The cryptocurrency market may be on the verge of a recovery, according to insights from Coinbase Institutional. The firm has indicated that December is set to be a pivotal month for digital assets, buoyed by favorable liquidity conditions, heightened anticipation for a rate cut by the Federal Reserve, and macroeconomic trends that appear to favor riskier investments.
As of December 4, the likelihood of a Federal Reserve rate cut has skyrocketed to 92%, a scenario that historically tends to promote renewed investment in the cryptocurrency market. Coinbase highlighted that the conditions they identified in October, which included a reset in market positioning and expected weakness in November, are now aligning with the characteristics of a typical December reversal, often seen as a precursor to a stronger upward trend.
With liquidity levels on the rise, the cryptocurrency market is becoming increasingly attractive to both institutional investors and systematic macro traders. The firm”s analysis points to a recovery in global M2 money supply, a key indicator of liquidity, which has been steadily increasing after a decline experienced earlier in the year. This positive trend in liquidity has historically correlated with robust periods for Bitcoin and the broader cryptocurrency ecosystem.
Moreover, concerns surrounding a potential “AI bubble” that could dampen the risk appetite have not come to fruition, as AI-related stocks and infrastructure investments continue to perform strongly. This resilience in the tech sector suggests that the broader risk cycle still holds potential for further growth. Additionally, the attractiveness of short-USD trades at current levels creates an incentive for foreign capital to flow into non-dollar assets, including cryptocurrencies.
Coinbase”s insights suggest that the previous market pullback in November should be viewed as a controlled reset rather than an indication of inherent weakness. Their prior research indicated that the market was gearing up for a significant move as the year-end approaches. With the M2 money supply increasing and expectations for macroeconomic easing strengthening, December stands out as a potential inflection point for the cryptocurrency market.
If momentum begins to resurface, this could signal the start of a renewed appetite for risk as we move into 2026, particularly if liquidity conditions continue to improve at the current pace.
