Bitcoin drops from $100,000 on risk aversion sentiment

Bitcoin price broke the $100,000 barrier on Monday and rose above $102,500 in early trading on Tuesday. Bitcoin plummeted to $96,000 later on Tuesday, however, as a risk aversion sentiment prevailed in markets. If BTC price declines, support can be found at $93,500, while resistance may be encountered at $103,000. 

Ethereum price also suffered heavy losses on Tuesday, plunging from $3,700 to $3,400. If Ethereum's price declines, it may encounter support near $3,300, while if it increases, resistance may be encountered near $3,740.

Bitcoin price registered a new all-time high of $108,200 in December after US President-elect Donald Trump confirmed plans to build a Bitcoin strategic reserve. Donald Trump has openly declared his support of crypto markets, announcing that he will make the US ‘the crypto capital of the planet’. Growing expectations that the new government will adopt a pro-crypto regulatory and fiscal policy have been boosting crypto markets, especially since Donald Trump reaffirmed his pre-election commitment to build a Bitcoin strategic reserve. 

Renewed expectations of the creation of a US Bitcoin reserve boosted Bitcoin price on Monday. Analysts at a Wall Street investment bank have put the odds of incoming US president Donald Trump creating a bitcoin reserve in 2025 at 60%, causing its price to surge above the key $100,000 level once more.

The uncertainty surrounding US President-elect Donald Trump’s trade tariffs is causing a risk aversion sentiment, driving risk assets down. On Monday, reports that Trump’s tariffs will be more moderate than previously anticipated caused turmoil in markets. According to the Washington Post, Trump is considering imposing international tariffs only related to sectors deemed critical to national or economic security. Trump, however, later denied these rumors, stating that the claims by the Washington Post were completely false.

Cryptocurrency prices are also affected by central banks’ interest rates. The US Federal Reserve cut interest rates by 25 basis points at its latest meeting to a target range of 4.25% to 4.50%.  Indications that the Fed will follow a more hawkish approach than previously anticipated are putting pressure on crypto markets. Fed Chair Jerome Powell’s stance has been more hawkish lately, emphasizing the need to be cautious about further rate cuts. In addition, the Fed’s latest dot plot indicated that only two rate cuts will take place in 2025, down from four projected in September.

Geopolitical concerns are promoting a risk aversion sentiment, lowering the appeal of high-risk assets such as cryptocurrencies. The situation between Russia and Ukraine remains critical. In addition, tensions between Israel and Lebanon have cooled after the ceasefire deal, but hostilities between Israel and Hamas continue in the Gaza area. Meanwhile, the civil war in Syria has been rekindled, further destabilizing the region and lowering risk sentiment.

BTC/USD 1h Chart

ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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