Bitcoin drops to $30.6K amid strong ADP report, increasing expectations of a Fed rate hike.

Bitcoin (BTC) fell to $30,600 shortly before press time, with part of the pullback from the 13-month high of $31,500 occurring after a blowout U.S. ADP private employment report was released at 12:15 UTC, according to blockchain data.

The ADP report surprised the markets significantly by surpassing expectations, showing that 497,000 private-sector jobs were added in June, more than double the consensus forecast of 220,000. This data overshadowed a report by the Labor Department, which indicated some weakness in the labor market, with first-time filings for jobless claims rising to 248,000 last week, slightly higher than the forecast of 245,000.

Treasury yields continued to rise after the release of the ADP report, with the two-year yield increasing by approximately 15 basis points to 5.118%, the highest level since 2006, according to charting platform TradingView. The 10-year yield also rose by 11 basis points to 4.05%, reaching its highest level since March.

The two-year note is more sensitive to short-term interest rate expectations. Its rise to fresh multi-year highs suggests that traders anticipate the Federal Reserve extending its rate hike campaign. In fact, fed funds futures traders now see a 94% chance of a 25 basis point rate hike this month, and markets are currently factoring in a 75% chance of three additional rate hikes by the end of the year. Since starting its tightening cycle in March 2022, the Fed has already raised rates by 500 basis points to the 5%-5.25% range. The tighter monetary policy has been one of the factors contributing to the decline in crypto markets over the past 18 months.

Stock traders also reacted negatively to this morning’s ADP news, with futures tied to the S&P 500 trading down 0.9% at press time and Nasdaq futures down 1.1%. Gold traded 0.5% lower for the day at $1,905 per ounce, and the dollar index erased early losses and traded unchanged on the day at 103.24.

Edited by Stephen Alpher.

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