Bitcoin Price Drops 1.3% in Response to US Payrolls Surpassing Estimates

Bitcoin experienced a decrease in value during the Wall Street open on February 2nd due to a surprising surge in United States unemployment data. Data from Markets Pro and TradingView showed a $500 drop in the Bitstamp exchange rate within one hour. This drop was a direct response to the U.S. nonfarm payrolls data, which revealed that January’s job gains were almost double the expected amount. This news suggested that the economy was not as negatively impacted by restrictive economic policies as previously assumed, leading to the possibility of higher interest rates for a longer period of time. As a result, risk assets like cryptocurrencies could experience a decrease in liquidity.

On January 31st, the Federal Reserve decided unanimously to keep interest rates at the same level, and Chair Jerome Powell dismissed rumors of rate cuts in March. The recently released jobless data further supported this narrative, causing the odds of a rate cut before May to decrease. According to CME Group’s FedWatch Tool, the likelihood of a rate cut in March stood at 17.5% at the time of writing, compared to 45% earlier in the week. Caleb Franzen, founder of Cubic Analytics, commented on social media that those who doubted the strength of the economy were proven wrong by these job figures.

Financial commentator Tedtalksmacro also expressed optimism beyond the immediate effects of the employment data. He suggested that the market overreacted to the data and predicted that cryptocurrencies could reach their previous highs in a few hours, as strong employment data is positive in the long run. Another obstacle for cryptocurrencies came in the form of the U.S. dollar index (DXY), which experienced a rapid increase, reaching new highs for 2024.

Despite these challenges, there was positive news for Bitcoin bulls as outflows from the Grayscale Bitcoin Trust (GBTC) were observed. The GBTC is one of the newly-launched spot Bitcoin exchange-traded funds (ETFs). Data from crypto intelligence firm Arkham showed that Bitcoin flows to custodian Coinbase were lower than previous days, offering some relief to Bitcoin investors. Popular trader Daan Crypto Trades commented that there were still net inflows into GBTC, albeit smaller than recent days.

Bitcoin faced a decline in value due to the surprising surge in U.S. unemployment data. This data indicated that the economy was not as negatively impacted by restrictive economic policies as previously thought, leading to possible longer periods of higher interest rates. The U.S. dollar index reached new highs, posing another hurdle for cryptocurrencies. There was some relief for Bitcoin bulls as outflows from the GBTC were observed, providing hope for investors.