Non-farmers surged by 16.2 million, causing BTC to fall below 80,000, and expectations for interest rate hikes are heating up

According to Woofun AI, the strong performance of the latest US employment data completely crushed the market's optimistic expectations that monetary policy will soon shift to easing, directly triggering a significant pullback in cryptocurrency asset prices. On the eve of the Jackson Hole meeting, Federal Reserve Chairman Kevin Walsh's remarks about potential interest rate hikes have made the market nervous, and the release of this data further heightened uncertainty, causing Bitcoin to fall below the key psychological threshold of $79,500, and the shadow of tightening macro-liquidity once again looms over the digital asset sector.

Judging from specific market performance, all major cryptocurrencies are under tremendous downward pressure. Bitcoin's trading price slipped to around $79,440, back below the $80,000 mark; Ethereum was also not spared, falling to around $2,454, falling below the important support level of $2,500.

According to data compiled by Woofun AI, Zcash has also fallen below the $1,000 level, and according to CoinMarketCap statistics, the prices of Ripple, Solana, and Chainlink have also declined to varying degrees.

It is worth noting that despite strong intraday fluctuations, the trend of Bitcoin, Ethereum, and several other cryptocurrencies has continued to rise in the past 24 hours, which means that the market is currently only regaining previous gains and has not experienced a full-day collapse.

This difference is critical to understanding the current market structure. The core variable is whether investors can withstand fundamental changes in US interest rate expectations. The direct reason behind this pullback was the August non-farm payroll data released by the US Bureau of Labor Statistics. The number of employed people increased by 162,000, which far exceeded the 56,000 increase originally anticipated by economists surveyed by Reuters.

What is more critical is the revision of historical data: the increase in the number of people employed in June was raised from 20,000 to 31,000, and the July figure was reversed from a reduction of 23,000 jobs to an increase of 21,000 jobs. These revisions increased the total number of employed people in the previous two months by 55,000.

Furthermore, the unemployment rate remained at 4.1%, and the labor force participation rate rose slightly from 61.4% to 61.6%. Together, these data paint a far better picture of the labor market than investors expected. The only mitigating factor in the report comes from wage levels: the average hourly wage increased by 0.3% in August and increased by 3.1% year over year, indicating that despite good employment conditions, the annual wage growth rate has not accelerated further, and inflationary pressure has not gotten out of control on the pay side.

Employment data profoundly affects the cryptocurrency market through monetary policy transmission mechanisms, rather than directly affecting Bitcoin's underlying network or application scale. A labor market that is still strong has given the Federal Reserve more policy space to focus on controlling inflation without supporting employment by maintaining low interest rates.

This policy orientation is likely to drive up the yield on short-term US Treasury bonds, as traders will demand higher returns on maturing bonds to cover risk. Higher yields will give government debt an advantage in competition with risky assets, while stricter borrowing conditions will also significantly increase the cost of holding leveraged positions. The dollar may also strengthen as investors expect US interest rates to remain high. Since cryptocurrencies are globally denominated in dollars, a stronger dollar will reduce purchasing power outside of the US, thereby making the global liquidity environment unfavorable. Therefore, the initial decline did not indicate a specific fundamental problem in the cryptocurrency industry; traders were only adjusting prices to deal with the possibility that the US financial environment might remain tight or tighten further.

The background to this price adjustment is that there are differences within the Federal Reserve as to whether it is necessary to raise interest rates again. Speaking at the Jackson Hole conference, Federal Reserve Chairman Kevin Walsh made it clear that he is considering raising interest rates in September. He said that policymakers must be convinced that inflation can return to the 2% target quickly enough, otherwise the Fed still has “a lot of work to do.” Although his final statement did not determine at which meeting the Federal Reserve would act, it also broke the assumption that “keeping interest rates unchanged is the only possible outcome in September.” By contrast, Federal Reserve Vice Chairman Christopher Waller took a more cautious approach in his September 3 speech. He said that recent inflation data has shown signs of improvement, and if this trend continues, he is inclined to support maintaining the current level of interest rates.

However, he also pointed out that if the August inflation data shows that this improvement is only temporary, he will also support interest rate hikes. He also stressed that since economic activity and the labor market are already in a more ideal situation, he will consider inflation factors more than employment data when making decisions. Although this employment data provides more support to officials who advocate more stringent policies, it is not enough to determine the outcome of the conference alone.

Looking ahead, the futures market still tends to raise interest rates. According to statistics, the Chicago Mercantile Exchange (CME) FedWatch tool shows that the probability that the Fed will raise interest rates by 25 basis points on September 16 is 60.2%. In this way, the target interest rate range will rise from 3.50% — 3.75% to 3.75% — 4.00%; the remaining 39.8% probability believes that interest rates will not change, while the probability of interest rate cuts is zero. FedWatch calculates these probabilities based on 30-day federal funds futures, so these values reflect market sentiment rather than the Federal Reserve's official predictions. The 60.2% value was the market benchmark before the CPI data was released, and this figure is likely to change significantly after the August inflation report is released.

If the CPI data shows strong performance, then continued price pressure combined with a strong employment situation will provide enough room for policy makers to operate, which will further strengthen expectations of interest rate hikes, and put continued pressure on the cryptocurrency market through higher yields, stronger dollars, and higher leverage costs. However, if the inflation data is moderate, then expectations of such interest rate hikes will weaken. Officials like Waller can argue that even if the employment situation remains stable, price pressure is gradually easing, so there is no need to raise interest rates again. For Bitcoin, the test now is whether investors can push the price back above $80,000 after the initial reaction triggered by employment data has subsided. The unexpected performance of employment data made it more difficult to continue the previous upward trend, but the August CPI report will give a more clear signal of whether changes in interest rate expectations will continue, which will be a key variable in determining short-term trends.