Bitcoin plummets as spot ETF hype deflates

Anticipation of the approval of Bitcoin spot exchange-traded funds (ETFs) by the Securities and Exchange Commission (SEC) triggered market volatility last week. The SEC approved 11 applications last week, including those from BlackRock, Ark Investments, and Fidelity. News of the approval boosted not only Bitcoin but other cryptocurrencies as well. 

The enthusiasm over the approvals did not last long, however, and a massive Bitcoin selloff was triggered soon after the approval last week. Crypto markets steadied at the beginning of this week but are starting to deflate again as the boost they received in the past few weeks from the hype created over the approval of Bitcoin spot ETFS is fading.

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 traders access to cryptocurrency through a regulated product, eliminating the risks of buying from unregulated exchanges. 

Bitcoin price plummeted on Thursday, dropping to $41,600. If BTC price declines, support can be found near $41,400, while resistance may be encountered near $44,000. 

Ethereum price dropped sharply on Thursday, touching the $2,460 level. If Ethereum's price declines, it may encounter support near $2,450, 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%. 

BTC/USD 1h Chart

ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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