What's Causing the Current Decline in Bitcoin's Value Today?

After reaching an all-time high of around $108,365, Bitcoin’s price has dropped by 4.75% in a day, trading at approximately $104,175 on December 18. This decline seems to be linked to the upcoming United States Federal Reserve interest rate decision, indicating that most Bitcoin traders are de-risking ahead of the event.

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BTC/USD Four-Hour Price Chart

Source: 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 showing 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.

Source: Crypto Rover

The sell-the-news phenomenon occurs when investors rapidly take profits after a significant price increase, leading to a temporary correction or consolidation period before potential further growth. This phenomenon is often observed in cryptocurrency markets, particularly during times of high volatility.

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. In a recent note, they wrote:

"We expect this week’s FOMC to contribute to the market’s volatility,"

"Following the FOMC, quiet macro weeks await, potentially setting the stage for Bitcoin momentum to further materialize during the holiday season."

This uncertainty around the Fed’s rate path ahead is likely contributing to the current price drop in Bitcoin.

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.

Stock-to-Flow Reversion Ratio

Source: CryptoQuant

Conversely, when the S2F reversion ratio drops below 1, it indicates a buy signal. For instance, on September 11, the metric fell below 1, which followed a sharp Bitcoin price rebound.

Between December 16 and December 17, the ratio dropped from 2.47 to around 2.27. CryptoQuant analyst DarkFrost notes:

"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?

The 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.

BTC/USD Daily Price Chart

Source: TradingView

Simply put, Bitcoin’s upward momentum is weakening, which typically precedes a price correction such as the one happening today.

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).

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.