Bitcoin (BTC) experienced a sudden drop and retest of $27,000 as the Wall Street market opened on October 6. This was due to the release of unexpected United States employment data, which caused uncertainty in the markets. BTC’s price lost 2.1% in a single hourly candle, but quickly rebounded, with $27,700 now becoming the area of interest again.
The volatility in Bitcoin’s price was a result of the U.S. non-farm payrolls (NFP) data for September. The number of jobs created was nearly double the expected amount, standing at 336,000 compared to the projected 170,000. While this data demonstrated the strength of the labor market despite the Federal Reserve’s efforts to combat inflation through interest rate hikes, it was viewed as bad news for risk assets, including cryptocurrencies.
Popular trader CrypNuevo commented on the situation, stating that the Fed wants the labor market to weaken, so good jobs data is actually seen as bad news. CrypNuevo also expressed surprise that the unemployment rate remained the same at 3.8% despite the increase in job creation, leading them to believe that the data will be revised down in the future.
Many traders, including CrypNuevo, now believe that there is an increasing likelihood of another rate hike from the Fed at the November meeting of the Federal Open Market Committee. Data from CME Group’s FedWatch Tool shows a shift in market expectations, with the probability of a rate hike on November 1st rising from 25% to 31.3%. The upcoming Consumer Price Index (CPI) release next week is expected to provide further insights on inflation, which will impact the Fed’s policy decisions.
The Kobeissi Letter, a financial commentary resource, highlighted that the pressure is now on both the markets and the Fed. The Fed’s pause on rate hikes was previously expected to last until June 2024, but now the market projects a pause until July 2024. Market futures dropped over 400 points after the release of the employment data, which is not the outcome the Fed had hoped for.
Looking specifically at Bitcoin’s reaction to the NFP data, spot and derivatives traders were seen exiting their positions. This can be observed through declining Bitcoin open interest (OI). This decline indicates that traders are closing their positions, which could lead to decreased volatility in the market.
Overall, the employment data has had a significant impact on the markets, with Bitcoin experiencing a temporary drop followed by a recovery. Traders are now closely watching for any further indications from the Fed and upcoming CPI data to gain a better understanding of future market movements. As always, it is important for investors to conduct their own research and exercise caution when making investment or trading decisions.