Bitcoin experienced a decline on Wednesday, trading at approximately $67,500, a decrease of 2% over the previous day. This downturn followed the release of a strong U.S. jobs report that tempered expectations regarding a possible interest rate cut by the Federal Reserve at its upcoming policy meeting.
In a broader market context, altcoins faced even sharper declines, with Ethereum dropping 3% to $1,950 and Solana slipping 3.4% to $80. Last week, Bitcoin had reached a low of $62,800 before partially recovering to $71,500 on Sunday, marking its lowest price point in 14 months.
The U.S. Department of Labor reported that 130,000 jobs were added in January, significantly surpassing economists” forecasts of 70,000, according to data from Trading Economics. The unemployment rate also fell to 4.3%, just below the anticipated 4.4%.
In light of these developments, Fed Chair Jerome Powell previously indicated that the central bank would adopt a data-dependent approach regarding future adjustments to the benchmark interest rate, which currently stands between 3.50% and 3.75%. Analysts suggest that the Fed is unlikely to feel compelled to stimulate the labor market through rate cuts given the unexpectedly strong job growth.
David Hernandez, a crypto investment strategist with 21Shares, remarked in a Wednesday note, “This report is a short-term headwind. The “cheaper money” catalyst that risk assets need to mount a sustained recovery just got pushed further out.”
Current market sentiment has shifted, with traders now estimating only an 8% probability that the Fed will implement a quarter-point rate cut in March, as per data from CME FedWatch. This figure has dropped from 20% just a day earlier and 27% a month prior.
Most traders are no longer anticipating a rate cut in March. However, bond markets indicate that expectations regarding rates remain relatively stable. Jasper De Maere, a desk strategist and OTC trader at crypto market maker Wintermute, noted that this suggests an increasing sensitivity among investors towards company valuations, particularly those linked to AI and similar sectors.
Lower interest rates typically provide advantages for risk assets, encouraging investors to seek higher returns in the face of diminished yields from cash. Despite this, cryptocurrencies have struggled in recent months, even as major stock indices continue to reach new highs.
Although the S&P 500 and tech-heavy Nasdaq initially rose following the release of January”s employment data, they later retreated along with Bitcoin. In contrast, gold prices increased by 1.3%, reaching approximately $5,100 per ounce, as reported by Yahoo Finance.
Chris Beauchamp, chief market analyst at trading platform IG, expressed in a note, “There still seems no appetite to go dip-buying in the asset class. In a world filled with AI and where gold continues to shine, Bitcoin“s appeal is firmly on the wane at present.”
