US NFP Report Sends Bitcoin Below $80,000 After Morning Bounce

A report, a purge. The market had a plan this Friday morning: take advantage of a more conciliatory speech from the Fed to get back above $81,000. The plan lasted two hours. At 2:30 p.m. Paris time, the US jobs report (NFP) fell, and Bitcoin immediately returned its morning surge, falling back below the $80,000 mark. Here's what happened, and why this particular number did so much damage.

The NFP report that took the market wrong-footed

The American economy created 162,000 jobs in August, well above the 55,000 expected by the consensus of economists, according to the report published by the Bureau of Labor Statistics and relayed by CoinDesk. The unemployment rate remains stable at 4.1%. July was revised upwards: the loss of 23,000 positions initially announced ultimately became a creation of 21,000 jobs.

On paper, good news for the American economy. Except that for the markets, a labor market that is too strong removes any urgency for the Fed to lower its rates, or even gives it arguments to raise them. The yield on 10-year Treasury bills jumped 3.3 basis points to 4.80%, that on 2-year bonds jumped 7 basis points to 4.40%. Bitcoin reacted in just a few minutes, dropping around 2% to fall back below $80,000.

$200 million in long positions swept away in one hour

The mechanics of the fall are classic, but fast. Traders had opened long positions (bets on a rise in the price, financed on credit) betting on the continuation of the morning rebound. When the price fell faster than they could absorb it, their positions were forcibly liquidated, which mechanically accentuated the decline. Around $200 million in long positions jumped in an hour across the entire crypto market.

Nothing exceptional in itself. A day of NFP often does this kind of collateral damage, especially after a rebound as rapid as that of the week. But the speed of the purge is a reminder of the extent to which leverage remains omnipresent in this market, even in the midst of an institutional phase.

Warsh versus Waller, Fed arbitration tightening

This figure does not fall into a vacuum. A week earlier, Fed Chairman Kevin Warsh put a September rate hike firmly on the table during a speech at Jackson Hole deemed harsh on Jerome Powell's legacy. This week, Governor Chris Waller had on the contrary suggested that an increase was not a given, which had propelled Bitcoin towards its 81,000 dollars in the morning. The NFP report once again leans towards the side of the hawks.

At the White House, however, no one is declaring victory for the hawks. In an interview with CNBC on Friday, economic advisor Kevin Hassett judged the report “much better” than expected. However, he does not draw the same conclusion as the bond markets. He details his method himself: annualize the variation in prices over three months rather than twelve, a calculation which today gives 1.6%, well below the 2% target. If inflation continues on this slope, he added, the case for a status quo would remain “pretty strong.” A good employment figure, therefore, but which is not enough to decide as long as prices remain reasonable.