Bitcoin’s decline comes ahead of the Federal Reserve’s key interest rate decision, which could see prices fall to $92,000.
After hitting an all-time high of $108,365, Bitcoin price fell 4.75% in one day, trading around $104,175 on December 18.
The drop ahead of the Federal Reserve’s key interest rate decision suggests that most Bitcoin traders are reducing risk ahead of the event. Bitcoin Falls on Buy Talks
The Fed is likely to vote for another quarter-point hike on December 18, especially after last week’s consumer price index showed that inflation rose in November.
Bitcoin prices have risen 13.20% since the release of the CPI data on December 11, with the current correction reflecting “buy the talk” sentiment in the market.
Bitcoin’s subsequent decline came amid uncertainty surrounding the future path of the Federal Reserve’s interest rates, with K33 Research analysts Vetle Lunde and David Zimmerman suggesting that the central bank could end rate cuts in the coming months. “We expect this week’s FOMC to further increase market volatility,” K33 Research analysts Vetle Lunde and David Zimmerman wrote in a note, adding:
” A quiet period ahead of the macroeconomic week following the Federal Open Market Committee (FOMC) meeting could open the door for Bitcoin’s rally to emerge over the holidays.”
Bitcoin’s on-chain signals suggest cautious withdrawals
As Bitcoin’s price trades near new highs, the stock-to-flow (S2F) indicator suggests cautious withdrawals.
Historically, when the S2F rate of return rises above 2.5, this indicates a level where the market is showing signs of a short-term correction. When the indicator breaks above 3, it indicates market overheating, which often coincides with regional highs and periods of increasing value.
However, when the S2F response rate is below 1, it indicates a sell signal. For example, September. On November 11, the indicator fell below 1 as Bitcoin’s price rose.
Between December 16 and 17, the ratio dropped from 2.47 to around 2.27.
CryptoQuant analyst DarkFrost said, “A smart strategy for using this indicator is to take small profits when the S2F Regression ratio reaches 2.5, and large profits when the ratio exceeds 3.” This is the trend for Bitcoin price over the past 24 hours, with a ratio of 2.5.
Bitcoin pullback to $92,000?
Bitcoin price has been declining over the past 24 hours amid technical weakness.
First, the divergence between the Bitcoin price’s rise and the Relative Strength Index (RSI) decline on the daily chart has sent Bitcoin price down.
Simply put, Bitcoin’s rate of increase is slowing, usually before a price correction like the one we’re seeing right now.
Second, Bitcoin’s decline is part of an uptrend, with the price moving within two converging lines. On December 18, BTC tested the upper line as resistance, leading to a sharp decline today to support the lower line.
Related: Bitcoin could hit $200,000 by mid-2025, says Bitfinex as the price continues to fall.
Traditional analysts view the Rising Wedge as a bearish reversal signal that is not spreading when the price breaks below the lower line and reaches the higher high of the Wedge.
This would place Bitcoin’s December low at $92,000, based on the 50-day moving average (50-day EMA; red wave).
