Coinbase just made a bold call. December could mark Bitcoin’s first real recovery since autumn’s brutal selloff.
The largest US crypto exchange pointed to three converging signals that haven’t aligned in months. Money supply hit record highs. Long-term holders stopped dumping coins. Plus, the Federal Reserve looks ready to cut rates again.
This matters because Bitcoin just endured two months of persistent outflows and selling pressure. Now the liquidity picture flipped fast. So let’s break down what changed and whether it’s enough to save December.
Fed Rate Cut Odds Hit 90 Percent
The Federal Reserve meets December 10. CME FedWatch data shows 90 percent odds of a rate cut at that meeting.
Why does this matter for crypto? Lower rates make risk assets more attractive. Bitcoin thrives when borrowing costs fall and investors chase higher returns outside traditional bonds.
Moreover, broader money supply numbers back up the rate cut thesis. US M2 money supply just hit an all-time high of $22.3 trillion. That tops the previous peak from early 2022.
Here’s the kicker. M2 spent two years contracting after 2022. That rare decline drained liquidity from markets across the board. But now it’s reversing hard.
Analysts track M2 closely because it captures cash, checking deposits, and easily convertible assets. When M2 rises, more money flows through the financial system. Bitcoin’s fixed supply of 21 million coins makes it particularly sensitive to these liquidity shifts.
So the macro backdrop just improved significantly. Plus, Coinbase noted that short-dollar positioning looks appealing now. That could pull more risk-seeking capital back into crypto markets.
Long-Term Bitcoin Holders Finally Stopped Selling
On-chain data reveals the second major shift. Bitcoin holders who’ve owned coins for five-plus years drastically reduced their selling.
CryptoQuant researcher Darkfost tracked this cohort throughout autumn. Daily sales from these “OG” holders averaged 2,350 BTC on a 90-day basis during peak selling pressure. That number just dropped to roughly 1,000 BTC.
This group accumulated Bitcoin around $30,000 or lower. Their sustained selling created one of the cycle’s main sources of supply pressure. But UTXO and spent-output metrics both show that pressure easing now.
“This data suggests that selling pressure from OGs is easing, which gives the market a bit more breathing room,” Darkfost explained. He added that STXO peaks from long-term holders keep declining as the cycle progresses.
Translation? The “weak hands” from lower price levels already sold. What remains is conviction holders who won’t panic at every dip. That gives Bitcoin more room to consolidate without constant overhead resistance.
Indeed, this matters tremendously for December. Bitcoin needs reduced selling pressure to build momentum. Long-term holder behavior often dictates whether rallies can sustain or collapse under profit-taking.
AI Trade Still Pulling Capital Into Crypto
Coinbase highlighted one more factor. The artificial intelligence investment wave continues driving money toward digital assets tied to automation and computing.
This makes sense. AI infrastructure requires massive computing power. Blockchain networks increasingly support AI applications through decentralized compute markets and data layers.
So institutional money flowing into AI doesn’t just stay in traditional tech stocks. Some of it spills into crypto projects building AI-related infrastructure. That creates another liquidity channel supporting the broader market.
Plus, AI hype generates retail interest too. Retail investors often follow institutional capital into trending sectors. Bitcoin benefits when these adjacent narratives gain traction and pull fresh buyers into crypto exchanges.
The convergence of AI momentum, improved macro conditions, and reduced selling pressure creates an unusual setup. Each factor reinforces the others.
Spreads Tighten as Market Depth Returns
Coinbase also noted tightening spreads across crypto trading pairs. This indicates improving market depth and liquidity.
Wide spreads signal thin order books and nervous traders. Tight spreads mean more buyers and sellers actively transacting at closer price points. That makes large trades easier to execute without massive slippage.
For context, October and November saw persistent liquidity outflows. Trading volumes dropped. Bid-ask spreads widened. Those conditions make it harder for Bitcoin to rally sustainably.
But December started differently. Order books filled back in. Volumes picked up. Spreads compressed. These technical improvements often precede price moves because they reduce friction for large capital deployment.
Still, spreads alone don’t guarantee a rally. They just remove one barrier. Bitcoin needs sustained buying pressure to actually move higher. But at least the market structure now supports potential upside instead of fighting it.
December’s Make-or-Break Moment
Bitcoin hasn’t posted a positive December since 2023. The month historically brings volatility as traders rebalance portfolios and institutions close books.
This December faces extra scrutiny. Bitcoin rallied hard through late 2024 before autumn’s correction erased significant gains. Now it’s testing whether bulls can reclaim momentum or if bears will extend dominance into year-end.
Coinbase’s analysis suggests the ingredients exist for recovery. Liquidity improved. Selling pressure eased. Macro conditions shifted favorably. But ingredients don’t guarantee the dish turns out right.
External shocks could still derail momentum. Geopolitical events, unexpected regulatory moves, or sudden macro deterioration would overwhelm these positive signals. Plus, Bitcoin’s price action remains volatile and unpredictable even in favorable conditions.
That said, the setup looks better than it has in months. If Bitcoin can hold current levels and build on improving fundamentals, December might surprise skeptics. If not, the winter could get colder.
The Real Test Comes Next Week
Fed decision day matters more than usual this cycle. That December 10 meeting will either confirm or reject the 90 percent rate cut odds.
If the Fed delivers as expected, Bitcoin could catch a strong bid. Risk assets typically rally on dovish policy shifts. But if the Fed surprises with hawkish commentary or no cut, the liquidity narrative breaks down fast.
Moreover, Bitcoin’s response to the decision will reveal whether this setup has teeth. A strong rally would validate Coinbase’s thesis. A weak or negative reaction would suggest other factors outweigh improving fundamentals.
Watch long-term holder behavior too. If they resume heavy selling, the relief rally ends quickly. But if they stay sidelined, Bitcoin gains breathing room to test higher levels without constant supply pressure.
December always brings surprises in crypto. This year’s setup at least provides a fighting chance for bulls. Whether they capitalize on it remains to be seen.
Coinbase made a bold call. Now markets will decide if they were right.