Cryptocurrency markets have seen a sharp downturn recently, triggered by stronger-than-anticipated economic data, which has caused interest rates to surge and raised doubts about the continuation of Federal Reserve rate cuts in the coming year.
In December, the U.S. job market experienced a significant boost, surpassing economist expectations with job growth and a surprise dip in the unemployment rate. According to the Bureau of Labor Statistics, the economy added 256,000 jobs in December, well above the forecasted 160,000, and an increase from the revised 212,000 in November (previously reported as 227,000).
The unemployment rate dropped to 4.1% in December, beating expectations of 4.2% and falling from November’s rate of 4.2%.
In reaction to the jobs report, Bitcoin (BTC) saw a dip of more than 2%, falling to $92,800 despite an earlier attempt to rebound.
This job market report follows a series of recent economic updates that have caused a broad selloff across asset classes. Investors have been scaling back their predictions for ongoing rate cuts by the Federal Reserve, leading to a pullback in the crypto market. Bitcoin, which had been nearing $103,000 on Monday, dropped below $92,000 by Thursday. Major altcoins experienced even steeper losses.
Traditional markets also showed reactions, with U.S. stock index futures declining by around 1% following the release. The bond market experienced the most significant change, as the 10-year Treasury yield rose by nine basis points to 4.78%. The dollar index surged by 0.6%, while gold prices slipped slightly below $2,700 per ounce.
In light of the report, traders adjusted their expectations for further rate cuts, with the probability of a March rate reduction falling from 41% to 28%, according to CME FedWatch. Similarly, the likelihood of a rate cut in May decreased from 44% to 34%.
Additionally, average hourly earnings increased by 0.3% in December, matching expectations but down from November’s 0.4% increase. Year-over-year, hourly earnings grew by 3.9%, slightly under the forecast of 4% and down from November’s 4% figure.
