Coinbase Institutional has painted a brighter picture for digital asset markets going forward than we’ve seen in recent weeks.
“With quantitative tightening [QT] ending, the Fed is back in the bond market, and the drain of cash from markets may be behind us,” Coinbase Institutional stated on Wednesday before adding, “That’s usually good for risk-on assets like crypto.”
The findings came in the company’s monthly outlook report, which took a deep dive into why Bitcoin and crypto markets performed so poorly last month.
Bitcoin has severely underperformed US equities on a risk-adjusted basis, falling over three standard deviations below its 90-day average, while the S&P 500 declined only one standard deviation, it reported.
“While fear remains elevated, we believe conditions favor a reversal in December.”
Buy the dip?
With quantitative tightening ending, the Fed is back in the bond market and the drain of cash from markets may be behind us. That’s usually good for risk-on assets like crypto.
So why did BTC dump?
• BTC broke major bull market support bands
• Options traders… pic.twitter.com/1C8mxtemun— Coinbase Institutional 🛡️ (@CoinbaseInsto) December 2, 2025
Breaking Down The Breakdown
There were several key challenges as the market digested October’s liquidation that hit altcoins particularly hard, the firm noted. Spot ETF flows have turned markedly negative, with November posting record cumulative outflows while stablecoin supply was contracting with the weakest 30-day momentum since 2023.
Long-term holders were distributing coins rather than accumulating, and digital asset treasury vehicles are trading below net asset values for the first time since 2024.
The report also discussed concerns about a “K-shaped” economic recovery where AI-driven job displacement could boost corporate profits while eroding personal income stability, though evidence that this is impacting crypto remains weak.
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“We think sidelined cash (e.g., sizable money‑market balances) could still pivot into regulated BTC vehicles when conditions stabilize.”
It all paints a gloomy picture, but macroeconomic fundamentals remain stronger than ever. Coinbase echoed the same sentiment from October in that “full market stabilization will likely take a few months.”
However, it stated that “conditions could be primed for a reversal in December, as we believe the Federal Reserve could cut rates and unlock some inflows.”
Bearish on The Fed
Reformed hedge-fund manager James Lavish echoed the sentiment, stating that he was “bearish on the Fed and what they continue to do to the value of the dollar.”
The US Dollar Index (DXY), which values the greenback against a basket of currencies, has plummeted more than 10% since the beginning of this year. It is likely to tank further when the Fed starts quantitative easing (QE) and injects liquidity.
In the last 16 years, the Fed has added a total of $8.8 trillion of liquidity to markets and removed a total of just $3.2 trillion before calling *uncle* for the second time. So when people ask why I am so bullish on Bitcoin, it is simple. I am bearish on the Fed and what they… pic.twitter.com/Z9cY2J6JDE
— James Lavish (@jameslavish) December 2, 2025
It appears to be already underway, as the Fed has just injected $13.5 billion into the banking system through overnight repos, the second-largest spike since the COVID-19 pandemic, according to data from the St. Louis Fed.
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