Core Viewpoint - Bitcoin is facing renewed macroeconomic pressure due to a stronger-than-expected US labor market, which has led to higher Treasury yields and diminished the likelihood of near-term Federal Reserve rate cuts [1][3]. Group 1: Labor Market and Economic Indicators - The US economy added 130,000 jobs in January, nearly double the consensus expectations, while the unemployment rate fell to 4.3%, indicating continued resilience in the labor market [1]. - Strong employment data complicates the outlook for risk assets like Bitcoin, as it reduces the urgency for monetary easing [2][3]. Group 2: Market Reactions - Following the jobs report, the US 10-year Treasury yield rose toward the 4.2% level, with several basis points increase, while the two-year yield also climbed, reflecting a reduced probability of near-term rate cuts [4]. - Higher yields tighten financial conditions, increasing borrowing costs across the economy and raising the discount rate used to value risk assets [5]. Group 3: Impact on Bitcoin - Bitcoin is highly sensitive to liquidity conditions; rising Treasury yields lead to a rotation of capital toward safer, yield-generating assets like government bonds [6]. - A stronger dollar often accompanies rising yields, which reduces global liquidity and makes speculative assets like Bitcoin less attractive [6]. - This combination of factors creates headwinds for crypto markets [8].

Balance Sheet Reduction - The balance sheet has been reduced by $22 trillion from 35% to just under 22% of GDP since June 2022 [1] - The plan is to stop balance sheet runoff when reserves are somewhat above the level judged consistent with ample reserves conditions [1] Liquidity and Money Market Conditions - Liquidity conditions are gradually tightening, including a general firming of repo rates [2] - More noticeable but temporary pressures on selected dates have emerged [2] - The committee is taking a deliberately cautious approach to avoid money market strains [2] Implementation Framework and Tools - The standing repo facility and discount window will help contain funding pressures [3] - These tools will keep the federal funds rate within the target range through the transition to lower reserve levels [3] Reserve Levels - The point of ample reserves may be approached in coming months [2] - A wide range of indicators are being closely monitored to inform this decision [2]