Signs of economic slowdown may prompt dovish Fed pivot, boosting bitcoin and risk assets: analysts

Friday's weaker-than-expected U.S. employment report for February is bolstering the argument for Federal Reserve rate cuts, which could boost risk-on sentiment and lift assets such as global equities and cryptocurrencies. However, persistent inflation risks related to tariffs and supply-chain disruptions could keep the Fed cautious, analysts said.

According to the U.S. Labor Department’s seasonally adjusted data, the U.S. economy added just 151,000 non-farm jobs from January to February — the weakest February growth since 2019. This figure fell short of the 170,000 net new jobs forecast by economists surveyed by Dow Jones.

A Nexo analyst told The Block that several factors are likely to weigh on employment growth in the coming months, including government job layoffs, reduced federal funding, uncertainty over tariffs, and tighter immigration policies. "These factors could contribute to a slowdown in hiring, dampening overall economic momentum and potentially reinforcing disinflationary trends," the Nexo analyst said.

Federal Reserve could come under pressure to cut rates

The analyst noted that the Federal Reserve now faces a difficult policy landscape. While weaker employment growth supports the case for rate cuts, persistent inflation concerns — particularly those stemming from supply-side constraints and geopolitical uncertainty — could prompt the Fed to proceed with caution. They added that the uncertain environment could weigh on the cryptocurrency sector.

“In the crypto market, macroeconomic uncertainty remains a key driver of volatility,” the Nexo analyst said. “A slowing economy and dovish Fed would likely fuel risk appetite, benefiting bitcoin and digital assets. However, prolonged inflation or fiscal instability could offset these gains, keeping investors wary.”

Wincent Senior Director Paul Howard told The Block that Friday’s jobs report falling below expectations supports the notion that rate cuts may be necessary to stimulate the economy. He also noted that reducing the cost of the deficit is likely a priority for the administration, which would favorably impact risk assets such as cryptocurrencies.

CoinPanel Trading Automation Expert Kirill Kretov highlighted the potential impact of a rising unemployment rate on digital assets, as it increases the likelihood of Federal Reserve rate cuts, thereby improving liquidity for bitcoin and decentralized finance. “Slightly weaker wage growth suggests easing inflationary pressures, making an earlier Fed pivot more plausible,” Kretov told The Block.

According to the CME FedWatch tool , most interest rate traders view June’s Federal Open Market Committee meeting as the earliest point this year where a rate cut could occur, with a 55.3% probability. The increased likelihood of a June rate cut coincides with a grim outlook from the Atlanta Fed’s closely watched GDPNow model, which revised its forecast for the U.S. economy to contract at a 2.4% annual rate in the first quarter of this year. If this estimate were to become confirmed, this would mark the first quarterly contraction since Q1 2022, fueling growing concerns about a potential recession.

Analysts see bearish positioning in the derivatives market

Bearish positioning is increasingly visible in the derivatives market as investors respond to global economic uncertainty, QCP Capital analysts said. “Risk reversals have become even more bid for puts over the past 24 hours, reflecting growing concerns over additional selling pressure,” the analysts noted. “Recent options flows indicate a more constructive bullish outlook emerging only from Q3 onwards.”

According to QCP Capital, while $80,000 remains a critical support level for bitcoin in the near term, the upside appears limited. “Until crypto finds a new narrative, we’re likely to see an increased correlation between bitcoin and equities in the near term,” they said.

With tariff-related risks still looming, QCP Capital analysts said volatility could intensify ahead of key U.S. macroeconomic data releases this week, such as the Consumer Price Index on Wednesday and the Producer Price Index on Thursday. Bitcoin and ether have both declined by approximately 3% over the past 24 hours and are down about 10% over the past week, according to The Block's Prices Page . Meanwhile, U.S. equity futures are also pointing to a weak open, with Dow Futures down 0.88%, SP 500 Futures down 1.11%, and NASDAQ Futures down 1.24% in pre-market trading.