The crypto market might finally catch a break this month after a rocky November. Coinbase Institutional researchers believe a recovery is on the horizon due to rising liquidity and favorable shifts in economic policy.
Investors have faced volatility recently. Yet the latest data suggests the tide is turning. A mix of Federal Reserve decisions and robust tech trends could spark the momentum traders have been waiting for.
Liquidity Returns as Fed Policy Softens
Global markets are all about cash flow. When money is cheap and easy to access, assets like Bitcoin usually go up. Coinbase Institutional points out that liquidity conditions are improving right when the market needs it most. The biggest driver here is the Federal Reserve.
The Fed has reportedly ended its quantitative tightening (QT) program as of December 1. This is a massive deal for financial markets. Quantitative tightening is when the central bank sells off assets to pull money out of the economy. Stopping this process leaves more cash in the system.
Market watchers are also eyeing interest rates. The probability of a rate cut is climbing fast.
cryptocurrency market recovery chart green candles december forecast
Current Market Expectations:
- Rate Cut Odds: 90% chance of a 25-basis-point reduction.
- Next Event: The Federal Open Market Committee (FOMC) meeting next week.
- Impact: Lower rates typically weaken the dollar and boost risk assets.
A weaker dollar makes crypto cheaper for foreign investors. The research team at Coinbase noted that shorting the US Dollar looks attractive right now. This macro setup creates a perfect storm for digital assets to regain their footing.
Tech Strength Supports Crypto Growth
Many analysts worried that the artificial intelligence boom was a bubble waiting to burst. If tech stocks crash, crypto often follows. However, Coinbase analysts dispel these fears in their latest note.
The report states that the AI trend still has plenty of room to run. This resilience in the tech sector provides a safety net for the broader risk market. Crypto and AI stocks often move in tandem because they appeal to the same type of growth-focused investor.
We are seeing a “positioning reset” in the market. The weakness we saw in November was expected by Coinbase’s custom M2 index. Now that the dip has happened, the path of least resistance appears to be up.
Russell 2000 Signals Potential Altseason
Bitcoin is not the only asset flashing buy signals. Technical analysts are looking at the stock market for clues about altcoins. The Russell 2000 index is the key chart to watch.
The Russell 2000 tracks small-cap companies in the United States. These companies are riskier than giants like Apple or Microsoft. Because of this risk profile, the Russell 2000 moves very similarly to the altcoin market.
Crypto analyst Ash Crypto highlights that the Russell 2000 is retesting its highs from November 2021. That date marks the peak of the last crypto cycle. If small-cap stocks break out above this level, it confirms a massive shift in risk appetite.
| Asset Class | Current Status | Implication |
|---|---|---|
| Russell 2000 | Testing 2021 Resistance | Breakout signals risk-on mode |
| Altcoins | Consolidating | Poised to follow small-caps |
| Ethereum | Lagging Bitcoin | Likely to catch up if stocks rally |
History shows these markets move in sync. A breakout in the Russell 2000 could be the green light for Ethereum and smaller tokens to begin a parabolic run in 2026. For now, it signals that the worst of the bear market is firmly behind us.
Fear and Leverage Have Reset
Market sentiment is another crucial factor for a December rally. The market was overheated, but recent price drops have flushed out the excess.
Ash Crypto noted that the “flash crash” on October 10 served a purpose. It wiped out over-leveraged traders who were betting with borrowed money. When leverage gets flushed, the market becomes healthier and harder to manipulate.
Current sentiment sits in a state of fear. This is actually a bullish sign for contrarian investors. Markets rarely bottom when everyone is happy. They bottom when people are scared.
The combination of fear and a leverage reset creates a springboard effect. Prices can move up quickly because there are fewer sellers left in the market. Coinbase believes this environment makes current price levels an attractive entry point for the coming weeks.
Investors should keep a close watch on the Russell 2000 and next week’s Fed meeting. These two events will likely dictate the trend for the rest of the year. If the data lands as expected, December could deliver the holiday cheer crypto holders have been waiting for.
