Payrolls-Led Bitcoin, Ether Price Drop to $68.4K Seen as 'Buy the Dip' Opportunity

Key Takeaway

• Bitcoin and Ether prices fell after stronger-than-expected U.S. jobs data, reducing the likelihood of a Fed rate cut in September.
• QCP Capital views this dip as a buying opportunity, anticipating at least one Fed rate cut amid global central banks' easing.
• Bitcoin dropped nearly 3% to $68,400; bullish flows observed with aggressive put sellers and call spread buyers in BTC.

Market Reaction to U.S. Jobs Data

Bitcoin (BTC) and ether (ETH) experienced a notable decline following the release of stronger-than-expected U.S. jobs data on Friday. The U.S. economy added 272,000 jobs in May, significantly surpassing the estimated 185,000 and April's revised figure of 165,000. This robust job growth, coupled with a slight increase in the unemployment rate to 4% and a 0.4% rise in average hourly earnings, dampened hopes for a Federal Reserve interest-rate cut in September. Consequently, the probability of a 25 basis-point Fed rate cut in September dropped from 85% to 60%, leading to a sell-off in risk assets, including cryptocurrencies.

Bitcoin, which was poised to break above $72,000, fell nearly 3% to $68,400, while ether and the CoinDesk 20 index followed suit. QCP Capital, a Singapore-based trading firm, noted that the Fed might struggle to maintain elevated rates as other central banks, such as the European Central Bank and the Bank of Canada, have already begun cutting rates. "Strong upside surprised on NFP (272K vs 182k), higher payrolls came with higher unemployment (3.9% to 4.0%). It was confusing enough to trigger a risk-off ahead of U.S. inflation numbers and FOMC," QCP Capital stated in a market update.

Market Sentiment and Trading Activity

The weekend saw little change in the prices of bitcoin and ether, with open interest and trading volumes declining after a $400 million leverage flush out on Friday. Analysts at Presto Research anticipate a return of market volatility in the coming week, driven by macroeconomic events such as the Consumer Price Index (CPI) release on Wednesday, the Federal Open Market Committee (FOMC) meeting on Thursday, and a speech by Janet Yellen on Friday.

The record leverage build-up on bitcoin futures led to significant losses for bullish traders as the market reacted to the non-farm payrolls (NFP) figures. Bitcoin's price dropped from $71,000 to $69,000 following the data release. Additionally, a decline in meme stock GameStop (GME) impacted riskier assets, causing major meme coins like dogecoin (DOGE) and shiba inu (SHIB) to lose up to 10%.

Since Friday, open interest in futures contracts across various tokens has decreased from $99 billion to $60 billion, indicating a significant reduction in trader bets. Trading volumes also fell by 10% in the past 24 hours, according to Coinglass data. As of early Monday, BTC traded at approximately $69,400, while ETH was around $3,660. Other cryptocurrencies like Solana (SOL) and XRP showed slight losses, and BNB tokens from BNB Chain dropped 5.5% after reaching a lifetime peak of over $710 last week. Cardano (ADA) saw a slight increase following confirmation of a technical event that could impact the network's fundamentals.

Dollar Strength and Market Implications

Asset managers increased their bearish bets on the U.S. dollar just before the release of the stronger-than-expected jobs data, which propelled the greenback to a one-month high. Funds have been boosting their net short dollar positions for six consecutive weeks, the longest streak since 2022, according to data from the Commodity Futures Trading Commission compiled by Bloomberg. The resilient U.S. labor market has set a firmer tone for the dollar, with Goldman Sachs strategists, including Kamakshya Trivedi, stating, "We still think the dollar will prove to be the 'safest haven' for portfolio flows over coming months" amid upcoming election uncertainty and strong asset returns.

The dollar advanced against all its Group-of-10 peers on Friday, with Bloomberg's greenback gauge posting its largest one-day gain since January. The U.S. currency continued to rise in early Monday trading in Asia, with the Bloomberg Dollar Spot Index increasing for a third consecutive day. Kathleen Brooks, research director at XTB, noted, "There is a small risk that they could rule out rate cuts for this year completely due to the strength of the labor market," which could trigger a surge in bond yields, broad-based dollar strength, and weakness for equities.

Street Views

• QCP Capital (Bullish on Bitcoin and Ether):

  "We agree that this is a good opportunity to buy the dip as the markets will increasingly price in at least one Fed rate cut from here. It will be difficult for the U.S. to ignore as the rest of the world continues to cut rates."

• QCP Capital (Bullish on Bitcoin):

  "Our desk saw bullish flows on this dip, both sellers of aggressive puts and buyers of call spreads, especially in BTC."