Bitcoin (BTC) experienced a sudden retest of $27,000 as the Wall Street opened on October 6th, following the release of wildcard United States employment data that rattled the markets. BTC/USD 1-hour chart showed that the largest cryptocurrency lost 2.1% in a single hourly candle. However, bulls quickly regained control and managed to recover those losses, bringing the focus back to the area of interest before the data release.
The volatility in the market was triggered by the unexpected increase in the US non-farm payrolls (NFP) for September. The number of jobs added was almost double the expected amount, with 336,000 compared to the forecasted 170,000. This unexpected jump in job numbers demonstrated the labor market’s resilience to the Federal Reserve’s counterinflation measures, particularly the interest rate hikes. Despite the positive implications of the September result, it was viewed as bad news for risk assets, including cryptocurrencies.
Popular trader CrypNuevo commented on the data, stating, “Good news is bad news since the FED wants the labor market to lose strength.” He also expressed surprise that despite the increase in job numbers, the unemployment rate remained the same at 3.8%. CrypNuevo believed that the data would be revised down and that the unemployment rate would be much lower. However, like many others, he also acknowledged the increasing likelihood of another rate hike from the Fed at the November meeting of the Federal Open Market Committee (FOMC).
The market perceived the data as a potential threat for a new 25 basis point hike in the Fed target rate on November 1st. The probabilities for a rate hike shifted from 25% to 31.3%, according to data from CME Group’s FedWatch Tool. The focus now turns to the Consumer Price Index (CPI) data, which will be released next week. The CPI is an important inflation indicator that influences Fed policy decisions.
Financial commentary resource The Kobeissi Letter highlighted the pressure on both the markets and the Fed itself. It reported that market futures fell over 400 points after the employment data release, stating that “This is NOT what the Fed wanted to see.” The report also mentioned that the previously expected Fed pause until June 2024 was now projected to be until July 2024.
Looking specifically at Bitcoin’s reaction to the employment data, spot and derivatives traders were seen exiting their positions based on the NFP print. This led to a decline in Bitcoin open interest (OI). The declining OI was seen as a return to more average and healthy levels, indicating that excessive speculation was being reduced.
In summary, Bitcoin experienced a brief dip in price following the release of better-than-expected employment data in the US. The implications of the data raised concerns about potential interest rate hikes by the Federal Reserve, which negatively impacted risk assets, including cryptocurrencies. However, the market’s resilience and the potentially revised unemployment rate led to a rebound in Bitcoin’s price. The focus now shifts to upcoming CPI data, which will provide further insights into inflation and its impact on Fed policy decisions.
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