Bitcoin’s latest drop comes just as macro conditions start to look less hostile, and Coinbase says the mismatch is no accident. The firm points to weakening technical support, ETF outflows and a skewed, AI-shaped economy that leaves a small group of wealthy investors steering most crypto moves. Coinbase Points to Market Signals Behind Bitcoin Sell-Off Coinbase Institutional says several market forces explain Bitcoin’s latest drop, even as conditions usually favorable for risk assets return. With quantitative tightening ending and the Federal Reserve stepping back into the bond market, the firm notes that the recent drain of cash from financial markets may be easing. Bitcoin Cost Basis Heatmap. Source: Coinbase on X However, Bitcoin has still broken key bull market support bands, which Coinbase flags as a technical warning. At the same time, options positioning has turned more bearish, suggesting traders now hedge against further downside rather than bet on a quick rebound. Meanwhile, Coinbase observes that long-time “OG” whales have been selling into the weakness, while spot Bitcoin exchange-traded funds report large outflows. In addition, digital asset traders (DATs) appear to be slowing activity, adding pressure to prices. In this environment, Coinbase Institutional says the higher-probability setups now favor trading confirmed breakouts instead of attempting to “catch a falling knife” by buying every dip. Wealth Split and AI Trends Shape Crypto Demand Coinbase Research links the latest crypto volatility to a wider split inside the U.S. economy. The report says much of the recent “doom and gloom” in digital assets comes from macro worries over inflation, recession risk and the Federal Reserve’s next rate move on December 10. Yet the U.S. economy still grows at an annualized 3.8 percent in the second quarter of 2025 after a mild contraction earlier in the year, which shows that headline data alone does not explain the pressure on risk assets. Analysts instead describe a “K-shaped” pattern where higher-income households control most financial assets, including crypto and stocks. Coinbase cites estimates that the top 10 percent of U.S. households own close to 89 percent of domestic equities, reinforcing the idea that market moves often reflect the behavior of a relatively narrow investor base. The report also highlights how artificial intelligence plays a double role. On one side, AI improves labor productivity and lifts corporate profits, which can support stock prices and, indirectly, demand for digital assets. On the other side, headlines about white-collar job cuts and pressure on middle management create anxiety over future income, which may limit how much capital flows into volatile assets such as crypto. Because of this tension, Coinbase says it is still too early to prove a strong statistical link between AI-driven job losses and Bitcoin returns. There are only a few years of data, and a simple regression shows low explanatory power. For now, the firm notes that upper-income investors who benefit from AI-boosted markets may still redirect part of their gains into instruments like spot BTC exchange-traded funds, especially while trillions of dollars remain parked in U.S. money market funds.
