Bitcoin's latest pullback is being driven chiefly by shifting expectations for U.S. Federal Reserve monetary policy rather than by the Binance hack, according to Coinbase Institutional's most recent weekly market report. The analysis flags stronger-than-expected U.S. economic data, growing expectations for interest rate increases, sizable outflows from spot Bitcoin ETFs, and a steep contraction in stablecoin supply as the main developments shaping current market conditions.

The findings arrive with Bitcoin trading below the key $73,000 support level, stoking concerns about additional downside. Coinbase Institutional cautioned that a sustained break beneath that threshold would significantly raise the probability of a slide toward the $66,000–$68,000 support zone.

Fed Rate Expectations Weigh on Bitcoin

Coinbase Institutional traced much of Bitcoin's recent softness to changing expectations around the Federal Reserve's interest rate path. As highlighted in a Wu Blockchain post on X citing the report, October nonfarm payrolls and Consumer Price Index (CPI) figures both came in above market expectations, deepening concerns about the outlook for monetary policy.

Nonfarm payrolls measure monthly employment changes across the U.S. economy outside the agricultural sector, while the CPI tracks changes in the prices consumers pay for a basket of goods and services — two data series the Federal Reserve weighs when setting policy.

In the wake of those releases, markets fully priced in a 25-basis-point interest rate hike for December. Expectations also pointed to a cumulative 64 basis points of rate increases over the following 12 months. With a December hike already fully priced in, the Fed's upcoming policy decision stands as a key near-term checkpoint for how those expectations develop.

The report described the shift in rate expectations as an important factor in the broader financial market environment. That repricing coincided with Bitcoin's decline, which Coinbase Institutional said aligned more closely with monetary policy repricing than with the Binance hack.

The distinction matters, the report argued, because it shifts attention to macroeconomic conditions rather than a single cryptocurrency industry incident when weighing the causes of Bitcoin's recent price weakness.

Bitcoin Slips Below $73,000 as Stablecoin Supply Contracts

The drop under $73,000 has placed a key technical support level under strain. Support levels are price zones that traders monitor for potential buying interest, and Coinbase Institutional identified the $73,000 threshold as an important reference point for the market, warning that a sustained move below it could increase the probability of further losses.

The research group highlighted the $66,000–$68,000 range as the next significant support zone should Bitcoin remain below $73,000. The report framed that range as a potential downside area rather than a confirmed price target.

Liquidity conditions have weakened in parallel. Figures cited in the report show stablecoin supply contracting by a record $11.5 billion over the past 30 days — a notable reduction in the amount of stablecoins circulating in the cryptocurrency market.

Because stablecoins are commonly used as trading capital and settlement assets across digital asset platforms, changes in their supply serve as an important metric for monitoring market liquidity.

Spot Bitcoin ETFs Log $1.44 Billion in Net Outflows

Institutional investment flows offered a further indication of market pressure. U.S. spot Bitcoin exchange-traded funds recorded $1.44 billion in net outflows over the five trading days leading up to November 11. The funds, which launched in January 2024, hold Bitcoin directly and offer exposure through conventional brokerage accounts, making their flows a closely watched indicator of institutional demand for Bitcoin.

The withdrawals coincided with a substantial deterioration in the aggregate unrealized position of ETF investors. According to Coinbase Institutional, holders of U.S. spot Bitcoin ETFs were sitting on approximately $12.7 billion in combined unrealized losses.

Unrealized losses represent declines in the value of holdings that have not necessarily been realized through asset sales. The reported figure therefore reflects the aggregate paper losses among ETF holders rather than confirmed realized losses.

$66,000–$68,000 Emerges as the Next Key Support Zone

Taken together, Coinbase Institutional's assessment draws on several indicators of pressure on Bitcoin: stronger-than-expected October employment and inflation data, expectations of additional Federal Reserve rate increases, a record $11.5 billion contraction in stablecoin supply, and $1.44 billion in spot Bitcoin ETF net outflows.

The report also stressed the significance of the $73,000 threshold. Should Bitcoin remain below that level, the likelihood of a move toward the $66,000–$68,000 support zone would increase significantly, according to Coinbase Institutional.

With ETF holders carrying approximately $12.7 billion in aggregate unrealized losses, the report identified the Federal Reserve outlook, market liquidity, and the $73,000 support level as the central factors in assessing Bitcoin's recent market decline.

Source: Hokanews