The cryptocurrency market, despite recent downturns, may be on the verge of a recovery, contingent on the Federal Reserve implementing a rate cut at its upcoming meeting. This optimistic outlook comes from Nigel Green, CEO of the independent advisory firm deVere Group, as the Fed's policy meeting on December 9-10 approaches. The forecast is particularly relevant given Bitcoin's recent sharp decline from its all-time high of $126,000 to a recent low of nearly $80,000.
Green attributes the current pullback not to a collapse in demand, but rather to market uncertainty. He notes that investors have reduced their exposure due to a lack of clarity regarding the Fed's next steps and other macroeconomic factors. He suggests that a rapid shift in positioning could occur once this uncertainty dissipates.
He further distinguishes this sell-off from previous ones, highlighting that the drop from $120,000 has effectively removed significant leverage that had been built into the rally. Green points to over $19 billion in long positions that have already been liquidated. This deleveraging process, he explains, has resulted in a market that is "structurally cleaner" than at its peak, which is crucial for Bitcoin's ability to rebound. The remaining market after forced selling is seen as the foundation for future growth.
Macroeconomic Influences on Asset Pricing
Green emphasizes the dominant role of liquidity in asset pricing within the broader macroeconomic landscape. He observes that contracting liquidity can put pressure on even high-quality risk assets, while expanding liquidity tends to benefit Bitcoin early on. He posits that a 25-basis-point rate cut by the Fed in December would "shift financial conditions pretty much immediately."
The trajectory of the US dollar is a central element in Green's analysis. Lower interest rates typically weaken the dollar and reduce real yields. This combination, according to Green, tends to redirect global capital towards assets with longer-duration payoff profiles, a category into which Bitcoin firmly falls. "Investors respond quickly when the dollar softens because they reassess the opportunity cost of holding cash," he commented.
For institutional investors, Green suggests that the Fed's communication will be as significant as the rate decision itself. If policymakers signal the possibility of further rate adjustments in 2026, it could lead to a recalibration of the entire yield curve and subsequent adjustments in risk-asset allocations. In such a scenario, Bitcoin could attract a substantial portion of this capital rotation.
Green acknowledges that the recent volatility should be considered within the context of a fragile global environment, marked by retreating equities, disappointing US economic data in early autumn, and ongoing geopolitical tensions. While these factors contribute to risk aversion, he maintains they do not diminish Bitcoin's long-term investment appeal.
He further notes that institutional desks are viewing the $80,000-$90,000 range as a valuation area with long-term promise, rather than a point of distress. This perspective, he argues, reflects the current sentiment among professional investors.
Solid Fundamentals Underpin Bitcoin
Green points to several structural factors that support Bitcoin. Its supply is fixed, adoption continues to grow, and the infrastructure for large-scale participation is improving. He also observes an increasing number of sovereign wealth funds and corporate treasuries considering digital asset allocations, a trend less prevalent in previous market cycles.
He argues that the convergence of structural demand with improved liquidity creates an amplified effect. "Bitcoin has already shown this repeatedly across multiple cycles. The draw-down does not erase that dynamic."
Green anticipates that investors will react swiftly if the Fed announces a rate cut. He expects volatility to increase around the announcement, but believes underlying capital flows are likely to favor Bitcoin. "Investors want to deploy capital; they simply want assurance that monetary conditions are moving in the right direction," he stated.
In conclusion, Green emphasizes the significance of the upcoming Fed meeting for digital asset markets. He highlights that Bitcoin has weathered a severe correction, but its fundamental underpinnings remain robust. A rate cut, he believes, would bolster liquidity, enhance market confidence, and pave the way for the next phase of Bitcoin's long-term upward trajectory.