Bitcoin's $85,000 Recovery Hinges on ETF Investor Commitment Post-Payrolls

Bitcoin's recovery above $85,000 is facing a critical demand test following a significant drop in expectations for another Federal Reserve rate hike. A recent study by Glassnode revealed that the most intense buying activity occurred before the latest jobs report, with Bitcoin subsequently retreating after the release. As of press time, Bitcoin was trading at $85,276, up 0.83% over 24 hours, but still below the $86,000 level reached prior to the payrolls data.

The initial surge in Bitcoin's price was driven by a short squeeze, with Glassnode estimating that $50 million in short positions were liquidated in just ten minutes on October 2, eight hours before the jobs report. However, the subsequent decline raises questions about who will sustain the upward momentum once the short positions are closed. Thursday's ETF inflows provided a positive signal, but incomplete data for Friday leaves uncertainty about the market's response to the payrolls report.

US spot Bitcoin ETFs recorded net inflows of $102 million on October 1, indicating renewed investor interest before the payrolls report. However, the market is now waiting to see if this trend continues or if there will be redemptions that could signal weaker demand. Glassnode's data also showed that open interest in Bitcoin futures rose by $2.1 billion in the 24 hours before payrolls but then fell by $1.5 billion after the report, highlighting the volatile nature of the market.

The broader economic context also plays a role. The latest Federal Reserve rate hike was in September, and the probability of another hike in October has fallen significantly. The September employment report showed minimal payroll gains and stable unemployment, suggesting a slower hiring pace that could influence future policy decisions. The upcoming Institute for Supply Management's services report on October 5 will provide further insights into the economic outlook and its potential impact on Bitcoin's price.