Cryptocurrencies steady after volatile week

Crypto markets steadied on Monday, after exhibiting high volatility last week. Anticipation on the Bitcoin spot exchange-traded funds (ETFs) approval by the Securities and Exchange Commission (SEC) triggered market volatility last week. 

Bitcoin price surged on Thursday as the first spot Bitcoin ETFs gained approval by the SEC. The SEC approved 11 applications, including those from BlackRock, Ark Investments, and Fidelity. News of the approval boosted not only Bitcoin but other cryptocurrencies as well.

The approval of the first spot Bitcoin ETFs is drawing investors’ attention and is likely to bring more institutional and retail money into crypto markets. Spot Bitcoin ETFs give access to the cryptocurrency to traders through a regulated product, eliminating the risks of buying from unregulated exchanges. The enthusiasm over the approvals did not last long, however, and a massive Bitcoin selloff was triggered on Friday.

Bitcoin skyrocketed to $48,800, its highest level since January 2022, after the approval of the first spot Bitcoin ETFs on Thursday. Bitcoin price suffered a massive correction on Friday though, retreating to the $42,000 level over the weekend. Bitcoin price steadied on Monday, trading around the $42,500 level. If BTC price declines, support can be found near $41,600, while resistance may be encountered near $49,000. 

Ethereum price also surged last Thursday, touching $2,690 for the first time since May 2022. Ethereum pared some of its gains at the end of the week though, dropping to $2,500 over the weekend and trading just above the $2,500 level on Monday. If Ethereum's price declines, it may encounter support near $2,200, while if it increases, resistance may be encountered near $2,700.

Crypto markets are under pressure by rising geopolitical tensions. The war between Israel and Hamas is threatening to spill over the Middle East as tensions rise in the Red Sea area. Concerns that the Geopolitical crisis in the Gaza area may spread to neighboring countries drive risk sentiment down putting pressure on risk assets. The US and the UK have launched a coordinated action against Houthi rebels in Yemen. The coalition delivered a series of air and sea strikes against Houthi targets in Yemen, risking retaliation from Iran.

Increases in central banks’ interest rates are putting pressure on risk assets. Most major central banks, however, are hitting pause on rate hikes, propping up crypto markets. The Fed kept interest rates unchanged at its December meeting, within a target range of 5.25% to 5.50%. The Fed’s forward guidance was more dovish than expected, hinting that the central bank is preparing to pivot to a less restrictive monetary policy. Markets are currently pricing in a 25 bp rate cut in March with over 70% probability, propping up risk assets.

BTC/USD 1h Chart

ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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