Hi nadav98,
Thanks for reaching out to Apple Support Communities.
It sounds like you're having an issue with setting up your AirTag.
We're happy to assist.
Manage Apple ID settings on iPhone - Apple Support -- If you go to Settings > [your name] do you see a red dot or message to update your Apple ID settings? If you do, tap the notification and enter the password of your Apple ID.
We recommend checking out the steps in the section titled "Set up your AirTag" from the article here: Set up your AirTag using your iPhone, iPad, or iPod touch - Apple Support
1) Make sure that your device is ready for setup.
2) If your AirTag is new, remove the wrap around the product and pull out the tab to activate the battery. Your AirTag will play a sound.
3) Hold your AirTag near your iPhone, iPad, or iPod touch, then tap Connect.* If you have multiple AirTags and see "More than one AirTag detected", make sure that only one AirTag is near your device at one time. Need help connecting your AirTag?
4) Select an item name from the list, or select Custom Name to name your AirTag and choose an emoji. Then tap Continue.
5) To register your AirTag with your Apple ID, tap Continue again.
6) Tap Done.
Now you can attach your AirTag to your item and see it in the Find My app.
We recommend the steps above because they directly address the issue you initially posted: you cannot set up your AirTag.
Should the issue continue, follow up with the steps in the section below.
1) Make sure that your device is ready for setup.
2) If the setup animation disappeared, press the side button or Sleep/Wake button on your iPhone to put your device to sleep. Then wake and unlock your iPhone. Wait up to 15 seconds, and the animation should reappear.
3) If you have multiple AirTags to set up, make sure that only one is near your device at one time.
4) Remove and then replace the battery in your AirTag.*
5) If your AirTag still won't connect to your device, reset your AirTag.
Learn what to do if you see a message that says the AirTag is connected to another Apple ID.
Please let us know the outcome after giving the above steps a try.
Cheers!