Non-farm data triggers BTC 'roller coaster': the full story behind the scenes

Background and Event Overview

On January 10, 2025, at 21:30, the U.S. Department of Labor released the latest non-farm payroll data (NFP): the actual number of employed people increased by 256,000, far exceeding the market's expected 160,000. This stronger-than-expected data directly reinforced the market's anticipation of further tightening of monetary policy by the Federal Reserve, leading to a rapid strengthening of the U.S. dollar index and causing a severe impact on global financial markets, including Bitcoin.

Affected by the data, Bitcoin fell sharply by 1.42% within 5 minutes after the release of non-farm data, forming a typical "needle insertion market": the price quickly bottomed out and rebounded sharply. This phenomenon not only demonstrates the high sensitivity of crypto assets to macroeconomic data, but also reveals the complex role of market sentiment and trading mechanisms in extreme market conditions.

From the perspectives of macro fundamentals, market sentiment, trading mechanisms, and liquidity, this article provides an in-depth analysis of the causes of the current market situation and the underlying market laws.

The core driving factor of pin insertion market.

1. Macro fundamental: Strong non-farm payroll strengthens expectations of interest rate hikes

Data analysis and market expectations difference

The non-farm payroll increased by 256,000, far exceeding the market's expectation of 160,000, indicating that the US job market remains robust and economic vitality significantly exceeds expectations. This data directly shattered the market's optimistic expectation of the Federal Reserve pausing or slowing down interest rate hikes, strengthening concerns about continued monetary policy tightening.

The market's readjustment of future interest rate expectations has intensified selling pressure on risk assets. The domino effect of a stronger dollar

Driven by non-farm data, the US Dollar Index (DXY) quickly rose, forming a suppression effect on non-dollar assets such as Bitcoin. The strong dollar has attracted a large amount of safe-haven funds, weakening the attractiveness of risk assets, making it difficult for cryptocurrencies such as Bitcoin to obtain funding support in the short term. This has had a knock-on effect on the global market.

The non-farm data has spillover effects on the global financial markets, not only exacerbating the volatility of assets such as the US technology sector and gold, but also transmitting to the Bitcoin market through changes in the US dollar exchange rate, further increasing the magnitude of fluctuations.

2. Market Sentiment: Short-term Panic and Expectation Reversal

Market expectations of mismatched triggering effects

Before the non-farm payroll data was released, the market generally expected a slowdown in job growth, which could ease the Fed's policy tightening pressure. However, the actual data's 'explosive' performance completely overturned this assumption, swiftly shifting market sentiment from optimism to pessimism. Investors' portfolio adjustments and reversed expectations directly triggered intense price fluctuations. The ripple effect of panic selling

After the non-farm payrolls data was released, some short-term funds and retail investors in the Bitcoin market showed emotional reactions, and the concentrated selling further accelerated the price decline. This panic emotion, coupled with the lack of market liquidity, formed a vicious cycle, pushing the price to quickly bottom out. Institutional trading has magnified the market impact.

In recent years, the institutionalization of the cryptocurrency market has continued to increase. Many institutional investors have adjusted their investment portfolios based on their judgments of the macroeconomy and Federal Reserve policies. After the release of the non-farm payroll data, institutional investors have reacted more quickly and on a larger scale, resulting in a significantly increased market sensitivity to macroeconomic data.

3. The amplification effect of trading mechanism and liquidity

Chain reaction of leveraged trading

The high leverage characteristics of the Bitcoin market are an important driver of needle-insertion market. After the non-farm data was released, the rapid decline in the price of Bitcoin triggered a large number of forced liquidation (blowout) of leveraged long positions. This chain reaction further amplified the magnitude of the price decline and accelerated the short-term volatility of the market. The role of algorithmic trading in promoting.

Quantitative trading strategies in the market are extremely sensitive to non-farm payrolls. After the data was released, the algorithm based on macro data quickly executed the selling strategy, and a large number of sell orders poured into the market, causing a sharp drop in liquidity and violent price fluctuations. Subsequently, the entry of the buy order of the arbitrage strategy pushes the price to rebound rapidly, forming a "pin" V-shaped reversal. The exacerbating effects of liquidity shortages

During the release of non-farm payrolls data, the liquidity of the Bitcoin market significantly decreases. Some market participants choose to cancel orders and wait to avoid risks, resulting in insufficient market depth. In this context, large trading orders are difficult to be effectively executed, leading to price fluctuations far beyond normal levels.

The Revelation of Events and Market Laws

1. The sensitivity of the cryptocurrency market to the macroeconomy is increasing.

With the deep participation of institutional investors, the price trend of the Bitcoin market is gradually being significantly influenced by macroeconomic data. This phenomenon indicates that Bitcoin is evolving from a purely decentralized asset to a globally connected asset in the market.

Traders need to closely monitor key macroeconomic indicators such as non-farm data, CPI, interest rate decisions, etc.

Before and after the release of major economic data, formulate event-driven strategies based on the difference between market expectations and actual values.

2. Margin trading and low liquidity lead to amplified volatility

The recent plug-in market highlights the amplifying effect of high leverage and low liquidity on market volatility. The leverage characteristic of the cryptocurrency market is in sharp contrast to the low volatility of traditional asset markets, with intense short-term fluctuations and greater risk exposure.

In event-driven markets, investors need to control leverage risks reasonably to avoid additional losses caused by the chain of liquidation.

Market participants should be vigilant about abnormal price fluctuations in low liquidity environments and maintain a moderate wait-and-see approach.

3. The profound impact of algorithmic trading pairs on the market

The popularity of quantitative trading strategies has made the encrypted market more responsive and volatile to macro data. While the widespread application of this technology is improving market efficiency, it is also exacerbating price fluctuations in extreme market conditions.

Investors need to understand the operation mechanism of quantitative trading and predict its potential impact in key events.

Retail traders should avoid chasing highs and selling lows in extreme market conditions, and reduce emotional trading behavior.

4. Global Market Linkage Impacted by Non-Farm Data

As a global asset, the price fluctuation of Bitcoin not only reflects the internal dynamics of the cryptocurrency market, but also closely relates to changes in the traditional financial market. The volatility of Bitcoin price further highlights the interconnectedness and systemic risks of the global market, especially after the impact of non-farm data.

Investors need to pay attention to the changes in the correlation between Bitcoin and other assets (such as the US dollar and US bonds) and optimize asset allocation.

By tracking global market sentiment and fund flows, better grasp the changing trend of Bitcoin price.

Summary

The Bitcoin spike in response to the release of non-farm payroll data is the result of the combination of macroeconomic data shocks, market sentiment reversal, and the complexity of trading mechanisms. The strong non-farm payroll data not only strengthened the market's expectations of a Fed rate hike, but also amplified market volatility through leverage trading, liquidity shortages, and algorithmic trading.

This event vividly reflects the high sensitivity and vulnerability of the cryptocurrency market in the face of macroeconomic data, while revealing the decisive role of market participants' behavior and trading mechanisms in price fluctuations. Investors need to comprehensively combine macroeconomics, market structure, and risk management methods in order to better protect their assets and seize potential opportunities in a high-volatility environment.

Related reading recommendation: Non-farm Effect: When Traditional Economic Barometers Move the Giant Wheel of Digital Currency

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