Coinbase expects the cryptocurrency market to enter a recovery phase in December as liquidity improves and selling pressure from long-term Bitcoin holders eases.
On December 5, a cryptocurrency trading platform based in the United States mentioned that market conditions have changed in recent weeks, pointing out new capital inflows, reduced spreads, and strong macro support.
Improvement in liquidity…increased possibility of Fed rate cuts
The exchange emphasized the CME FedWatch, which indicates a nearly 90% expectation of a rate cut by the Federal Reserve during the meeting on December 10.
It added that there has been a rapid shift from the persistent outflows characterizing October and November, indicating a recovery of liquidity.
In fact, broad money supply data seems to support this claim. Federal Reserve figures show that M2 has rarely contracted for several years, exceeding the peak of early 2022 and reaching a record $22.3 trillion.
Analysts often track M2 to understand changes in liquidity and inflation expectations. Moreover, increased liquidity has historically coincided with the strong performance of Bitcoin, which has a fixed supply of 21 million coins.
At the same time, Coinbase stated that dollar short holding at current levels appears attractive and could lure more risk-seeking investors into cryptocurrency.
Additionally, the company claimed that so-called AI trading still has momentum and continues to attract funds to the digital asset sector related to automation and computing demand.
Long-term holders, Bitcoin selling restraint
In particular, on-chain indicators point in the same direction.
Darkfost, an on-chain researcher at CryptoQuant, stated that the spending of Bitcoin wallets over five years old has significantly decreased after a long period of high activity in that group.
He mentioned that the average daily selling by long-term holders decreased from about 2,350 BTC based on the 90-day moving average to around 1,000 BTC. This indicator often signals pressure from investors who accumulated coins at a historically low price level of around $30,000.
Darkfost added that the reduction in UTXO and spent output activity is the point where pressure eases as the market cycle progresses. Thus, if the selling by 'OG' holders decreases, there is a greater chance that Bitcoin will solidify its bottom after the volatile autumn.
This data seems to indicate that the selling pressure from OGs is easing, giving the market some breathing room. Notably, as the cycle progresses, the selling pressure is decreasing, and the STXO peaks of these OGs (90-dma) are gradually lowering," the analyst explained.
Overall, improvements in liquidity, support from macro indicators, and easing supply pressure prepare for a strong December. If momentum is maintained, Bitcoin could record its first positive December close since 2023.
