Bitcoin fell below the US$80,000 mark, strong employment data rekindled Fed interest rate hike expec

Key Facts

Bitcoin fell below the $80,000 mark on Friday. In the hour of the August jobs report, Bitcoin prices fell about 2%, giving up Thursday's gains.

U.S. employers added 162,000 jobs in August, far exceeding market expectations of 53,000 to 65,000. This data suggests that current interest rates are not enough to curb economic activity and thereby curb inflation.

According to CoinGlass data, approximately US$278 million was cleared in the cryptocurrency derivatives market in four hours, of which approximately 86% were long positions.

Bitcoin (BTC) fell back below $80,000 on Friday. As of the time of writing, Bitcoin was trading at US$79,512. Earlier, a much stronger than expected U.S. jobs report rekindled market expectations for the Federal Reserve to raise interest rates this month.

The decline erased Thursday's rise in Bitcoin from about $77,000 to nearly $81,800. Data showed prices remained above $81,000 on Friday morning, but fell about 2% to $79,450 in the hour after the data was released at 8:30 a.m. EDT.

Why strong employment data increases the probability of a rate hike

According to the U.S. Bureau of Labor Statistics (BLS), non-farm payrolls increased by 162,000 in August, and the unemployment rate remained at 4.1%. According to CNBC, economists surveyed by Dow Jones expected 53,000 new jobs, while a FactSet survey cited by CNN put the figure at 65,000.

The Associated Press explains that the strong hiring data "sends a signal that current borrowing costs may not be high enough to curb the economy and cool inflation." This makes monetary policy tightening more likely, and interest rate expectations this week have driven volatility in the crypto market in two directions.

After the data was released, traders priced the probability of a 25 basis point rate hike at the September 15-16 meeting at approximately 60%. The current target interest rate range is 3.50% to 3.75%.

On the Polymarket platform, transactions related to the decision totaled approximately US$94 million. In the same hour that Bitcoin fell 2%, the probability of the same outcome (i.e., a rate hike) jumped from 40% to 52%.

Since Federal Reserve Chairman Kevin Warsh delivered a hawkish speech in Jackson Hole last week, the risk of rate hikes has hung over the crypto market. Bitcoin fell below $77,000 at the time and started below $78,000 in early September.

Thursday's rally came after Federal Reserve Governor Christopher Waller said he would support keeping interest rates unchanged as long as inflation remained moderate. But Friday's numbers were not good for him.

Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management, said: "A higher-than-expected rise in non-agricultural data may exacerbate concerns about interest rate hikes, but the outcome depends on inflation data released next week." Producer price index (PPI) and consumer price index (CPI) readings will be released on September 10 and 11.

Large-scale liquidations reached US$278 million

According to CoinGlass, the reversal triggered approximately US$278 million in liquidations, of which approximately US$240 million were long positions, with a total of 100,914 traders liquidated within 24 hours.

Traditional markets have less volatility, with the S & P 500 falling only about 0.3% in afternoon trading.

Saylor and Schiff question the accuracy of the data.

Strategy founder Michael Saylor believes the market overreacted to the data's numbers within its error range. He pointed out that the U.S. Bureau of Labor Statistics sets 90% confidence intervals for monthly changes within a range of about 122,000 people each.

He wrote on social media: "However, trillions of dollars in assets were forced to be repriced because economists speculated it was 56,000 people. We turned statistical noise into monetary policy."

Economist Peter Schiff predicts that the data will not remain high in the end. He wrote: "This time, the data that significantly exceeds expectations is very likely to eventually be lowered or even become less than expected." Data for June and July had previously been revised upward.