Bitcoin's battle to defend $23,000 continues, as institutional buying sentiment heats up

As investors digested the latest U.S. jobs data and focused on a series of speeches from Federal Reserve members this week, Bitcoin fell below $23,000 over the weekend, falling to $22,655 in early trading on Monday, the lowest level since January 31. At press time, Bitcoin rebounded less than 1% to $23,039.37, down 0.4% since the beginning of February.

Strong labor market

Bitpush previously reported that the U.S. Department of Labor announced on Friday that non-farm payrolls increased by 517,000 in January, far higher than the Dow Jones estimate of 187,000, and the unemployment rate hit a 53-year low. After the data was released, Treasury yields and the U.S. dollar index rose, and the crypto market moved in the opposite direction of the two.

“Bitcoin continues to lose momentum after a 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 survived a week full of key events and economic data while maintaining prices around $23,000, but the market has already priced in the buy-up rationale and this week could be impacted by profit-taking sell orders,” Yuya Hasegawa wrote in his market report.

Economist and author of the Crypto is Macro Now newsletter Noelle Acheson commented that the report "deals a blow to anyone who expected the Fed to cut rates soon," "The surge in payrolls and the drop in the official unemployment rate to its lowest level in more than 50 years suggest that this has a long way to go and remind markets that the Fed has no other reason to cut rates."

She added: "Expectations are shifting towards tighter and higher rates (which the Fed has been emphasizing), which is negative for risk assets."

Fed Chairman Jerome Powell is scheduled to speak on Tuesday at the Economic Club of Washington, D.C., and several other Fed members are scheduled to speak this week.

Whales and institutions are active again

In a recent tweet, data aggregation platform Santiment detected approximately 620,000 small Bitcoin “whales” (wallets holding 0.1 BTC or less) returning to the BTC network.

This happened after the crypto market’s FOMO (standing for “fear of missing out”) kicked in again on January 13, when the Bitcoin price revisited the $20,000 level.

Santiment says these 0.1 or less BTC addresses grew slowly in 2022, but 2023 shows a return of trader optimism.

Digital asset management company CoinShares said that large institutional investors poured money into Bitcoin and other digital asset funds for the fourth consecutive week, including Grayscale , 3iQ and 21 Shares, which are available to qualified investors. This suggests that the sentiment of institutional investors has turned positive, which is a significant change in 2023.

Last week, digital asset investment products saw inflows totaling $76 million, the fourth consecutive week of inflows, with year-to-date inflows now at $230 million, highlighting a decisive change in investor sentiment at the start of 2023. Bitcoin remains the main focus for investors, with inflows totaling $69 million, accounting for 90% of total inflows last week. Total investment assets under management are up 39% year-over-year and currently stand at $30.3 billion, the highest level since August 2022.

Additionally, asset managers saw a surge in crypto long positions as investor sentiment improved.

The latest Commitments of Traders (COT) report from the Commodity Futures Trading Commission ( CFTC ) shows that of the 7,734 open futures positions held by asset managers, 7,671 are long positions and only 63 are short positions. As of January 24, asset managers added 644 long positions. The 7,671 open long positions are an all-time high overall, and the 99.1% long concentration of asset managers is also an all-time high. This report is specifically for asset managers that report futures positions to the CFTC and does not include asset managers who have no exposure to cryptocurrencies.

Waiting for encryption callback

For some investors and analysts, the crypto market is showing a bullish trend, but it may adjust again before a new bull run begins. According to Wolfe Research, Bitcoin is trading “at its most overbought state in more than two years” and “needs a ‘brake’ check.”

Many believe that the macro environment will continue to pose great challenges to risk assets, including cryptocurrencies. Cryptocurrencies reached their highest correlation with stocks last year, and this trend is unlikely to end soon.

“Given last week’s failure to fully dampen the market’s optimistic rate outlook, Fed members are likely to continue to remind markets that the federal funds rate will climb above 5% and remain there throughout the year,” said Yuya Hasegawa.

Mike Alfred, a well-known cryptocurrency investor, has posted a tweet sharing his optimistic view on the price of Bitcoin. He believes that Bitcoin is likely to reclaim the $25,000 level after speculators rushed to buy it. However, to do so, BTC must first surpass $23,133 and stabilize above this support level.