Coinbase Predicts Bitcoin Recovery in December Amid Market Downturn

Coinbase anticipates that the cryptocurrency market will begin to recover in December as liquidity improves and selling pressure from long-term Bitcoin holders decreases.

Key Takeaways

Coinbase predicts a recovery for the cryptocurrency market in December driven by improved liquidity.
The expectation of a Federal Reserve rate cut has increased market confidence.
Long-term Bitcoin holders are selling less, indicating reduced selling pressure.
Overall, supportive economic factors and easing selling by long-term holders may lead to a stronger December performance for Bitcoin.

On December 5, Coinbase, a leading US-based crypto trading platform, reported a shift in market conditions over the past few weeks, citing increases in new capital flow, tighter spreads, and robust macroeconomic support.

Improved Liquidity Conditions with Rising Fed Cut Expectations

The exchange pointed out a significant rise in expectations for a Federal Reserve rate cut, with the CME FedWatch Tool indicating nearly 90% odds for the meeting on December 10. This uptick in liquidity marks a notable change from the consistent outflows seen in October and November.

Data on the broader money supply appears to bolster this outlook. Recent Federal Reserve statistics reveal that M2 has surged to a record high of $22.3 trillion, surpassing its peak from early 2022 after experiencing a rare multiyear contraction.

Analysts frequently monitor M2 for insights into liquidity fluctuations and inflation expectations. Historically, increased liquidity has been associated with improved performance for Bitcoin, thanks to the asset’s limited supply of 21 million coins.

Coinbase also mentioned that the current environment for short-dollar positioning is attractive, which may bring more risk-seeking investors back to the crypto market. Additionally, the company highlighted that ongoing interest in AI-related investments continues to direct funds toward digital asset sectors linked to automation and computing demand.

Decreased Selling Pressure from Long-Term Bitcoin Holders

On-chain indicators suggest that long-term Bitcoin holders are pulling back from selling. Darkfost, a researcher at CryptoQuant, noted a dramatic decline in spending from Bitcoin wallets older than five years after a period of intense selling activity from this group.

Average daily sales from these long-term holders have decreased to approximately 1,000 BTC, down from around 2,350 BTC over a 90-day moving average. This metric typically indicates pressure from investors who acquired coins at lower price ranges, particularly near $30,000.

Darkfost further explained that the decline in unspent transaction outputs (UTXOs) and spent-output activity signifies easing pressure as the market cycle progresses. Therefore, reduced selling by these "OG" holders provides Bitcoin with the capacity to consolidate following a turbulent autumn.

“This data suggests that selling pressure from OGs is easing, which gives the market a bit more breathing room," Darkfost noted. "It's worth mentioning that this selling pressure appears to be declining as the cycle advances, with the peaks of short-term holder transactions (90-day moving average) from these OGs becoming progressively lower.”

Overall, improved liquidity, supportive macroeconomic indicators, and reduced supply pressure create a favorable environment for a stronger performance in December. If the positive momentum persists, Bitcoin could achieve its first positive December finish since 2023.