Coinbase Institutional [released its The new monthly outlook report suggesting market conditions may favor a December reversal following Bitcoin's turbulent November.
Coinbase Institutional reported speculative excess has been flushed from crypto markets.
A positioning reset created healthier market structure heading into year-end, according to the report.
"A rocky November may have set the stage for a December to remember," Coinbase Institutional stated on social media.
What Happened
Open interest across Bitcoin, Ethereum, and Solana perpetual futures fell 16% month over month.
U.S. spot Bitcoin exchange-traded funds recorded $3.5 billion in outflows during November.
Spot Ethereum ETFs saw $1.4 billion in redemptions, marking the largest monthly outflow since their July 2024 launch.
Bitcoin perpetual funding rates dropped two standard deviations below their 90-day average before stabilizing.
The systemic leverage ratio, which tracks purely speculative positioning, declined to approximately 4% to 5% of total market capitalization.
That figure represents a 50% reduction from the roughly 10% level observed this summer.
Read also: Crypto.com Brings Liquidity Tools to UAE Financial Provider LuLuFin
Why It Matters
Lower leverage typically indicates healthier market structure with reduced vulnerability to sharp drawdowns.
The Federal Reserve's quantitative tightening program has ended, with the central bank returning to bond market operations.
"That's usually good for risk-on assets like crypto," noted Coinbase Institutional.
Markets are pricing in a 93% probability of a Federal Reserve rate cut, according to Polymarket data cited by the firm.
Bitcoin underperformed U.S. equities on a risk-adjusted basis in November.
The cryptocurrency fell more than three standard deviations below its 90-day average while the S&P 500 declined only one standard deviation.
Spencer Hallarn, Global Head of OTC at GSR, agreed with the assessment.
"I think we've shaken out a lot of the bulls and built a solid base of skepticism," Hallarn said.
"Perpetual funding rates are very low or negative, which suggests there isn't much leverage in the system."
Read next: Anthony Scaramucci Forecasts Solana Will Overtake Ethereum by Market Value