Coinbase Signals Crypto Comeback as Liquidity and Rate Cut Hopes Rise

• Coinbase Institutional forecasts a strong December recovery for crypto markets, driven by an expected Federal Reserve rate cut (86% on CME FedWatch) and improving liquidity signaled by its proprietary M2 index.
• Additional tailwinds include a persistently resilient AI sector that has not corrected and a weakening U.S. dollar, both supportive of capital rotation into risk assets like Bitcoin (BTC).
• Major institutional shifts – Vanguard reversing its crypto ETF ban and BofA (BAC) allowing wealth advisers to recommend up to 4% portfolio allocations to crypto – underscore growing mainstream acceptance and provide fresh demand catalysts.

Coinbase Institutional’s latest market analysis underscores a potential resurgence for cryptocurrency markets in December, driven by a confluence of monetary policy expectations and enhanced liquidity metrics that historically correlate with rallies in assets like Bitcoin (BTC). This perspective aligns with broader trends in digital asset adoption, where institutional frameworks are increasingly integrating crypto as a portfolio diversifier amid persistent volatility.

Central to this outlook is the heightened probability of a Federal Reserve rate cut, now reflected at 86% on the CME’s FedWatch tool. Such a move would signal a pivot toward looser monetary conditions, reducing the opportunity cost of holding non-yielding assets like Bitcoin and encouraging capital flows into higher-risk categories. Lower interest rates have long served as a catalyst for Bitcoin’s price appreciation, as evidenced by its performance in prior easing cycles, where BTC often outpaced traditional risk proxies due to its scarcity and decentralized nature.

Complementing this are signals of improving liquidity, as captured by Coinbase’s proprietary M2 index, which monitors monetary flows influencing asset valuations. This metric’s uptick suggests a reversal from the tighter conditions that constrained November’s performance, validating the firm’s earlier forecast of a subdued month followed by renewed momentum. In practice, enhanced liquidity facilitates larger institutional entries, smoothing price discovery and mitigating the sharp drawdowns that have characterized recent sessions.

Further bolstering the case for upside are structural shifts in adjacent markets. The anticipated correction in artificial intelligence investments, which have defied expectations of a downturn throughout 2025, could redirect capital toward alternative growth narratives, including blockchain-based innovations. Similarly, a softening U.S. dollar (DXY) – evident in its recent trajectory – amplifies the appeal of dollar-denominated alternatives like Bitcoin, which benefits from inverse correlations with the greenback during periods of depreciation.

These macroeconomic tailwinds coincide with accelerating mainstream integration of crypto exposure. Vanguard’s recent policy adjustment now permits trading of ETFs and mutual funds holding primary cryptocurrencies such as Bitcoin and Ether (ETH) on its platform, extending access to millions of brokerage accounts and underscoring a maturation in regulatory acceptance. In parallel, Bank of America (BAC), one of the US’s largest financial institutions, has authorized its wealth advisers to incorporate up to 4% crypto allocations in client portfolios, targeting investors comfortable with thematic volatility while emphasizing prudent sizing at the lower end for conservative profiles. These developments reflect a strategic evolution among legacy institutions, transitioning from outright skepticism to measured endorsement, which in turn amplifies demand through regulated vehicles.

Despite a rough patch in recent weeks, Bitcoin’s resilience is becoming clearer as headlines gain traction. With spot Bitcoin ETFs demonstrating sustained inflows even amid broader market pullbacks, the stage appears set for a liquidity-fueled December that could reaffirm crypto’s role in diversified strategies. Investors monitoring these dynamics should prioritize risk calibration, given Bitcoin’s inherent leverage to sentiment shifts, but the alignment of policy, liquidity, and institutional momentum points to a constructive environment for recovery.

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