Bitcoin struggles to hold on to key $42,000 level

Crypto markets steadied this week, after exhibiting high volatility last week. Anticipation of the approval of Bitcoin spot exchange-traded funds (ETFs) by the Securities and Exchange Commission (SEC) triggered market volatility last week. Crypto markets are starting to deflate after receiving a major boost in the past few weeks from the hype created over the approval of Bitcoin spot ETFS.

Bitcoin price steadied this week but started to decline on Wednesday, struggling to hold on to the key $42,000 level. If BTC price declines, support can be found near $41,400, while resistance may be encountered near $44,000. 

Ethereum price also weakened on Wednesday, dropping to the $2,520 level. If Ethereum's price declines, it may encounter support near $2,450, while if it increases, resistance may be encountered near $2,700.

Bitcoin price surged last 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 enthusiasm over the approvals did not last long, however, and a massive Bitcoin selloff was triggered on Friday.

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. 

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 pausing 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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