In a significant development, Bitcoin’s price has dropped by 4.75% in the past day after reaching an all-time high of around $108,365. As of December 18th, the cryptocurrency is trading at approximately $104,175.
Uncertainty Ahead of the Federal Reserve’s Rate Decision
The decline in Bitcoin’s price appears to be a result of sell-the-news sentiment among traders ahead of the United States Federal Reserve’s key interest rate decision on December 18. This move suggests that most Bitcoin investors are taking a cautious approach and de-risking their positions before the event.
Sell-the-News Sentiment Takes Hold
The price surge in Bitcoin after the consumer price index (CPI) data release on December 11 has led to a correction, reflecting a ‘sell-the-news’ sentiment in the market. The CPI data showed inflation rising in November, which may have contributed to the decline in Bitcoin’s price.
According to Crypto Rover, the sell-the-news sentiment is driven by the fact that the Fed will likely vote for another quarter-point rate cut on December 18. This move could lead to increased volatility in the market and put downward pressure on Bitcoin’s price.
Unclear Rate Path Ahead
The uncertainty surrounding the Fed’s rate path ahead has added to the decline in Bitcoin’s price. K33 Research analysts Vetle Lunde and David Zimmerman note that the central bank may pause rate cuts in the coming months, which could lead to further market volatility.
K33 Research Analysts’ Note
"We expect this week’s FOMC to contribute to the market’s volatility," wrote Lunde and Zimmerman in a note. "Following the FOMC, quiet macro weeks await, potentially setting the stage for Bitcoin momentum to further materialize during the holiday season."
Bitcoin Onchain Indicator Shows Cautious Profit-Taking
The Stock-to-Flow (S2F) Reversion indicator is signaling cautious profit-taking as Bitcoin’s price trades near a new record high. Historically, when the S2F reversion ratio rises above 2.5, it has often marked levels where the market shows signs of potential short-term corrections.
S2F Reversion Ratio
According to CryptoQuant analyst DarkFrost, "A prudent strategy when using this indicator is to take moderate profits once the S2F reversion ratio hits 2.5 and to secure larger profits when the ratio exceeds 3." The current S2F reversion ratio of around 2.27 suggests that cautious profit-taking may be underway.
Bitcoin Correction Target at $92,000?
The decline in Bitcoin’s price is also due to weakening technicals. On the daily chart, a growing bearish divergence between BTC’s rising prices and declining relative strength index (RSI) indicates weakening upward momentum. This typically precedes a price correction.
BTC/USD Daily Price Chart
Secondly, Bitcoin’s drop is part of its prevailing rising wedge trend, where the price is rising inside two converging, ascending trendlines. On December 18, BTC tested the wedge’s upper trendline as resistance, leading to a sharp decline toward its lower trendline support today.
Rising Wedge Trend
According to Traditional analysts, rising wedges are bearish reversal indicators that resolve when the price breaks below the lower trendline and drops by as much as the wedge’s maximum height. This puts Bitcoin’s downside target for December at approximately $92,000, coinciding with the 50-day exponential moving average (50-day EMA; the red wave).
Conclusion
In conclusion, the decline in Bitcoin’s price is driven by sell-the-news sentiment ahead of the Federal Reserve’s rate decision and weakening technicals. While the S2F reversion indicator suggests cautious profit-taking, the rising wedge trend indicates a potential correction target at $92,000.
Disclaimer
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
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