Bitcoin’s $3K Drop Comes as Fed Rate Hike Bets Surge, but Analyst Remains Bullish

All eyes on Friday were on the US jobs report, which actually showed that the US economy had added 162,000 jobs in August, almost triple expectations of roughly 55,000-58,000. The unemployment rate remained at 4.1%, while July’s initially reported loss of 23,000 jobs was revised to a gain of 21,000.

The reaction in financial markets was instant. Bitcoin dropped sharply below $79,000 after it was rejected at $82,400 earlier that day, and the US stock market joined the ride. In contrast, Treasury yields and the greenback jumped.

Good News Is Hurting Markets?

Although a strong labor market sounds positive at first glance for financial markets, there’s more to the story as it comes to monetary policy. Such a favorable labor environment gives the Federal Reserve more room to keep fighting inflation without worrying that higher borrowing costs will trigger a sharp deterioration in employment.

Consequently, strong economic data can become negative news for risk assets when inflation remains high. The analysts at the Kobeissi Letter determined that “the system is broken,” pointing to stocks falling despite the economy creating substantially more jobs than expected.

Expectations for higher interest rates typically push Treasury yields and the dollar north, while tightening financial conditions and reducing investors’ appetite for risk assets. That should explain BTC’s immediate reaction and price drop after the report went live.

Long-Term Bullish

You may also like:

• Bitcoin Is Back Above $80,000, But Fidelity Says the Bear Market May Not Be Over Yet
• Bitcoin ETF Inflows Exceed $700M as Historical Pattern Points to BTC Local Top
• Bitcoin Price Plunges After Blowout US Jobs Report: Here’s Why

In that framework, higher rates can pressure the cryptocurrency in the short term, but they don’t solve the structural problems BTC was designed to hedge against.

The asset remains very sensitive to interest-rate expectations over shorter periods, but if inflation stays structurally elevated while governments continue running large deficits and debt burdens grow, the long-term argument for owning a scarce asset with a fixed supply could become much stronger.