Coinbase expects the cryptocurrency market to shift to a recovery phase in December as liquidity improves and the selling pressure from long-term Bitcoin holders decreases.
On December 5th, a cryptocurrency trading platform operating in the United States announced that market conditions have changed in recent weeks, referring to new investments, tighter spreads, and stronger macro support.
Liquidity conditions are improving as Fed rate cut possibilities increase.
The stock market emphasized expectations for a rate cut by the U.S. central bank, as CME FedWatch shows a probability of nearly 90 percent for the meeting on December 10th.
Additionally, the return of liquidity signifies a strong reversal following the persistent net outflows typical of October and November.
Broader cash reserve readings appear to support this theory. Statistics from the U.S. Federal Reserve indicate that M2 has risen to a record $22.3 trillion, surpassing its early spring 2022 peak following a rare multi-year contraction.
Analysts often monitor M2 to understand changes in liquidity and inflation expectations. Increased liquidity has historically been associated with stronger performance from Bitcoin, as the asset has a fixed supply of 21 million coins.
At the same time, Coinbase stated that short-term dollar positions appear attractive at current levels, which may entice more risk-seeking investors back into crypto.
Additionally, the company claimed that the so-called AI trading continues its trend and continues to draw money into automation and computing-related digital assets.
Long-term Bitcoin holders are retreating from selling.
In particular, blockchain indicators point in the same direction.
Darkfost, an on-chain researcher at CryptoQuant, noted that sales from Bitcoin wallets over five years old have plummeted sharply after months of activity from this group.
He noted that the average daily sales of these long-term holders have dropped to around 1,000 BTC on a 90-day moving average, compared to about 2,350 BTC. This metric often indicates pressure from investors who accumulated coins at lower historical price levels, including around $30,000.
Darkfost added that the decline in UTXO and used production activity indicates easing pressure as the market cycle progresses. Reduced selling from OG holders gives Bitcoin more room to consolidate after a volatile fall.
"This data suggests that the selling pressure from OGs is easing, allowing the markets a bit more breathing room. It is noteworthy that their selling pressure seems to be decreasing as the cycle progresses, and these OG's STXO peaks (90-dma) are continuously declining," the analyst explained.
Overall, improving liquidity, supportive macro indicators, and easing supply pressure create conditions for a stronger December. If the trend continues, Bitcoin could post its first positive December close since 2023.
