After a strong first month of 2023, where bitcoin (BTC) had its best January in 10 years, the Nasdaq Crypto Index (NCI) ended the first week of February closing Sunday (02/05) with a slight downturn of 3.5%. BTC was down 4.1% and ether (ETH) fell by 1.9%. Interestingly, following last month’s trend, both the CF DeFi Composite index and the CF Digital Culture index outperformed the NCI, closing the week with -1.0% and +0.7% performances, respectively. 

The week started with what seems to be the beginning of a consolidation phase for crypto after a strong rally. BTC went under $23,000 after starting the week at $24,000 while ETH lost the $1,600 level.  

On Tuesday, financial markets in general performed well on news that the US Employment Cost Index had a slower-than-expected increase for the third quarter in a row, indicating that inflation continues to decelerate. Tuesday also brought solid results from companies like Exxon, Pfizer, and General Motors. The positive mood seemed to have impacted BTC, which regained the $23,000 mark, but ETH lagged and remained under $1,600.

The much-anticipated Fed announcement on Wednesday delivered good news for investors, with the expected 25 bps hike being confirmed and Chair Jerome Powell’s speech delivering a more dovish outlook for the next several months. By Wednesday night, BTC had surpassed the $24,150 mark, with ETH rising past $1,700 only to lose steam over the next couple of days. 

On Friday, January’s US jobs report came in surprisingly strong. Nonfarm payrolls increased by 517,000 for the month, shattering analysts’ estimate of 187,000. The unemployment rate fell to 3.4%, the lowest since May 1969.

All indexes for US stocks fell broadly on Friday as a consequence of the impact of the strong jobs report to the future of interest rates. In fact, the release has started to induce a shift in market expectations for the Fed’s target rate in the months ahead. The probability of another 25 bps hike in May has doubled from 30% to 60% by Friday night. The market’s conviction that the Fed’s consensus forecast of year-end rates of 5.00 to 5.25% has increased from nearly 0% to almost 9%. On top of the macro data, on Friday, Apple, Amazon, and Google posted earnings that disappointed markets, contributing to a bad mood going into the weekend.

Although crypto seemed to dismiss the negative results from tech companies, this resiliency didn’t last through the weekend. By Sunday, BTC had fallen under $23,000, followed by ETH, which ended the week close to $1,600. This marked the first red week for all major crypto assets following January’s four-week green streak, a healthy correction that might point to a consolidation phase for crypto prices in the weeks ahead.

This week, investors will be paying attention to Chair Powell’s Tuesday speech at an economic club in Washington and to jobless claims on Thursday, which can provide further hints at what’s next for monetary policy in the world’s largest economy.

THIS WEEK

Hashdex Monthly Call on February 8

Bull Run or Bull Trap: Opportunities and Risks as Crypto Rushes into 2023

There has been much speculation about crypto’s performance this year and its parallel with previous cycles. But is the bottom in? And what macro factors will affect crypto in the weeks and months ahead? Join FalconX’s Head of Research David Lawant and Hashdex’s CTO & Head of Products Samir Kerbage on Wednesday, February 8, for a discussion on the factors that should drive investor interest in crypto in this first quarter and beyond.

IN THE NEWS

January’s U.S. Jobs Report was Stunningly Good

 

Fed Slows Rate Hikes, Signals Further Increases Are Coming

 

Solana Unveils App Store For Saga Phone

Markets will continue to follow Solana phone and its initiatives as it could be a strong catalyst for crypto adoption.

 

Binance Partners With Mastercard to Launch Prepaid Crypto Card in Brazil

 

Elon Musk Wants Twitter Payments System to Accommodate Crypto

Crypto investors will be on the lookout for the crypto initiatives of Web2 giants as they could be catalysts for crypto adoption due to their large base of users. Other social media platforms have previously announced crypto-related initiatives, including Twitter.

 

Ethereum Staking Withdrawal Testnet Zhejiang to go Online Feb. 1

This is the first of three testnets that will be launched to guarantee a successful outcome of the much-anticipated Shanghai update which, among other changes, will allow unstaking of ETH out of the mainnet,

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