The cryptocurrency market's late-summer rally ran into a wall on Friday after a much stronger-than-expected US jobs report pushed traders to price in a September Federal Reserve rate hike, halting bitcoin at $82,400 and dragging major digital assets lower.
Bitcoin had spent the week recovering from a hawkish reaction to Fed Chair Kevin Warsh's stance and geopolitical turbulence. After falling below $77,000 on Saturday and again on Monday following new US-Iran attacks, BTC consolidated between $76,400 and $79,000 before breaking out on Thursday. It surged past $80,000 and reached $82,400 early Friday, its highest level since mid-May. The momentum ended when the Bureau of Labor Statistics released the August employment report.
Nonfarm payrolls rose by 162,000, about triple the 56,000 forecast and the fastest pace in five months. The unemployment rate held at 4.1%, but this time for the right reason: labor force participation climbed to 61.6% from a five-year low of 61.4%, and the labor force grew by 683,000. July's initially reported loss of 23,000 jobs was revised to a gain of 21,000, while June and July were revised up by a combined 55,000. Average hourly earnings rose 0.3% monthly and 3.1% annually.
The report reversed the dovish narrative from July. CME FedWatch now shows a 60.4% probability of a September hike to 3.75%-4.00%, up from 49.4% a day earlier, with essentially zero chance of a cut. Treasury yields rose, with the 2-year yield at 4.38% and the 10-year at 4.78%. The dollar firmed near 99.1. Bitcoin dropped about 2.58% to $79,169, while gold slipped 0.68% to $4,443.
Elsewhere in crypto, Strategy resumed bitcoin purchases after a two-month pause, acquiring 4,603 BTC for $370 million. Bitcoin closed August with a near-25% monthly gain, marking its first green August during a bear market. Weekly outperformers among altcoins included ZEC up 20%, XMR up 10%, and UNI up nearly 40%. Fidelity analysts cautioned that the bear market may not be over despite the rebound.
The next major data point is the August inflation report on September 11, followed by the FOMC meeting on September 15-16. A hot inflation print could harden the case for a hike, while a soft one would reopen the argument for holding rates.
