US nonfarm employment rose 64,000 by November. This was better than expected, but revealed deeper cracks on the labor market. Bitcoin fell briefly below $86,000.
The headline number of jobs was better than worst case fears. However, an increase in unemployment to 4.6% has triggered conflicting risk appetite.
Crypto traders hesitated as they analyzed the possible implications of future Federal Reserve rate reductions.
The immediate reaction to the Payrolls Surprise
It was the classic case of “bad information is good” that characterized the crypto market’s response to November’s jobs report.
Initial headlines of 64,000 new jobs, compared to the 45,000 that were expected, caused some “good news, bad news” shudders, implying the economy was not collapsing quickly enough for emergency stimulus.
The details painted a much more rosy picture, with the unemployment rate rising to 4.6%, and the data for October being revised massively downward (showing an overall loss of 105,000 positions).
Bitcoin’s volatility was immediate, with the price dropping immediately from its intraday high of $87,000, to a range between $85,200 and $85,600.
The price drop was not a sale in panic, but rather a repricing.
The US dollar fell as Treasury yields dropped on soft data. This typically boosts cryptocurrency.
The “recession-risk” signal, which is embedded in the 4.6% unemployment, initially caused risk assets to be spooked, leading to a temporary breakdown of correlation, where Bitcoin fell even though bonds rose.
A trading desk analyst noted that “we saw a flushing of leverage within the first 15-minutes post-print.”
The market tries to determine if a 4.6% unemployment rate means that it’s time to ‘buy Fed puts’ or sell the recession.
Next steps for Bitcoin traders: what to watch?
Bitcoin needs to reclaim its momentum by decoupling from fears of recession and aligning with “liquidity trade”.
Three specific signals should be monitored by traders in the coming 48 hours.
- Support floor of $85,000: It is crucial to maintain this level. Bitcoin’s lows of $80,500 in November could be revisited if “recession anxieties” intensify and traditional stocks fall.
- Checking ETF flows for confidence: In recent sessions, BlackRock (IBIT), and Fidelity have experienced reversals of outflows into inflows.
- Yield Curve & DXY : Bitcoin could theoretically be bid up to $88,000 if the US Dollar Index (DXY), on the basis of this report continues to fall below 100.
As Asian markets adjust to the reality of a “dovish Fed”, if Bitcoin remains at $87,000 until the US closing, we can expect it to drift up towards $88,500. If Bitcoin breaks below $84,800, it opens up the possibility of a price under $82k.
The post November’s jobs data and Bitcoin’s short term trend will be updated as new information becomes available.
