Bitcoin and other cryptocurrencies experienced a significant drop after initial gains were reversed, following a volatile trading session triggered by a disappointing US jobs report. Bitcoin surged by 1.6% in response to the August employment figures released Friday morning in New York, only to decline sharply later, falling 4.5% to approximately $53,555, marking its lowest price since August 5. Ether, the second-largest cryptocurrency, also plummeted nearly 6%.
The US payrolls increased by 142,000 in August, falling short of the 165,000 average forecast from Bloomberg’s survey. Additionally, the previous two months’ figures were revised down by 86,000. These mixed data led to heightened speculation among traders about the possibility of the US central bank implementing a 50 basis-point rate cut when it meets later this month—a move that would be the first rate reduction in over four years. However, traders soon reassessed whether the report was dire enough to prompt such a substantial cut.
A more accommodative monetary policy generally benefits speculative assets like cryptocurrencies. “Today’s market reaction is more about a risk-asset selloff,” said Cosmo Jiang, portfolio manager at Pantera Capital. “Expectations for a 50 basis-point cut in September became overly optimistic. The mixed employment data, which wasn’t clearly negative, lowers the likelihood of such a significant cut. Consequently, risk assets, including equities and crypto, are all experiencing declines.”
Stocks also fell, with the S&P 500 initially rising but then dropping 1.8% towards the end of the trading session. Bitcoin and other major cryptocurrencies have recently shown a strong correlation with global equities. Data compiled by Bloomberg indicates a 30-day correlation coefficient of 0.60 between the largest 100 digital assets and MSCI’s world shares index, reflecting a close alignment in their movements.
“Bitcoin’s reaction to macroeconomic events has closely mirrored the behavior of equities,” noted Benjamin Celermajer, co-chief investment officer at Magnet Capital. Earlier this year, record inflows into US spot-Bitcoin exchange-traded funds (ETFs) fueled a significant rally in Bitcoin. However, that rally has since tapered off, and the ETFs have seen losses in recent days due to outflows.
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