What is the Reason Behind Bitcoin’s Price Increase Today?

On October 2, Bitcoin’s value surged approximately 3%, briefly exceeding $87,000, spurred by disappointing U.S. job statistics that bolstered predictions for a pause by the Federal Reserve in October, combined with a wave of short liquidations driving the price up.

At the time of writing, CoinGecko data indicated Bitcoin was trading around $86,300 after reaching an intraday peak above $87,000, rebounding from sub-$84,000 levels earlier in the day. Trading volumes escalated as BTC returned to levels previously tested during its September upswing.

The increase in value gained momentum after U.S. nonfarm payrolls only grew by 29,000 in September, significantly below the anticipated 90,000 jobs by economists. The unemployment rate also climbed to 4.2% from 4.1%, and August payroll figures were revised down from 162,000 to 133,000.

Bitcoin had already been on an upward trajectory prior to the employment report, but the disappointing figures provided traders with additional reason to speculate that the Fed would refrain from altering interest rates later this month. Simultaneously, the price crossing $85,000 pushed bearish traders out of the market.

Weak jobs data supports Bitcoin price

The recent employment statistics surfaced when the likelihood of another October rate hike had already diminished.

As previously mentioned by crypto.news, by October 1, the probability of an October rate increase had fallen to 23% on Polymarket, down from around 70% just a week earlier. Federal Reserve Vice Chair Philip Jefferson indicated that policymakers might require additional time before implementing any rate changes.

In September, the Fed raised its target range by 25 basis points to between 3.75% and 4%.

The weaker employment data from September offers policymakers another crucial labor market metric to weigh ahead of their meeting scheduled for October 27 to 28. Bitcoin has been pressured by rising borrowing costs in recent weeks, especially as the 10-year Treasury yield surpassed 5%.

This effect was observable earlier this week when Bitcoin traded around $83,500 simultaneous to the 10-year Treasury yield climbing to about 5.20%. Bitcoin had previously reached approximately $87,400 before retracing much of that increase.

Short liquidations push BTC toward $87,000

A portion of today’s rally can be attributed to bearish traders being forced to liquidate their positions as Bitcoin navigated through a cluster of sell orders near $85,000.

According to CoinGlass data referenced in market reports, Bitcoin short liquidations surpassed $120 million over a 24-hour span as BTC neared $87,000. Futures open interest saw an increase of nearly $2.3 billion during this spike, indicating that traders were entering new positions while simultaneously closing existing shorts.

Crossing the $85,000 threshold was pivotal for positioning, as this area had previously acted as a resistance point during the last price pullback.

Bitcoin had declined toward $83,000 on September 29 after peaking around $87,400 earlier in the month. At that time, CoinGlass data indicated significant liquidation exposure near $85,500.

When Bitcoin reclaimed this area on October 2, traders betting on falling prices were compelled to repurchase BTC to close their leveraged positions. This influx of buy orders compounded the existing buying activity in the market.

Derivatives have been instrumental in the recent price movements of Bitcoin. A CryptoQuant Bull Score assessment revealed that although spot demand apparently declined by roughly 170,000 BTC over the last 30 days, futures open interest rose during September’s uptrend.

Bitcoin ETF demand remains in the background

Institutional investments through U.S. spot Bitcoin ETFs have persisted as a crucial source of demand, even amidst BTC’s latest volatility.

The funds accumulated $2.39 billion in a single week from September 21 to September 25, achieving net inflows throughout all five trading sessions.

Monday alone accounted for $999 million, followed by $714.7 million on Tuesday. Daily inflows subsequently decreased to $346.9 million, $190.7 million, and $134.5 million over the next three sessions.

BlackRock’s IBIT represented around $1.16 billion of the overall weekly inflow, while Fidelity’s FBTC attracted $701.6 million.

Demand from funds has rebounded significantly since mid-year. U.S. spot Bitcoin ETFs had experienced approximately $5.8 billion in net outflows by July 13, but subsequent inflows restored their year-to-date totals to a positive stance by late September.

Analysts at Bitfinex warned on September 30 that a stronger spot demand would be necessary for a sustained advance, particularly as leverage decreased and ETF inflows diminished from their peak session in September.

Bitcoin price faces another test near $87,500

Bitcoin’s rally above $87,000 brings it back to a level that had halted its previous surge.

Lacie Zhang, research lead at Bitget Wallet, previously identified $87,500 as the key upside level to monitor throughout October. Her expected monthly range for Bitcoin is between $78,000 and $95,000, contingent on institutional demand, inflation, and interest rates.

Breaking through $87,500 might pave the way towards $95,000, according to Zhang, but institutional purchases would need to outpace selling from long-term holders and miners for the rally to persist.

On the downside, Zhang identified $82,000 as a crucial support level, with a liquidation zone ranging from approximately $82,000 to $82,500. A continued drop below $80,000 would invalidate her bullish seasonal outlook.

Bitcoin’s next macroeconomic examination is slated for October 14 with the release of September’s consumer inflation data, providing Fed officials with another significant economic reading ahead of their October policy meeting.