Bitcoin falls to 1-month low as jobs data sparks market volatility

Bitcoin and other cryptocurrencies plunged after earlier gains were erased, as digital assets got caught in a wild trading session across markets after a disappointing US jobs report.

Bitcoin jumped as much as 1.6 per cent following the August employment report Friday morning in New York, only to turn decidedly lower about an hour later. The original crypto asset fell 4.5 per cent at about $53,555, its lowest price since Aug. 5, as of 2:54 p.m. in New York. Ether, the second-biggest cryptocurrency, tumbled almost 6 per cent.

US payrolls rose by 142,000 in August, less than the 165,000 average forecast in a Bloomberg survey, and the prior two months' figures were revised lower by 86,000. Swaps traders have increased the chances that the US central bank will cut rates by a half percentage point, or 50 basis points, when policymakers meet later this month to announce what is broadly expected to be the first rate cut in over four years. But traders later revised whether the report was bad enough to inspire that big of a cut.

A looser monetary policy is good news for speculative assets like crypto.

“Today it’s more of a risk-asset selloff,” said Cosmo Jiang, portfolio manager at Pantera Capital. “I think expectations for a 50 basis-point cut in September got too high, and my view is it is super unlikely to happen. Mixed employment data this morning, or in other words not obviously bad, lowers the probability of a 50 basis-point cut. And risk assets — equities, crypto — are all down on that.”

Stocks also fell, with the S&P 500 opening higher before sliding 1.8 per cent in roughly the last hour of trading. Bitcoin and other major tokens have been tightly tracking global equities in recent weeks. The 30-day correlation coefficient for a gauge of the largest 100 digital assets and MSCI's index of world shares is near 0.60, one of the highest levels over the past two years, data compiled by Bloomberg show. A reading of 1 indicates assets are moving in lockstep, while minus 1 signals an inverse tie.

“Bitcoin has been responding to macro events in a highly correlated manner to equities,” said Benjamin Celermajer, co-chief investment officer at Magnet Capital.

Record inflows into US spot-Bitcoin exchange-traded funds ignited the record-breaking rally in the largest digital asset earlier in the year. But that rally then fizzled, and the ETFs have lost money in recent days amid outflows.