On December 18, the crypto market experienced a sharp correction as Bitcoin, XRP, Dogecoin, and HYPE all plummeted due to panic triggered by Wall Street. This highlights the strong correlation between traditional markets and cryptocurrencies, emphasizing the need for caution. The drop occurred amidst a widespread risk-off sentiment in the US financial markets. Analysis.
Bitcoin was trading around $86,816 at the time of writing, marking a brutal pullback after climbing to $90,360. This is the most violent 4-hour candle in several months. And the entire crypto market has suffered the consequences.
According to some sources, this drop is allegedly due to Wintermute, a market maker that is potentially on the brink of bankruptcy. According to rumors, the platform is actively selling its BTC and altcoins to cover losses.
From a charting perspective, BTC is showing impressive resilience on the daily timeframe at the $86,300 level. Indeed, 4 daily closes have ended at this level (red line), proving that it is a support that is, for now, indestructible.
Overall, BTC is displaying a chart in the process of a bullish reversal. However, the CPI announcement and the Bank of Japan are fueling short-term volatility. A quick return to $82,000 to $83,000 is still possible.
Altcoins experienced even stronger pressure than Bitcoin during this session. XRP, which had enjoyed an impressive rally in recent weeks thanks to favorable legal developments with the SEC, corrected brutally. Capital rotation toward defensive assets particularly affected tokens that had recently outperformed.
Dogecoin, driven by its usual speculative euphoria, recorded a marked decline. The memecoin remains extremely sensitive to market sentiment shifts and institutional capital movements. Technical support levels are now being tested, and traders are closely monitoring whether these critical zones will hold or break.
HYPE, a relatively recent token that has captured the attention of retail investors, has not escaped the selling wave. Low-cap, high-volatility assets are traditionally the first hit during panic movements. Trading volume exploded, a sign of intense selling pressure from short-term holders.
This crypto correction has its direct origin in the decline of U.S. stock indices. The S&P 500 and Nasdaq posted significant losses, pushing institutional investors to reduce their exposure to risk assets. This correlation between traditional markets and cryptos has strengthened in recent years with the massive arrival of institutional players.
Statements from the Federal Reserve regarding monetary policy have also weighed on sentiment. Investors anticipate that interest rates will remain at elevated levels longer than expected. This outlook reduces the attractiveness of speculative assets like cryptocurrencies, which generally thrive in environments of abundant liquidity.
The crypto market therefore remains closely tied to global macroeconomic dynamics. Professional traders now monitor traditional economic indicators as much as on-chain metrics to anticipate price movements.
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Charles Ledoux is a Bitcoin and blockchain technology specialist. A graduate of the Crypto Academy, he has been a Bitcoin miner for over a year. He has written numerous masterclasses to educate newcomers to the industry and has authored over 2,000 articles on cryptocurrency. Now, he aims to share his passion for crypto through his articles for InvestX.
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