The cryptocurrency market took a significant hit on December 18, with the total market capitalization dropping by approximately 3% to around $3.65 trillion. This sudden decline has left many investors wondering about the core catalysts behind this downturn and whether more losses are on the horizon.

Bitcoin Leads the Market Slump

The crypto market’s decline is part of a correction that started during the late New York trading hours on December 15, 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 18.

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 18, marking a 4% loss over the last 24 hours. Other top-cap cryptocurrencies posting significant losses on December 16 include Dogecoin (DOGE), Cardano (ADA), and Tron (TRX), which are down 3.4%, 3.4%, and 6%, respectively.

Massive Liquidations in the Derivatives 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 9 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.

The 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 move highlights the impact of interest rate cuts on the valuation of the largest companies listed on stock exchanges in the United States.

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 17, 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 17 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.

‘Tomorrow marks the final Fed meeting of 2024,’ declared capital markets commentator The Kobeissi Letter in a December 17 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.

‘Meanswhile, CPI, PPI, and PCE inflation are all back on the rise as the labor market weakens,’ The Kobe