On December 18, Bitcoin’s price reached a new record high of around $108,365 but has since dropped by 4.75% to trade at approximately $104,175. This decline is in anticipation of the United States Federal Reserve’s key interest rate decision, which suggests that most Bitcoin traders are de-risking ahead of the event.
BTC/USD Four-Hour Price Chart
[Image description: BTC/USD four-hour price chart from TradingView]
Bitcoin Drops Due to Sell-the-News Sentiment
The Fed is likely to vote for another quarter-point rate cut on December 18, especially in light of last week’s consumer price index (CPI) data, which showed inflation rising in November. Bitcoin’s price surged by up to 13.20% since the CPI data release on December 11, with its correction now reflecting a ‘sell-the-news’ sentiment in the market.
Unclear Fed Rate Path Ahead
Bitcoin’s decline is further attributed to an unclear Fed rate path ahead. K33 Research analysts Vetle Lunde and David Zimmerman note that the central bank may pause rate cuts in the coming months. They stated, "We expect this week’s FOMC to contribute to the market’s volatility." Additionally, they added, "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. Conversely, when the ratio drops below 1, it indicates a buy signal.
Bitcoin’s Stock-to-Flow Reversion
[Image description: Bitcoin stock-to-flow reversion from CryptoQuant]
CryptoQuant analyst DarkFrost noted that "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." This appears to be the case with Bitcoin prices in the last 24 hours as the ratio treads around 2.5.
Bitcoin Correction to $92,000?
Bitcoin’s price drop in the last 24 hours has appeared further due to weakening technicals. First, the drop follows a growing bearish divergence between BTC’s rising prices and declining relative strength index (RSI) on the daily chart. Simply put, Bitcoin’s upward momentum is weakening, which typically precedes a price correction such as the one happening today.
BTC/USD Daily Price Chart
[Image description: BTC/USD daily price chart from TradingView]
Second, 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.
Related:
Bitcoin may hit $200K by mid-2025 as price drops ‘will remain mild,’ says Bitfinex Traditional analysts see rising wedges as bearish reversal indicators, resolving 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).
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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