The Bitcoin bulls and bears are in a battle for supremacy in wake of the latest blockbuster US jobs report, with the Bitcoin price swinging on either side of the $43,000 level as traders assess the outlook for US monetary policy this year, and the potential impact on crypto.
The Bitcoin price was last trading around $42,900, roughly flat on the day.
The latest US employment numbers showed that the US economy added 353,000 new employees in January.
That’s well above the expected gain of 187,000.
Moreover, the unemployment rate remained unchanged at 3.7% versus expectations for a rise to 3.8%.
Macro traders were thus forced to pare back on Fed rate cut bets, and this initially weighed on Bitcoin.
Markets Pare Fed Rate Cut Bets
The Bitcoin price dipped as low as the $42,500s as the US interest rate future market implied probability that the Fed cuts interest rates by 25 bps in March dropped under 20% from close to 40% on Friday, as per the CME’s Fed Watch Tool.
Traders have also been pulling back on expectations for a rate cut by May.
The implied probability of no cuts by May leaped to nearly 30% on Friday from only around 6% on Thursday.
This time one month ago, markets implied a more than 70% probability of at least two rate cuts by May.
But stronger-than-expected CPI inflation, retail sales, consumer sentiment, GDP, consumer confidence, JOLTs job opening, PMI and now jobs data have all painted a picture of a US economy that is still very robust, weakening the argument somewhat for rate cuts over the course of the last month.
Macro headwinds can thus go some way to explaining Bitcoin’s pullback from earlier yearly highs above $49,000.
Of course, post-spot Bitcoin ETF approval profit-taking in Grayscale’s GBTC was another major headwind.
The ETF has seen outflows of $6 billion since its conversion from a trust, as per ETF.com.
But those flows have slowed substantially this week to around $200 million per day.
And inflows into newly launched spot Bitcoin ETFs by the likes of BlackRock have outweighed GBTC outflows this week.
Indeed, news hit the wires on Friday that BlackRock’s ETF just hit the $3 billion in assets under management mark.
That could have helped to lift Bitcoin sentiment at the time, lifting the price back to session highs above $43,400.
But the price has since dipped back under $43,000 as the Bitcoin bulls and bears continue to battle for supremacy.
Where Next for the Bitcoin (BTC) Price?
At current levels just under $43,000, the Bitcoin price remains trapped well within its multi-week $38,000-$49,000 range.
But price risks remain strongly tilted towards the upside in the medium term.
Yes, perhaps strong US economic data will prevent the Fed from cutting quite as soon as the market wants.
But with YoY Core PCE inflation well below the current interest rate, financial conditions are very tight.
Even if the economy continues to perform well, that means there is still potential room for rate cuts this year.
That means macro should remain a net tailwind for crypto market and the Bitcoin price this year.
Meanwhile, ongoing inflows to newly launched spot Bitcoin ETFs adds a new price-insensitive source of demand to the market.
And the upcoming Bitcoin issuance rate halving is about to slash sell pressure from Bitcoin miners.
A flood of new demand combined with a supply shock is a recipe for a much higher Bitcoin price.
Dips towards the bottom of Bitcoin’s recent price range will likely continue to be aggressively bought, as happened in January.
An eventual push back towards $50,000 is on the cards for the weeks/months ahead.