On Feb. 1 and Feb 2. Bitcoin’s (BTC) price surpassed even the most bullish price projections after the U.S. Federal Reserve announced plans to raise interest rates by 25 basis points.
Even though Fed chair Jerome Powell told investors not to wait for interest rate cuts in 2023, during his press conference he did clearly state that the employment data is currently the main focus.
The results of the ADP payroll survey revealed on Feb. 1 that U.S. private-sector hiring was significantly slower in January. ADP’s measure of private sector payrolls was 106,000, well below the 160,000 market consensus. This data fueled investors’ expectations of future interest rate hikes by the Fed going forward.
After testing the $22,500 support on Feb. 1, Bitcoin gained 6.5% in five hours and has since been flirting with the $24,000 level. While the recent gains are exciting, traders should note that the improvement in crypto market sentiment tracked the risk-on attitude seen in traditional markets.
Stocks with negative operating margin presented significant gains on Feb. 2, including Coinbase (COIN) 20%, Cloudflare (NET) 15%, Unity Software (U) 12% and DoorDash (DASH) 10%. That factor alone should be a warning sign that the gains of the last few weeks might not be sustainable. It’s also important to remember that Bitcoin’s 40-day correlation to the S&P 500 remains above 75%.