Bitcoin value declines by 2% following US employment figures as expectations for Federal Reserve interest rate increases intensify.

Bitcoin (BTC) experienced a quick retest of $27,000 around the opening of Wall Street on October 6, as unexpected U.S. employment figures unsettled the markets.

BTC/USD 1-hour chart. Source: TradingView

Analysis: Jobs data “not what Fed wanted to see”

Data from Cointelegraph Markets Pro and TradingView tracked BTC price movements as the leading cryptocurrency declined by 2.1% in a single hourly candle.

A subsequent recovery allowed bulls to regain those losses, with $27,700 — the previously significant level before the data release — now back in consideration.

The fluctuations were attributed to U.S. non-farm payrolls (NFP) rising to nearly double the anticipated figure for September — 336,000 compared to 170,000.

This highlighted the labor market’s continued strength against the Federal Reserve’s inflation control measures through interest rate increases; however, the implications of the September data were perceived as negative for risk assets, including cryptocurrencies.

“Good news is bad news since the FED wants the labor market to lose strength,” noted popular trader CrypNuevo in a response on X (formerly Twitter).

“Given this increase, it surprises me that the unemployment rate stayed the same (3.8%). So I believe that the data will be revised down and it’ll be much lower.”

Like others, CrypNuevo also observed the growing probability of another rate hike from the Fed during the November meeting of the Federal Open Market Committee.

“The market interprets this data as a new risk for a potential 25 basis point hike on November 1st (25% probabilities given yesterday vs 31.3% probabilities today),” he added, referencing information from CME Group’s FedWatch Tool.

“We have CPI on Thursday next week and that’ll hopefully provide us with a clearer perspective.”

Fed target rate probabilities chart. Source: CME Group

CPI, or the Consumer Price Index, is one of the primary inflation metrics influencing Fed policy.

Continuing, financial commentary outlet The Kobeissi Letter indicated that the pressure was now on both the markets and the Fed itself.

“Furthermore, the Fed pause was previously anticipated until June 2024; now a pause is expected until July 2024,” it reported regarding market expectations for rate adjustments.

“Market futures just fell 400+ points after the report. This is NOT what the Fed wanted to see.”

Bitcoin open interest drains

Focusing on Bitcoin’s specific response, popular trader Skew indicated that spot and derivatives traders were exiting following the NFP announcement.

Related: Bitcoin still outperforming US dollar versus ‘eggflation’ — Fed data

Spot sold & perps puked after the jump in NFP
shorts chasing a bit more here
Likely PvP for rest of the morning https://t.co/7faaQLfur5

— Skew Δ (@52kskew) October 6, 2023

“Slight probability shift on Nov 1 towards a hike but still unlikely,” read a further forecast regarding Fed actions.

“Would need to see FED tone & posturing first to weigh the probability.”

Updating earlier analysis from October 6, fellow trader Daan Crypto Trades pointed out a decrease in Bitcoin open interest (OI).

This had previously reached levels that initiated surges of upward movement followed by downward volatility.

“That’s another $600M in Open Interest lost since yesterday’s high. Getting to the more average and ‘healthy’ levels again,” he summarized.

BTC/USD chart with aggregated OI. Source: Daan Crypto Trades/X

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.