The cryptocurrency market faced a sharp correction on December 20, with Bitcoin plunging over 7.5% to breach the $94,500 mark. At the same time, Ethereum tumbled more than 13.75%, falling to $3,186. The total crypto market capitalization dropped below $3.4 trillion, currently standing at $3.399 trillion — a 24-hour decline of 9.4%.
Bitcoin’s market cap now sits at $1.88 trillion, reducing its dominance to 55.6%, while Ethereum’s market cap has fallen to $396 billion, accounting for 11.6% of the total market share.
Massive Liquidations Amid Market Downturn
According to data from Coinglass, more than 370,000 traders were liquidated in the past 24 hours across the crypto derivatives market. The scale of margin calls highlights the extreme leverage used during the recent bullish run and underscores the fragility of over-extended positions in volatile conditions.
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Such mass liquidations are not uncommon during rapid price reversals, especially after prolonged rallies fueled by speculative momentum. As prices fall, leveraged long positions get automatically closed out by exchanges, often amplifying downward pressure through cascading sell-offs.
Fed’s Stance Adds Pressure on Market Sentiment
Adding to the bearish sentiment, Federal Reserve Chair Jerome Powell stated during a recent press conference that the Fed is legally prohibited from owning Bitcoin and has no intention of changing those regulations. While this was not a new policy announcement, the reminder served as a reality check for investors hoping for institutional adoption at the central bank level.
Powell’s comments emphasized that monetary policy remains focused on price stability and financial system integrity — areas where decentralized digital assets are still viewed with caution by regulators.
This regulatory clarity, or lack thereof, continues to influence investor behavior. While some see government non-involvement as a sign of Bitcoin’s independence, others interpret it as a barrier to broader financial integration.
From Election Gains to Profit-Taking: What Changed?
Since U.S. Election Day on November 5, Bitcoin had surged over 45%, driven largely by optimism surrounding Donald Trump’s pro-crypto campaign promises. Trump advocated for reduced regulatory oversight on digital assets and expressed support for establishing a strategic national Bitcoin reserve — a concept that energized retail and institutional investors alike.
However, as prices climbed rapidly, many analysts warned of overheating. Sean McNulty, Trading Director at liquidity provider Arbelos Markets, noted increased demand for hedging strategies post-Fed meeting. "Markets are pricing in higher volatility," he said. "We’re seeing more options activity and short-term puts being bought as traders prepare for potential downside."
Zann Kwan, Chief Investment Officer at Revo Digital Family Office, predicts Bitcoin could stabilize around the $90,000–$92,000 range in the near term. “The fundamentals remain strong, but short-term corrections are healthy,” Kwan explained. “This pullback may help shake out weak hands before the next leg up.”
Crypto-Linked Stocks Follow Market Downward
The downturn wasn’t limited to digital tokens. On Thursday (U.S. Eastern Time), publicly traded companies with significant crypto exposure also saw losses:
- Bit Digital dropped over 8%
- MicroStrategy and Riot Platforms both fell more than 6%
- MARA (Marathon Digital Holdings) declined over 5%
- Coinbase slipped more than 2%
MicroStrategy closed down 6.63%. Despite the drop, the company reaffirmed its long-term commitment to Bitcoin. In a statement issued Tuesday, MicroStrategy indicated it may launch a new Bitcoin acquisition strategy if market conditions allow — signaling continued confidence in BTC as a treasury reserve asset.
Why This Correction Matters for Investors
While sudden price drops can be unsettling, they serve important functions in maturing markets:
- They reduce excessive leverage
- They create buying opportunities for long-term holders
- They test network resilience and investor psychology
Moreover, such corrections often precede consolidation phases before renewed upward momentum — especially when underlying adoption trends remain intact.
Key factors to watch moving forward include:
- Regulatory developments in the U.S. and EU
- Institutional inflows via spot Bitcoin ETFs
- On-chain metrics like exchange outflows and wallet growth
- Macroeconomic signals such as interest rate decisions and inflation data
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Frequently Asked Questions (FAQ)
Q: Why did Bitcoin crash suddenly?
A: The drop was triggered by a combination of profit-taking after a strong rally, increased market volatility post-Fed commentary, and widespread liquidation of leveraged positions.
Q: Is it safe to buy Bitcoin after a 370K+ liquidation event?
A: Such events often signal short-term bottoming patterns. While risks remain, many investors view large liquidations as contrarian indicators suggesting fear-driven selling — potentially creating entry points.
Q: Can the Federal Reserve ever own Bitcoin?
A: Currently, U.S. law prohibits the Federal Reserve from holding commodities like gold or Bitcoin. There are no active proposals to change this, meaning direct central bank ownership is unlikely in the near future.
Q: How does Bitcoin’s market dominance affect altcoins?
A: When BTC dominance falls (as it did in this correction), funds may rotate into altcoins. Conversely, rising dominance often pulls capital away from smaller cryptocurrencies during risk-off periods.
Q: What is a liquidation in crypto trading?
A: A liquidation occurs when a trader’s margin balance falls below maintenance levels due to price movement. Exchanges automatically close these leveraged positions to prevent negative balances.
Looking Ahead: Volatility Is the New Normal
The recent sell-off reminds us that despite growing institutional interest and improving infrastructure, cryptocurrency markets remain highly volatile. Rapid price swings will continue to characterize the space — especially around macroeconomic events and policy statements.
Yet, long-term believers point to sustained on-chain activity, increasing global adoption, and technological advancements like the Lightning Network and Layer-2 scaling solutions as reasons to stay optimistic.
As the market digests this correction, traders and investors should focus on risk management, diversification, and staying informed — rather than reacting emotionally to short-term noise.
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With core keywords including Bitcoin price, crypto liquidation, market correction, Ethereum drop, Fed policy, MicroStrategy Bitcoin holdings, cryptocurrency volatility, and market dominance, this event underscores the interconnected nature of regulation, sentiment, and technical trading dynamics in today’s digital asset landscape.
Staying ahead means understanding not just price charts — but also the macro forces shaping them.