Bitcoin Slumps Amid Surprising US Unemployment Surge and Strengthened Dollar
Summary:
Bitcoin witnessed a sharp drop as US unemployment data showed a surprising surge. The unemployment figures indicated that the economy was not as negatively affected by the economic policy slowdown as feared, increasing the likelihood of interest rates remaining high longer, impacting riskier assets like cryptocurrencies. This drop followed the Federal Reserve's decision to maintain previous rates, further supported by decreased rates before May. Meanwhile, the US dollar index reached new 2024 highs, causing additional challenges to the crypto industry. However, Bitcoin bulls were offered some respite as outflows from Grayscale Bitcoin Trust saw a reduction.
Bitcoin (BTC) witnessed a drop coinciding with the Wall Street opening on Feb. 2, particularly shocked by the sudden rise in US unemployment figures. The BTC/USD 1-hour chart revealed a $500 per hour decrease on Bitstamp, in tune with Cointelegraph Markets Pro and TradingView's data tracking. The strong reaction in the Bitcoin market followed the release of US nonfarm payroll data, exceeding nearly twice the predicted figures for January at 353,000, compared to the expected 185,000.
An increase in selling pressure was noted, backed by the data suggesting the slowing economic policy failed to negatively impact the economy as previously feared. This could mean that interest rates may remain high for an extended period, potentially drying up liquidity for risk-sensitive assets, including cryptocurrencies.
On Jan. 31, the Federal Reserve decided to uphold its earlier determined rates. Federal Reserve Chair Jerome Powell aimed to debunk speculation around possible rate cuts in March. The unemployment data added weight to this narrative and reduced the possibility of rate cuts before May. As per CME Group’s FedWatch Tool, the likelihood of a reduction in March declined to 17.5% compared to 45% earlier in the week.
Founder of Cubic Analytics, Caleb Franzen, commented on X (earlier Twitter), refuting pessimistic views following last month's nonfarm payroll (NFP) data. He stated that December figures had been revised upwards, thus discounting the economy's skepticism.
Economic commentator Tedtalksmacro exhibited optimism, indicating that the discrepancy in employment figures might lead to a quick recovery in crypto worth back to its peak. He suggested this as an awakening signal for the overly optimistic market.
Contrarily, the US dollar index (DXY) surged steeply, marking new highs for 2024, posing additional challenges to the crypto market. However, Bitcoin bulls can take comfort in the decrease in outflows from the Grayscale Bitcoin Trust (GBTC), a newly established spot Bitcoin exchange-traded fund (ETF).
Crypto intelligence firm Arkham reported that flows to custodian Coinbase were around 4,400 BTC — a considerable decrease from previous days and well below the peak 25,000 observed in January. Daan Crypto Trades, a popular trader, opined partial inputs on the data, noting that despite the decrease, another day of inflows was witnessed.
Investment or trading decisions should not be made based on this article since it does not provide any investment advice or recommendations. All trading or investment moves carry inherent risks, and an individualized research initiative is recommended.
Published At
2/2/2024 5:44:46 PM
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