Bitcoin struggles around $23,000 level as new-year rally loses steam

The price of bitcoin dipped below $23,000 over the weekend as investors digested the latest U.S. employment numbers and looked toward a batch of Federal Reserve member speeches. Bitcoin fell as low as $22,655 early Monday morning, its lowest level since Jan. 31, according to Coin Metrics, after breaking through the $24,000 on Thursday. It was last trading higher by less than 1% at $23,001.58. For the month, bitcoin is down 0.4%. However, it’s still up 39.1% for 2023. Meanwhile, ether fell as low as $1,610.21 Monday. It was last higher by 1.7% at $1,646.12.

A strong labor market

“Bitcoin continues to lose its momentum after the stronger-than-expected January jobs report forced the market to prepare for two more rate hikes,” said Yuya Hasegawa, crypto market analyst at Japanese bitcoin exchange Bitbank. “Bitcoin has survived a week packed with important events and economic data, while maintaining the price around $23,000, but the market may have exhausted reasons to buy the coin and could be subjected to profit-taking sell orders this week,” he said. On Friday, the Labor Department reported the strongest gain in nonfarm payrolls – 517,000, for the month of January, far higher than the 187,000 Dow Jones estimate – since July and a 53-year low in the unemployment rate. After the numbers were released, Treasury yields rose and the U.S. dollar index followed – both of which tend to move inversely to crypto. The report “delivered a blow to all those expecting the Fed to cut rates soon,” said Noelle Acheson, economist and writer of the Crypto is Macro Now newsletter. “The bump in employment, and the lowering of the official unemployment rate to the lowest in over 50 years, suggests that scenario is a way off still, and reminds the market that the Fed has no other reason to bring rates down.” “Expectations are shifting to more tightening, and higher rates for longer (what the Fed has been saying all along), which is not good for risk-on assets,” she added.

Awaiting a crypto pullback

For several investors and analysts, the crypto market is showing a bullish trend, and likely found a bottom at $17,000 in December, but is likely to pause at least once more before taking off on a more meaningful bull run. Bitcoin is trading “at the deepest overbought condition in over two years” and is “due for a brake check,” according to Wolfe Research. Many believe that the macro environment will continue to be a big challenge for risk assets including crypto. In 2022, crypto’s correlation with stocks was at its highest and that trend isn’t likely to be over. Fed chair Jerome Powell is scheduled to speak at the Washington D.C. Economic Club on Tuesday, and several other Fed members are slated to deliver speeches this week. “Given last week’s failure to fully suppress the market’s optimistic rate outlook, the Fed members will likely continue to remind the market that the Federal Funds rate will climb above 5% and will be kept there throughout the year,” Hasegawa said.