Bitcoin Slides Following Strong Jobs Data: Why the Probability of a Fed Rate Hike Remained at 58%?

Despite strong employment data, the probability of a Fed rate hike remained at 58%; although Bitcoin and the two-year Treasury note saw sharp movements, market pricing did not change significantly compared to the previous week.

Friday’s robust jobs report strengthened expectations that the Fed might hike interest rates this month. However, according to CoinDesk, the CME FedWatch Tool—which gauges expectations for Fed decisions based on futures prices—shows that investors are pricing in only a 58% probability of a 25-basis-point hike. This rate remained very close to the level seen in the week prior to the data release.

Should the Fed proceed with a hike, the policy rate is expected to rise to the 3.75%–4% range. It is noteworthy that the market is pricing this decision not as a foregone conclusion, but as a possibility that remains on the table.

Sharp reaction in Bitcoin and bond yields

Following the employment data, the price of Bitcoin fell from $81,300 to $78,700 within a few hours. During the same period, the yield on the two-year U.S. Treasury note, which is sensitive to interest rate expectations, rose from 4.36% to 4.42%.

These movements created the impression that expectations for a Fed rate hike were strengthening. However, the fact that the probability of a hike remained close to the previous week suggests that the market does not view the data as a definitive signal of the decision. While more hawkish commentary emerged on social media and from some analysts, futures prices showed a more limited change.

The next critical data point for the market will be the inflation data to be released on September 11. If inflation comes in below expectations, it could once again weaken the probability of a rate hike. The Fed’s interest rate decision will be announced on September 16.