The cryptocurrency market experienced a decline of approximately 3% on December 18, with the total market cap falling to approximately $3.65 trillion.

This sudden decline has confused many investors. Investors trying to understand the main reasons behind this decline in the market are questioning whether there will be more losses.

A closer look at today’s crypto market decline appears to be part of a correction that began on December 15, when Bitcoin peaked at $108,364 on Bitstamp and quickly fell to $103,173.

Bitcoin price fell as much as 5% on December 18, falling to an intraday low of $103,173. While this decline in Bitcoin led to panic sales among crypto investors, declines were also seen in other cryptocurrencies.

Ether dropped to $3,800 on December 18, losing 4% in the last 24 hours. On December 16, other cryptocurrencies with large market values ​​such as Dogecoin, Cardano and Tron experienced significant losses of 3.4%, 3.4% and 6%, respectively.

This decline was accompanied by large liquidations in the derivatives market. According to CoinGlass data, a total of $419 million worth of positions were liquidated in the last 24 hours, while $333 million of this consisted of long positions.

On December 18, long positions worth $53 million in Bitcoin were also liquidated. A similar situation was seen in the derivatives market on December 9, and long positions worth over $1.5 billion were liquidated.

These liquidations caused TOTAL, the market cap of the entire cryptocurrency market, to drop by 11%, removing more than $400 billion from the market.

The predominance of long positions indicates that the crypto market is overleveraged on the upside, driven by profit-taking and risk aversion ahead of today’s Fed interest rate decision.

This correction in the crypto market parallels the weakness in US stock markets. On December 17, the S&P 500 index decreased by 0.4%, while the Nasdaq index decreased by 64 points. The Dow Jones index lost 0.61% for the eighth consecutive day, experiencing its longest losing streak since 1978.

“Tomorrow will be the last Fed meeting for 2024,” said The Kobeissi Letter in its post on December 17, adding that market participants have turned their focus to the US Federal Reserve interest rate cut decision to be announced today.

According to CME Group’s FedWatch Tool data, the probability of the Fed keeping interest rates steady is 4.6% at the time of writing, while the probability of a 0.25% interest rate cut is 95.4%. This interest rate cut will be the third interest rate cut throughout 2024 and will provide a total decrease of 100 basis points.

On the other hand, it is stated that the labor market has weakened with the increase in Consumer Price Index (CPI), Producer Price Index (PPI) and Personal Consumption Expenditures (PCE) inflation rates again.

“The fight against inflation is not over yet, the Fed’s outlook for 2025 will be watched carefully,” it said. Today’s decline in the crypto market follows the increasing negative divergence between the price and the relative strength index (RSI).

Between November 11 and December 17, TOTAL rose and made higher highs. However, during the same period, the RSI fell and formed lower highs. This divergence between rising prices and falling RSI could indicate weakness in the current uptrend and a possible reversal.