Bitcoin’s Price Drops as US Job Market Shows Strength

Introduction

Bitcoin reached a new high for 2023 yesterday, reaching a price of $31,500. However, this celebration was short-lived as strong data on the US job market was released. This data suggests that the Federal Reserve will raise interest rates, causing the price of Bitcoin to fall. Currently, Bitcoin is trading at $30,093.

Strong job market

The US ADP Private Employment Report, which was released recently, revealed a surprisingly strong job market. In June, the private sector added 497,000 jobs, surpassing the expected increase of 220,000. As a result of this positive jobs report, 2-year Treasury yields rose by 15 basis points to reach 5.118 percent. This is the highest level since 2006. US 10-year Treasuries also saw an increase of 11 basis points, with yields reaching 4.05 percent, marking their highest level since March.

Government bonds with a 2-year term are more sensitive to short-term interest rate expectations. The rise in yields for these bonds indicates that the market now believes there is a 92 percent probability of another interest rate hike in July. Additionally, the market expects three more rate hikes by the end of 2023.

Impact on bitcoin

The strong job market data is bad news for bitcoin. As mentioned earlier, the macroeconomic outlook for bitcoin is not favorable. The Federal Reserve’s ongoing battle with inflation sees this data as an opportunity to further combat inflation through rate hikes.

The only factor that can potentially hinder the Federal Reserve’s fight against inflation is a solid recession. However, the chances of a recession are increasing with the central bank’s interest rate hikes. Unfortunately, even though a recession could potentially halt the rate hikes, it is not a positive development for bitcoin in the short term.

In a recession scenario, unemployment rises, forcing individuals to sell their risk assets like bitcoin in order to meet their financial obligations. Whether in a recession or a non-recession scenario, the outlook for bitcoin in 2023 appears bleak from a macroeconomic perspective. Although optimism surrounds BlackRock’s Spot Bitcoin ETF application, it cannot sustain bitcoin’s performance indefinitely. As a result, bitcoin is again falling in response to these macroeconomic data.

Conclusion

The strong US job market data indicates a potential interest rate hike by the Federal Reserve, causing the price of bitcoin to drop. The macroeconomic outlook for bitcoin in 2023 is challenging due to the ongoing battle against inflation and the possibility of a recession. Despite the optimism surrounding BlackRock’s Spot Bitcoin ETF, bitcoin’s performance remains influenced by macroeconomic factors. These recent developments suggest a bleak short-term outlook for bitcoin.