Inflation Concerns, Strong Jobs Data Put Bitcoin on the Defensive

The price of bitcoin BTC$91,462.39 retreated on Wednesday after a Federal Reserve official reiterated her concerns about jobs data and inflation.

“I don’t really see a compelling reason to pause, meaning wait until you get more evidence to decide what to do,” said Federal Reserve Bank of Cleveland President Loretta Mester in an interview with the Financial Times.

Despite some encouraging signs in recent months, said Mester, the Fed had more work to do to stem inflation.

Mester is an Federal Open Market Committee (FOMC) “alternate member,” meaning that she votes on interest rates in the absence of one of the 12 voting members. Known as one of the more hawkish members of the Fed, her comments shouldn't have been too surprising, but nevertheless helped knock the price of bitcoin down about $500 to $27,000 early Wednesday morning.

Meanwhile, an unexpectedly strong Job Openings and Labor Turnover (JOLTS) report showed openings increasing to 10.1 million in April, more than an anticipated 9.375 million, and bolstering Mester’s argument that labor markets remain stubbornly tight.

Not all market participants have been phased by the price decline.

Mikkel Morch, of Digital Asset Fund Ark36 believes that the fundamental drivers of bitcoin, including adoption and institutional interest, point to higher prices despite current macroeconomic concerns.

“While short-term volatility persists due to the Federal Reserve's tightening measures and ongoing global economic uncertainties, our stance at ARK36 remains bullish on Bitcoin for the long term”, stated Morch.

Michael Silberberg of crypto hedge fund Alt Tab Capital, echoed those sentiments, indicating that institutional investors often embrace volatility in crypto markets. “This is a highly volatile market," he said, "which is one of the traits that attracts institutional investors in the first place.”

A key to watch in upcoming days is to what extent BTC prices settle near $27,000, which coincides with its 20-day moving average. A decline below this threshold could see bitcoin approach the lower range of its Bollinger Band at $26,300.

Among upcoming data points of interest will be Friday’s nonfarm payrolls data. Current forecasts call for the economy to add 180,000 jobs in May. A reading above 180,000 would likely have a bearish impact on prices.