Bitcoin (BTC) experienced a setback, dropping to $30,600 as investors reacted to the blowout U.S. ADP private employment report, causing an increase in expectations for a Federal Reserve rate hike. The digital currency pulled back from its recent 13-month high of $31,500, marking a decline in its value.
The ADP report, released at 12:15 UTC, took the market by surprise with its optimistic data. It revealed that the private sector had added 497,000 jobs in June, surpassing the consensus forecast of 220,000. This strong employment report overshadowed the Labor Department’s findings, which indicated slight weaknesses in the labor market, including a rise in first-time jobless claims to 248,000, slightly exceeding the forecast of 245,000.
Following the release of the ADP report, Treasury yields saw an upward surge. The two-year yield climbed around 15 basis points to reach 5.118%, its highest level since 2006, according to data from TradingView. The 10-year yield also increased by 11 basis points, reaching 4.05%, a peak not seen since March.
The rise in the two-year note’s yield, which is more sensitive to short-term interest rate expectations, suggests that traders anticipate an extension of the Federal Reserve’s rate hike campaign. Currently, futures traders for fed funds see a 94% likelihood of a 25 basis point rate hike taking place this month. Moreover, the market now factors in a 75% chance of three additional rate hikes by the end of the year. Since initiating its tightening cycle in March 2022, the Fed has raised rates by a total of 500 basis points, bringing the range to 5%-5.25%. This tightening of monetary policy has contributed to the decline in the cryptocurrency markets over the past 18 months.
The news of the strong ADP report also had a negative impact on stock traders. At the time of reporting, S&P 500 futures were down by 0.9%, while Nasdaq futures showed a decrease of 1.1%. Additionally, gold experienced a 0.5% decline, trading at $1,905 per ounce. On the other hand, the dollar index initially experienced losses but eventually traded unchanged at 103.24 throughout the day.
Bitcoin’s retreat and the negative reactions from stock traders indicate the impact of the ADP report on market sentiment. The heightened expectations for a Federal Reserve rate hike have influenced various asset classes, contributing to a dynamic and uncertain financial landscape. Investors will closely monitor upcoming developments as they navigate the potential consequences of monetary policy adjustments on the cryptocurrency market and other investment sectors.