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The weakness of the US labor market is emerging as a key risk variable for cryptocurrencies in December and the beginning of 2026. The expectation for a Fed rate cut has been increased by the increase in job layoffs, the slowdown in hiring and the deterioration of consumer confidence.
This change may affect Bitcoin and Ethereum more severely than stocks due to the fragile liquidity conditions in the digital asset.
The growing stress in the labor market increases the pressure on the Federal Reserve
The layoff announcements in October escalated to Its highest level since 2003. Many large employers have cut jobs or frozen hiring, reflecting fee costs, AI restructuring and post-lockdown uncertainty.
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Consumer confidence also declined in November, with job insecurity rising.
Despite these pressures, weekly jobless claims remain low. Markets interpret this mixed picture as a sign that the economy is in decline but not collapsed.
As a result, traders now anticipate a 25 basis point cut at the December meeting. The price of futures markets will decrease significantly for 2026.
The December cut would be a sharp shift from the Fed’s previous stance of “higher rates for longer.” It will also signal that the central bank responds to the weakness of the labor market before the wider damage spreads.
Cryptocurrency markets are very sensitive to liquidity signals
It works with Bitcoin and Ethereum In low liquidity After the liquidation shock on October 10. Market makers have reduced inventory risk, leaving order books with less depth.
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Tom described it to me The market “limps” for six weeks due to the affected liquidity capacity.
These conditions increase the overall processing impact. When liquidity is tight, Cryptocurrencies typically move faster than stocks.
This dynamic was evident in November, when ETFs collapsed and selling pressure forced Bitcoin to fall about 30% from its peak in October.
Metrics on the chain are now showing signs of stabilization. The 90-day Tucker CVD moved from flat selling to neutral, indicating seller fatigue.
At the same time, users are borrowing against Bitcoin instead of selling, reducing spot supply pressure but increasing the inherent risk of liquidation.
A December rally is possible, but not guaranteed
will be reduced Interest rates cut in December Real returns and injects liquidity into risky assets. Historically, Bitcoin rises in such conditions, especially after deep pullbacks.
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Many metrics point to improving momentum. The Fear and Greed Index reading rose from 11 to 22. The average RSI for trades rose to 60 after reaching oversold levels earlier in the month. And also the MACD turned positive.
However, ETF flow data remains uncertain. November saw a significant flow, but recent days show temporary flows.
if ETF orders are backThin liquidity can amplify upward moves. If flows resume, the market may return to recent lows.
Cryptocurrencies will be dominated by the general behavior until the end of the year. A lenient federal stance could trigger a similar rally for 2023.
A hawkish tone could undermine the current recovery and reinforce the downward trend seen in November.
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January 2026 brings additional volatility risk
Although cryptocurrencies are growing in December, January remains uncertain. The combined work report for October to November arrives on December 16. The release may underlie deeper business pressures not yet captured by the weekly data.
If layoffs accelerate in January, risk assets could weaken. Markets may interpret declining employment as a sign of recession.
In this scenario, price cuts cannot offset general risk aversion. Bitcoin typically reacts first in such circumstances given its liquidity profile.
Alternatively, if the report shows moderate softness with steady wage growth, markets may be pricing in a measured slowdown.
This will support any December rally to continue at the beginning of 2026. However, liquidity conditions will determine the range of price swings.
With momentum improving and liquidity remaining weak, the market remains poised for a big move. The direction will be determined based on how the Federal Reserve responds to the growing pressure in the labor market and how investors interpret the broader economic signal in the coming weeks.
