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. Perhaps that’s why the rate hike odds immediately jumped to over 50% after the jobs report went live.

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. Even US President Donald Trump was surprised by the initial market reaction.

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