Bitcoin Slides as Fed Rate Cut Doubts Follow Strong Jobs Report

In brief

• The U.S. economy added 130,000 jobs in January.
• Traders grew increasingly doubtful about a rate cut in March.
• Gold prices climbed following the jobs report’s release.

Bitcoin resumed its slide on Wednesday after a strong U.S. jobs report dampened hopes that the Federal Reserve would lower interest rates at its next policy meeting. The leading cryptocurrency by market cap changed hands around $67,500, a 2% decrease over the past day, according to CoinGecko. Altcoins showed steeper declines, with Ethereum and Solana falling 3% to $1,950 and 3.4% to $80, respectively, over the same period. Last week, Bitcoin plunged as low as $62,800, before recovering partially to $71,500 on Sunday. As it plummeted, the digital asset notched its lowest price point in 14 months. 

The U.S. Department of Labor indicated that employers added 130,000 jobs in January, far exceeding economists’ expectations of 70,000 jobs, per Trading Economics. The unemployment rate ticked down to 4.3%, slightly below economists’ expectations of 4.4%. After rounding out the year with three consecutive rate cuts, Fed Chair Jerome Powell signaled earlier this month that the central bank would maintain a data-dependent approach in considering future adjustments to its benchmark rate at a target range of 3.50% to 3.75%. It’s unlikely that the Fed will feel pressured to stimulate the job market through lower interest rates amid a hotter-than-expected labor market, according to David Hernandez, a crypto investment strategist at exchange-traded fund issuer 21Shares. “This report is a short-term headwind,” he wrote in a Wednesday note. “The ‘cheaper money’ catalyst that risk assets need to mount a sustained recovery just got pushed further out.”

On Wednesday, traders penciled in an 8% chance that the Fed would cut interest rates by a quarter percentage point in March, according to CME FedWatch. That marked a decrease from 20% the day before and 27% a month ago. Most traders no longer foresee a rate cut in March, but bond markets are signaling that expectations are relatively unchanged, Jasper De Maere, a desk strategist and OTC trader at crypto market maker Wintermute, wrote in a note.  That suggests investors could rather be growing increasingly sensitive toward company valuations, particularly around AI and associated businesses, he added. Lower interest rates typically benefit risk assets, as investors are incentivized by lower payouts on assets like cash to seek higher returns elsewhere. Still, cryptocurrencies have languished in recent months, as major stock indexes have continued to hit record highs. Although the S&P 500 and tech-heavy Nasdaq initially ticked up after the release of January’s employment data, the indexes later retreated alongside Bitcoin. Meanwhile, the price of gold rose 1.3% to around $5,100 per ounce, according to Yahoo Finance. “There still seems no appetite to go dip-buying in the asset class,” Chris Beacuchamp, chief market analyst at trading platform IG, wrote in a note. “In a world filled with AI and where gold continues to shine, Bitcoin’s appeal is firmly on the wane at present.”