Coinbase Predicts December Crypto Rally as Fed Rate Cut Odds Reach 92%

TLDR

• Coinbase Institutional predicts crypto market recovery in December as liquidity improves and Fed rate cut odds reach 92%
• Federal Reserve ended quantitative tightening on December 1, creating bullish outlook for digital assets
• Coinbase’s custom M2 money supply index anticipated November weakness and December reversal
• Russell 2000 approaching November 2021 highs, which crypto expert Ash Crypto says signals potential altcoin bull run
• Short USD trades considered attractive at current levels as macro conditions turn favorable

Coinbase Institutional stated on December 5 that the crypto market may enter a recovery phase this month. The firm’s research team pointed to improving liquidity conditions and growing expectations for a Federal Reserve interest rate cut.

The institutional arm of Coinbase shared its analysis on social media platform X. They noted that the odds of a Fed rate cut have jumped to 92% as of December 4.

The Federal Reserve ended its quantitative tightening program on December 1. This policy shift removes pressure from financial markets by stopping the reduction of the Fed’s balance sheet.

Coinbase’s research team developed a custom global M2 money supply index to track liquidity conditions. This index predicted November weakness in crypto markets followed by a December reversal.

Liquidity Trends Support Recovery Outlook

The Coinbase analysis highlighted rising liquidity trends through late 2025. Their custom index shows systemic liquidity turning more supportive for digital assets.

Market analysts often track global M2 shifts to understand liquidity cycles. Crypto markets typically respond to changes in capital availability across the financial system.

The odds of a 25-basis-point rate cut currently stand around 90% for the Fed’s upcoming FOMC meeting next week. This monetary easing could attract capital that has been sitting on the sidelines.

Coinbase Institutional also noted that the “AI bubble” hasn’t burst yet. The research team said this sector still has room to grow, which provides another positive factor for crypto markets.

Russell 2000 Signals Potential Altcoin Movement

The firm stated that short USD trades look attractive at current price levels. A weaker dollar typically benefits risk assets including cryptocurrencies.

Crypto analyst Ash Crypto provided additional perspective on market conditions. He identified the Russell 2000 index as a key indicator for altcoin season.

The Russell 2000 is approaching its November 2021 all-time highs. Both the Russell 2000 and altcoin market capitalization peaked during that period before entering a bear market.

Ash Crypto stated that the Russell 2000 is retesting its November 2021 highs at a key resistance zone. A breakout above these levels would confirm the start of a bull run, he said.

The analyst noted that the Russell 2000 and crypto altcoins often move in sync. If the Russell breaks out, ethereum and other altcoins are expected to follow.

Market Conditions After Recent Volatility

The crypto market recently experienced a flash crash event on October 10. This event flushed out leveraged positions from the market.

Ash Crypto stated that all leverage has been cleared from the system. He described this as a perfect setup for a potential upward move in prices.

Market participants are watching the Russell 2000 closely for signals about altcoin direction. The index’s performance in coming weeks could indicate how digital assets will move.

Coinbase’s M2 index shows bitcoin’s price movements alongside their liquidity gauge. The visual data reinforces the view that systemic liquidity conditions are improving for crypto assets.

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