Bitcoin is showing signs of a potential recovery in December, fueled by improving liquidity, positive shifts in the macroeconomic environment, and increasing anticipation of interest rate cuts by the Federal Reserve. Coinbase, the largest cryptocurrency exchange in the United States, released a report on December 5, 2025, suggesting that the Bitcoin market is poised to enter a recovery phase this month.
Several factors support this optimistic outlook. The report cites increased capital inflows into the crypto market, tighter spreads, and a macro environment that is becoming increasingly favorable for digital assets. A key driver of this shift is the growing expectation that the Federal Reserve will cut interest rates. As of December 4, 2025, traders were assigning a 92% probability to a rate cut, a development that has historically spurred renewed interest in risk-oriented assets like cryptocurrencies.
The anticipation of policy easing by the Federal Reserve is expected to weaken the dollar and boost global liquidity, which typically benefits technology stocks and growth assets, including Bitcoin. Moreover, lower interest rates tend to increase liquidity in financial markets, providing more capital for riskier investments like cryptocurrencies. This environment incentivizes investors to move capital from safer assets into riskier ones in search of higher returns.
Coinbase also noted that long-term Bitcoin holders have significantly reduced their selling activity, easing a major source of supply pressure that has weighed on the market. According to CryptoQuant data, average daily sales from wallets older than five years have fallen to roughly 1,000 BTC, a sharp decrease from the 2,350 BTC seen on a 90-day moving basis. This indicates that the selling pressure from early investors who accumulated coins at lower prices is subsiding.
The improving macroeconomic backdrop is further evidenced by the rise in the global M2 money supply, which has climbed to a record $22.3 trillion. This expansion of the money supply has historically aligned with stronger Bitcoin performance, given its fixed supply of 21 million coins.
Despite the overall positive sentiment, some analysts remain cautious. Kevin O'Leary, a well-known investor, has expressed skepticism about the likelihood of a December rate cut and its potential impact on Bitcoin's price. O'Leary believes that Bitcoin has "found a level for now" and does not anticipate a substantial price decline, even if the Fed decides to hold rates steady. He also pointed to the continued presence of inflation as a reason why the Fed might not cut rates.
Nevertheless, the broader market outlook appears to be optimistic. Bitcoin has shown resilience, with its price rebounding above $93,000 amidst hopes of Fed rate cuts and regulatory momentum. Technical analysis suggests that the BTC-USD structure is stabilizing, with short-term momentum building above $92,000.
If the current momentum continues, December could mark the beginning of a broader recovery phase for Bitcoin heading into 2026. The combination of improving liquidity, supportive macro indicators, and softening supply pressure sets the stage for a potentially stronger performance in the coming weeks.
