The air felt thick with anticipation last Friday. Everyone watched the jobs report, expecting a clear signal. What we got instead was a surprise, a real head-scratcher for anyone trying to make sense of the market.
- The U.S. jobs report for August was significantly weaker than expected, with only 22,000 new jobs added and downward revisions to previous months. This unexpected weakness has fueled strong market expectations for a Federal Reserve rate cut.
- Despite the anticipation of rate cuts, Bitcoin has shown a muted reaction, failing to sustain an upward trend and exhibiting bearish technical signals like a double top breakdown.
- Potential for increased Treasury yield volatility, sticky inflation, and ongoing fiscal concerns create a complex economic landscape that could pressure Bitcoin, even with expected Fed easing.
Bad news, it turns out, was just bad news. The weak U.S. jobs numbers hit the wires, and the smart money immediately started betting on the Federal Reserve cutting rates deeper. You’d think Bitcoin, the digital gold, would cheer this kind of talk. But it didn’t.
Instead of soaring on the promise of easier money, Bitcoin stayed heavy. It hovered stubbornly below $112,000. This reluctance to find upside, this quiet refusal to rally, hints at something deeper. It suggests we might be in for a tougher ride ahead.
The Jobs Report Jolt
August was a tough month for job seekers. The nonfarm payrolls report showed a paltry 22,000 new jobs. That figure fell far short of the Dow Jones projection, which had eyed 75,000 additions. It was a significant miss, to say the least.
And it got worse. The report also revised down job creation for June and July by a combined 21,000. June, in particular, saw a net loss of 13,000 jobs after the revision. That’s not a typo, a net loss.
Nine different sectors, from manufacturing to professional services, registered job losses. Only health services and leisure and hospitality managed to shine. It painted a rather bleak picture of the labor market.
The reaction was swift and sharp. The Kobeissi Letter, a well-known newsletter service, didn’t mince words. They called the jobs report “absolutely insane.”
The Kobeissi Letter called the jobs report “absolutely insane.” The newsletter service described the downward revisions in prior months as a sign of a broken system and the labour market entering recession territory.
They went on to describe the downward revisions as a sign of a broken system. For them, it looked like the labor market was heading straight into recession territory. A strong statement, but one that resonated with many.
Following this data, the market’s conviction grew. The probability of a Fed rate cut at the September 17 meeting surged to a full 100 percent. The odds of a more aggressive 50-basis-point cut also jumped to 12 percent. This shift sent Treasury yields lower, a classic response to expected monetary easing.
But the story doesn’t end there. We’re expecting more revisions. Marc Chandler, Managing Director and Chief Market Strategist at Bannockburn Global Forex, shared a telling detail. He noted that the BLS will announce annual benchmark revisions on Tuesday.
These revisions, he suggested, are expected to point to even weaker job growth earlier in the year. Some surveys even hint that between 500,000 and 1 million jobs could be revised away. If that happens, it will only add more fuel to those rate cut bets.
Bitcoin’s Bearish Signals
Despite all this talk of Fed cuts, Bitcoin’s reaction was muted. It briefly rallied, touching over $113,300, on those hopes of softer yields. But that bounce was fleeting. Prices quickly slipped back under $111,982, a key level known as the double-top neckline.
Failing to reclaim that level is significant. It reinforces the bearish setup we saw with the late August double top breakdown. Brent Donnelly, president of Spectra Markets, pointed out that prices crossing below the Ichimoku cloud further validates this outlook. It’s a technical signal many traders watch closely.
For those unfamiliar, a double top is a bearish reversal chart pattern. It appears after an asset has been on an uptrend. The price hits a high point, pulls back to a support level (the neckline), then rises again but fails to beat the first high. When it breaks below that neckline, it signals the uptrend has lost steam, and a downtrend might follow.
The first line of support for Bitcoin now sits around $101,700. This level aligns with the 200-day simple moving average (SMA), a widely watched indicator. What’s more, this recent double top breakdown looks eerily similar to one we saw in February. That earlier pattern led to a significant multi-week sell-off, pushing prices down to about $75,000. History doesn’t repeat exactly, but it often rhymes, as they say.
Yields and Inflation’s Shadow
This bearish technical outlook for Bitcoin isn’t just about chart patterns. It’s also tied to the potential for increased volatility in Treasury yields. A pickup in yield volatility often tightens financial conditions, which isn’t usually good news for risk assets like Bitcoin.
In the short term, the impending Fed rate cuts could initially push the 10-year yield lower. This would be a positive development for Bitcoin and other risk assets. But, and it’s a big “but,” the downside for yields looks limited. It could quickly reverse, much like what we witnessed in late 2024.
Do you remember last year? From September through December 2024, the 10-year yield actually rose. This happened even as the Fed began cutting rates. It reversed earlier declines that had occurred in the lead-up to September. The 10-year yield bottomed out at 3.6 percent in mid-September 2024, then climbed to 4.80 percent by mid-January.
Why did this happen? Analysts at ING offered some perspective. They noted that the rise in yields last year was open to interpretation. But it had an underpinning of macro resilience, sticky inflation, and lots of talk about fiscal spending as a medium-term risk.
This time around, the worries about the economy are certainly more intense. But, ING points out, these are offset by ongoing fiscal concerns and a quite different inflation dynamic. It’s a complex dance of factors, making predictions tricky.
Today’s labor market appears significantly weaker than last year. Yet, inflation is relatively higher, and government spending continues unabated. Both of these factors suggest that the yield could surge following the September rate cut. It’s a scenario that could put more pressure on Bitcoin.
Adding another layer to this puzzle is the August CPI data, due next week. When the Fed cut rates last September, the U.S. consumer price index was comfortably below 3 percent. Since then, it has edged back up to 3 percent. This upcoming report is likely to provide further evidence of inflation’s stubbornness.
Wells Fargo, for instance, forecasts that the core CPI will likely have risen by 0.3 percent. This would keep the year-over-year rate at 3.1 percent. The headline CPI is also expected to have risen 0.3 percent month-over-month and 2.9 percent year-over-year. These numbers, if they hold true, won’t make the Fed’s job any easier, nor Bitcoin’s path clearer.
So, here we are. A weak jobs report, strong bets on Fed rate cuts, and Bitcoin shrugging it all off with a bearish technical pattern. The coming weeks, with yield volatility and inflation data on the horizon, promise to be anything but dull. It leaves us wondering, what will Bitcoin do when the market finally decides which way the wind is truly blowing?
