Bitcoin’s latest drop stems from structural strains, Coinbase Institutional explained, as weakening trend signals, thinning liquidity, whale selling and ETF outflows pressured the market despite normally supportive easing monetary conditions.
Market Volatility Rises as Bitcoin Breaks Support With Liquidity Compression
Coinbase Institutional, a division of crypto exchange Coinbase (Nasdaq: COIN), explained on social media platform X on Dec. 2 why bitcoin’s price is dumping. The group noted that easier monetary conditions usually help risk assets, yet recent market action diverged from expectations.
Coinbase stated:
So why did BTC dump?
The division outlined several structural pressures weighing on bitcoin. The asset slipped beneath major bull-market support bands, signaling weakening trend strength. Options activity shifted toward bearish structures. Longtime whales sold into declining liquidity. Spot bitcoin ETFs saw significant outflows, reducing consistent buy-side demand. Digital asset traders slowed participation, tightening liquidity conditions and amplifying market swings.
The firm further noted:
With quantitative tightening ending, the Fed is back in the bond market and the drain of cash from markets may be behind us. That’s usually good for risk-on assets like crypto.
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Coinbase also posted an accompanying chart showing bitcoin’s cost-basis distribution across 2025. The heatmap displays concentrated pockets of holder supply between roughly $95,000 and $110,000, with darker bands indicating heavier clusters of coins bought in those ranges. As the price fell sharply in November, the chart shows bitcoin moving below dense ownership layers, suggesting many market participants are now holding unrealized losses. The visualization also reflects thinner supply zones at lower levels, which may influence volatility as price searches for areas with stronger historical demand.
Bitcoin cost basis distribution heatmap shared by Coinbase Institutional. Source: Coinbase
The team also emphasized its tactical view, stating:
In this environment, we think higher probability setups favor breakout trades over knife-catching.
Analysts noted narrowing liquidity pockets, persistent clustering in implied volatility, and selective institutional flow patterns that influence near-term behavior. While the analysis leaned cautious, pro-crypto voices counter that bitcoin’s fixed issuance, broader international adoption, and continued institutional integration support a constructive long-run thesis. They argue that corrective phases clear excess leverage and help create more stable foundations for future appreciation as macro conditions gradually normalize.
FAQ ⏰
- Why does Coinbase say bitcoin is dropping? Coinbase points to weakening trend signals, bearish options flows, whale selling, and ETF outflows as key pressures.
- What role do spot bitcoin ETF outflows play? Coinbase notes that they reduce steady buy-side demand and hurt market stability.
- How does liquidity affect bitcoin’s recent volatility? Tight liquidity from slower trader participation and whale selling amplifies market swings.
- What does Coinbase’s cost-basis chart suggest? It shows falling below dense ownership zones, leaving many holders at unrealized losses.
Author: Kevin Helms
Source: Bitcoin
Reviewed By: Editorial Team
