COINBASE PREDICTS NOVEMBER SLUMP COULD LEAD TO DECEMBER UPSIDE FOR BITCOIN
Coinbase Institutional released its monthly outlook on Wednesday, highlighting that market conditions may support a reversal in December after Bitcoin’s underperformance in November.
The report pointed to the Federal Reserve’s return to the bond market as quantitative tightening ends, signaling that the cash drain on markets may be easing—a development generally positive for risk-on assets like cryptocurrencies.
In November, Bitcoin underperformed U.S. equities on a risk-adjusted basis, falling more than three standard deviations below its 90-day average, while the S&P 500 declined only one standard deviation over the same period.
The report also identified key challenges in the cryptocurrency market. Spot exchange-traded fund flows turned negative, marking a record cumulative outflow for the month. Stablecoin supply saw its weakest 30-day momentum since 2023.
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Additionally, long-term Bitcoin holders were distributing rather than accumulating coins, and digital asset treasury vehicles traded below net asset values for the first time in 2024, underscoring pressure in the market.
K-Shaped Recovery and Potential Bitcoin Rebound
The report also examined the possibility of a “K-shaped” economic recovery, where AI-driven job displacement may boost corporate profits while reducing personal income stability. However, Coinbase Institutional noted that there is currently little evidence that this trend has materially affected cryptocurrency markets.
The firm highlighted that sidelined cash, including large money-market balances, could flow into regulated Bitcoin vehicles once market conditions stabilize. According to the report, full stabilization of the market may take several months, consistent with the outlook shared in October.
Coinbase suggested that if the Federal Reserve cuts interest rates and unlocks capital inflows, conditions could be favorable for a market reversal in December, potentially supporting Bitcoin gains after its November underperformance.
Why Does James Lavish Remain Bullish on Bitcoin?
James Lavish, a former hedge fund manager, explained on X that over the past 16 years, the Federal Reserve has injected $8.8 trillion in liquidity into markets while only removing $3.2 trillion “before calling ‘uncle’ for the second time.”
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Lavish added, “So when people ask why I am so bullish on Bitcoin, it is simple. I am bearish on the Fed and what they continue to do to the value of the dollar. Bitcoin captures this.”
Supporting this view, data from the Federal Reserve Bank of St. Louis showed that the Fed recently added liquidity to the banking system through overnight repurchase agreements, marking the second-largest surge since the COVID-19 pandemic.
FAQs
1. What does Coinbase Institutional predict for Bitcoin in December?
Coinbase Institutional predicts that market conditions could support a reversal in December, potentially allowing Bitcoin to recover after its underperformance in November.
2. How did Bitcoin perform compared to U.S. equities in November?
In November, Bitcoin underperformed U.S. equities on a risk-adjusted basis, falling more than three standard deviations below its 90-day average, while the S&P 500 declined only one standard deviation.
3. What market challenges did the Coinbase report highlight for November?
The report highlighted record negative flows in spot exchange-traded funds, weak 30-day momentum in stablecoin supply, long-term Bitcoin holders distributing coins, and digital asset treasury vehicles trading below net asset values.
4. How could a “K-shaped” economic recovery impact cryptocurrencies, according to the report?
A K-shaped recovery, driven by AI-related job displacement, could increase corporate profits while reducing personal income stability. However, Coinbase noted that there is currently little evidence this trend has materially affected cryptocurrency markets.
5. Why is James Lavish bullish on Bitcoin?
James Lavish is bullish on Bitcoin because he is bearish on the Federal Reserve and its impact on the dollar. He notes that the Fed has injected $8.8 trillion into markets over the past 16 years while removing only $3.2 trillion, and recent liquidity injections support Bitcoin’s value as a hedge.
