Coinbase Institutional paints a brighter picture for the future of the digital asset market than we have seen in recent weeks.
“With the end of quantitative tightening (QT), the Fed may return to the bond market and capital outflows from the market may slow down,” Coinbase Institutional said on Wednesday, adding, “This is typically a good thing for risk-on assets like cryptocurrencies.”
The findings were published in the company’s monthly outlook report, and were a deep dive into why Bitcoin and the crypto market performed so poorly last month.
Bitcoin has significantly underperformed U.S. stocks on a risk-adjusted basis, more than three standard deviations below its 90-day average, while the S&P 500 index has fallen by only one standard deviation.
“While fears remain high, we believe conditions favor a reversal in December.”
Would you like to buy dip?
With quantitative tightening ending and the Fed returning to the bond market, capital outflows may end. This is usually a good thing for risk-on assets like cryptocurrencies.
So why was BTC dumped?
• BTC breaks out of major bull market support bands
•Option trader… pic.twitter.com/1C8mxtemun— Coinbase Institutional 🛡️ (@CoinbaseInsto) December 2, 2025
breakdown breakdown
The company noted that there were several key challenges as the market digested the October liquidation, which hit altcoins particularly hard. Spot ETF flows have turned significantly negative, with stablecoin supply contracting at its weakest 30-day momentum since 2023, while November saw record cumulative outflows.
Long-term holders are distributing coins rather than accumulating them, and the digital asset treasury vehicle is trading below its net asset value for the first time since 2024.
The report also discusses concerns about a “K-shaped” economic recovery, where job losses due to AI could boost corporate profits while undermining personal income stability, although evidence that this is impacting cryptocurrencies remains weak.
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“We believe that once the situation stabilizes, sidelined cash (e.g. large money market balances) could be converted into regulated BTC instruments.”
All of this paints a bleak picture, but macroeconomic fundamentals remain stronger than ever. Coinbase echoed the same sentiment as in October: “It will likely take several months for the market to fully stabilize.”
However, “we think the Fed could potentially cut rates and release some of the inflows, so conditions could be ripe for a reversal in December.”
Bearish on the Fed
Reform hedge fund manager James LaBiche agreed, saying, “I’m bearish on the Fed and what it continues to do to the value of the dollar.”
The U.S. Dollar Index (DXY), which measures the dollar’s value against a basket of currencies, has plunged more than 10% since the beginning of this year. If the Fed begins quantitative easing (QE) and injects liquidity, it is likely that there will be another collapse.
Over the past 16 years, the Fed has added a total of $8.8 trillion of liquidity to the market and removed a total of just $3.2 trillion before calling it “Uncle” for the second time. So when people ask why I’m so bullish on Bitcoin, it’s simple. I’m bearish on the Fed and its content… pic.twitter.com/Z9cY2J6JDE
— James Lavish (@jameslavish) December 2, 2025
The Fed just injected $13.5 billion into the banking system through overnight repos, the second-largest surge since the coronavirus pandemic, and it appears to have already begun, according to data from the St. Louis Fed.
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