Bitcoin has continued falling today after starting strong, even hitting above $94,000 earlier this week. Even with macroeconomic data that would usually favor risk assets, the the largest crypto has continued to fall. This illustrates that there are more complicated matters at play beyond the U.S. economic data.
After the U.S. JOLTS report for November was released, Bitcoin dropped briefly below $91,000. As of today, Bitcoin is trading around $91,000, which is an intraday decline of almost 3% after the same price drop from the previous day when BTC fell from the $94,000.
Many speculators were surprised with the decline, considering that the JOLTS data was worse than predicted, which would be bullish for Bitcoin and other risk-sensitive assets.
According to the US Bureau of Labor Statistics, there were 7.1 million job openings in November, which is below the market expected 7.6 million and even the downward adjusted October figure of 7.4 million. This data marks the lowest job openings in over a year, which marks a continued cooling of the U.S. labor market.
In the past, weaker labor data has signaled the potential for interest rate cuts, as they tend to support Bitcoin due to the increased cash flow and the reduced attractiveness of high-interest value contracts such as bonds.
The Fed has reiterated this thinking in their most recent comments. Fed Governor Chris Waller stated that the labor market’s continued weakening is essentially “requesting” policymakers to implement additional rate cuts.
Furthermore, Fed Governor Chris Miran is said to have supported rate cuts of more than 100 basis points for the year, which points to the increasing lack of confidence in growth momentum.
The focus of the market is now on the upcoming releases of the economic data from the U.S. The U.S. labor market report due on January 9 will be of key interest. A miss in the non-farm payrolls and an increase in the unemployment rate will strengthen the case for rate cuts ahead of the January meeting in FOMC. The forecast for inflation to be released next week will be of critical importance as it will confirm the steady inflation of Bitcoin.
Short-term selling pressure appears to be weighing heavily on BTC despite macro indicators pointing in support of it. One key contributor is the Bitcoin spot ETF market. On Tuesday, Bitcoin ETFs experienced the first net outflow for the year.
According to SoSoValue, they had a daily loss of $243.24 million, just a day after recording an inflow of almost $700 million, their largest inflow since the markets last crashed on October 10.
Fidelity continues to lead all outflows with approximately $312.24 million departing from its Fidelity Bitcoin ETF. Grayscale, Ark Invest, and VanEck have also noted outflows. In the case of BlackRock, although they are not showing direct outflows, Arkham data shows the asset manager sent 567 BTC (approx. $52.2 million) to Coinbase, which might indicate they are selling.
Overall, Bitcoin’s drop clearly reveals the push and pull between the bullish macroeconomic fundamentals at play and the short-term volatility. The ETF flows and profit taking are the primary drivers of volatility, which in turn lead to significant short-term changes in the price.
