really that big of a surprise for most, uh, people that are following the market closely. It's not surprising that that came right after the Grayscale decision, we knew that there was going to be a decision to delay or, or, or not delay coming this week, uh, thought it might be yesterday or today. So, really no surprise there, uh, to us that that happened, obviously, the market kind of had this, this, you know, spike on Tuesday and then, and then dropped again yesterday, uh kind of leveling out for the week on the news. I think that just shows the anticipation that the market has around, around this event and how important it is. Uh what we'll see with the decision of a spot Bitcoin ETF. And so uh the delay, not that surprising. I think we'll see more delays coming in the next few months and likely won't have a decision on a spot Bitcoin ETF uh until potentially October maybe even into early 2024. But I do think there's a chance that, you know, we'll see a pivot from the sec in the way that they are approaching, uh you know, regulating crypto and specifically their disapproval for spot Bitcoin ETF S over the past few years that might be shifting, which is really exciting. All right, Ryan, I want to turn now and look at some new data out of bit wise of. Uh a new report says that bit wise believes crypto will enter most institutional portfolios. This chart looks at Bitcoin's impact on a traditional 60 40 portfolio. Talk to me about what we are seeing here. Here comes the chart. There we are great. Yeah, this shows the the potential impact of adding Bitcoin to additional 60 40 portfolio, 60% stocks, 40% and bonds. That's that time tested strategy for most institutional investors, the way they're approaching uh investing in the markets on behalf of their clients. And so what we looked at here is if you add a little bit of crypto, most of the time, we don't recommend adding more than 5% because that can have an outsized impact on volatilities on drawdowns of the traditional portfolio. But when you add a 1% or 2.5% or 5% allocation to crypto, it can generally have a really strong benefit to portfolios without having uh any major impact to the downside. And so it it it's like Cayenne Pepper, we like to say, you know, a little bit goes a long way. But ultimately, this just shows that adding Bitcoin to that traditional portfolio can really have a positive impact and give you some upside exposure to the booming crypto industry and to the to the, you know, uh growing Bitcoin market, uh it kind of fits into this portfolio in the alternative sleeve and So if you think about traditional portfolios, uh a lot of them have about like a 10% allocation to alternative assets. And we think that Bitcoin belongs in one or, or 2.5 or 5% of that alternative sleeve. And uh we're seeing a lot of investors kind of turn the corner on that thought process this year, especially as we, you know, escape those kind of COVID market times and, and look forward to investing in technology and you know, alternative assets to give, give some of that exposure to their clients. And so uh really exciting to see the impact that Bitcoin can have on a portfolio even when you add just a little bit. All right, Ryan, thanks so much for joining the show this morning and I hope you have a great weekend. Yeah, thank you so much. That was bit wise crypto analyst, Brian Rasmussen.