Crypto Markets Analysis: Crypto Trades Lower as Regulatory Concerns Trump Encouraging Macro Signs

“Bad” job market news that financial markets have been craving arrived, but crypto markets had other concerns.

Initial jobless claims in the U.S. rose 7% week over week to 196,000, exceeding expectations of 189,000. The higher figure represents the first increase in jobless claims in six weeks.

Counterintuitively, investors consider higher unemployment a positive thing for risker assets – crypto and otherwise.

They see a cooler employment market as an antidote for hotter inflation. Jobs data so far this year has been surprisingly positive, suggesting the U.S. economy was still expanding and that stubbornly high prices would endure.

Traditional equity markets traded higher immediately following the latest job numbers, before moderating to close lower. The tech-heavy Nasdaq was off more than a percentage point and the S&P 500 fared nearly the same.

Crypto markets saw no such bounce, however. One explanation could be that regulatory concerns are taking precedence over macroeconomic ones. On Thursday, crypto exchange Kraken agreed to “immediately” end its crypto staking-as-a-service platform for U.S. customers and to pay $30 million to settle Securities and Exchange Commission (SEC) charges it offered unregistered securities.

The news followed a day after Coinbase CEO Brian Armstrong tweeted that he'd heard rumors the SEC would like to ban retail investors from engaging in cryptocurrency staking, the income-generating technique at the core of running blockchains including Ethereum.

"I hope that's not the case as I believe it would be a terrible path for the U.S. if that was allowed to happen," he tweeted Wednesday.

The banning of staking would remove a source of cash for certain crypto holders, removing a valued benefit in the crypto space. The threat of this occurring bit hard into digital asset prices.

BTC’s chart has highlighted its decoupling from traditional assets so far this month, as its correlation with both the S&P 500 and Nasdaq fell from as high as 0.77 to a current level of .44 and .36. Equity markets embraced the encouraging jobs data but crypto prices seemed weighted down by concerns about potential, new staking regulation.

To be sure, a staking ban would apply to proof-of-stake blockchains, not a proof-of-work blockchain like Bitcoin. But the Armstrong tweet sent nearly all crypto assets plunging.

Now, it appears that crypto investors are taking more of a cautious stance than a panicked one. Trading volume remains below its 20-day moving average. The trends over the next few days will be interesting to watch.