On December 18th, the cryptocurrency market took a hit, with the total market capitalization plummeting by around 3% to approximately $3.65 trillion. The sudden plunge has left many investors scratching their heads, trying to understand the core catalysts behind this downturn and whether more losses are on the horizon.
24-Hour Performance of Large-Cap Cryptocurrencies
Let’s take a closer look at the factors driving the crypto market down today.
Bitcoin Leads the Market Slump
Today’s crypto market decline is part of a correction that started during the late New York trading hours on December 15th when Bitcoin (BTC) tumbled from an all-time high of $108,364 reached on Bitstamp. BTC price dropped as much as 5% to an intra-day low of $103,173 on December 18th.
The decline in BTC triggered panic selling among crypto investors, with cryptocurrencies dropping across the board. Ethereum (ETH) extended its two-day losses, dipping as low as $3,800 on December 18th, marking 4% losses over the last 24 hours. Other top-cap cryptocurrencies posting significant losses on December 16th are Dogecoin (DOGE), Cardano (ADA), and Tron (TRX), which are down 3.4%, 3.4%, and 6%, respectively.
Massive Liquidations Across the Derivatives Market
Massive liquidations across the derivatives market accompanied this downturn in the crypto market. Data from CoinGlass shows that a total of $419 million have been liquidated over the last 24 hours, with $333 million making up long positions. Long BTC leveraged positions totaling $53 million have also been liquidated on the day.
This trend is similar to what was seen on December 9th in the derivatives market when more than $1.5 billion long positions were liquidated. These liquidations accompany an 11% drop in TOTAL – the combined market capitalization of all cryptocurrencies – with more than $400 billion being wiped off the crypto market.
A Predominance of Long Liquidations Suggests Overleveraging
A predominance of long liquidations suggests that the crypto market was overleveraged on the bullish side, primarily due to profit-taking and risk-off mode ahead of today’s Fed decision on rate cuts. This is a sign that investors were heavily invested in the market, expecting further gains, which ultimately led to their downfall.
Risk-Off Sentiment Pushes the Crypto Market Down
The ongoing correction in the crypto market mirrors the weakness witnessed in US equities. The S&P 500 dropped by 0.4% to close the day at 6,050.61 on December 17th, while the Nasdaq composite index declined by 64 points.
The Dow Jones index clocked its ninth consecutive daily loss, its longest losing streak since 1978, losing 0.61% to close the trading day on December 17th at 43,339.
This performance highlights the impact of interest rate cuts on the valuation of the largest companies listed on stock exchanges in the United States.
The Final Fed Meeting of 2024
‘Tomorrow marks the final Fed meeting of 2024,’ declared capital markets commentator The Kobeissi Letter in a December 17th post on X. As such, market participants have now turned their focus on the US Federal Reserve’s interest rate cut decision later today.
According to data from CME Group’s FedWatch Tool, the odds of the Fed keeping interest rates unchanged are now standing at 4.6% at the time of writing, against 95.4% for a 0.25% rate cut.
A 25 basis points cut will mark the Fed’s third rate cut of 2024, bringing the total reduction to 100 basis points. This could further contribute to the decline in the crypto market if investors become risk-averse and start selling their assets.
Total Market Capitalization: Support and Resistance Levels
The consistent rise in TOTAL has led to overbought conditions for most of the period between November 11th and December 8th, when the RSI moved above 70, occasioning a correction as buyer exhaustion and profit-booking set in.
If the selling intensifies, the crypto market will likely drop toward the $3.50 trillion support embraced by the ascending trendline. Note that this line has acted as a dynamic support for TOTAL since November 11th.
On the other hand, a resurgence in buying pressure could push the crypto market cap toward its all-time high of $3.73 trillion, reached on December 16th.
Conclusion
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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