Expectations for a December bitcoin recovery are mounting, with Coinbase Institutional highlighting macroeconomic factors such as rising global M2 liquidity and anticipated Federal Reserve interest rate cuts as key drivers.

Macro tailwinds and liquidity boost

Coinbase’s latest research points to improved liquidity conditions and a 92% probability of a Fed rate cut as of December 4, signaling a possible upside for bitcoin.

The firm notes that its custom global M2 money supply index, which tracks fiat currency supply, supports the case for a December reversal after earlier predictions of market weakness.

Investor sentiment and ETF inflows

Despite these positive macro signals, Coinbase observes that sentiment remains dominated by fear, with both institutional and retail investors reluctant to deploy capital.

This hesitancy has left markets in limbo pending a recovery in exchange-traded fund inflows.

Rate cuts and the ‘Santa rally’

Analysts are closely watching the Fed’s December 10 rate decision, which could spark a ‘Santa rally’—a common pattern of short-term gains around Christmas.

Nic Puckrin, co-founder of Coin Bureau, emphasized the importance of the Fed’s actions:

“If the Fed cuts rates on December 10th, along with ending QT, there’s little standing in the way of a Santa rally for Bitcoin - bar any major geopolitical bombshell.”

However, Puckrin cautioned that any hawkish remarks from Fed Chair Jerome Powell could limit the rally’s upside.

Technical and policy drivers

Chris Kim, CEO of Axis, attributed November’s sell pressure to Powell’s earlier hawkish tone but expects a December rebound, citing technical support near $80,000 and positive ETF developments.

Kim also noted that speculation about Kevin Hassett potentially becoming the next Fed Chair could usher in a “more dovish” policy stance, further supporting bitcoin’s outlook.