Coinbase Monthly Outlook: Bitcoin and COIN50 both lost key support. How far is the market still from rebounding?

Original title: Monthly Outlook: How Do You Define a Crypto Bear Market?

Original author: David Duong, CFA - Global Head of Research

Compiled by: Daisy, ChainCatcher

Summary of key points:

• As of mid-April, the total market value of cryptocurrencies except Bitcoin has dropped from its December 2024 high of $1.6 trillion to $950 billion, a drop of 41%. In addition, the scale of venture capital has also decreased by 50% to 60% from the level from 2021 to 2022.
• We believe that conservative risk response strategies should be adopted at the current stage. However, we expect crypto market prices to stabilize in the mid-to-late period of the second quarter of 2025, laying the foundation for a rebound in the third quarter.

Summary

Multiple factors are being superimposed, which may indicate the arrival of a new round of "encrypted winter". As global tariff policies are introduced one after another and may further escalate, market sentiment has deteriorated significantly. As of mid-April, the total market value of cryptocurrencies except Bitcoin fell to $950 billion, down 41% from the high of $1.6 trillion in December 2024 and a year-on-year decrease of 17%. It is worth noting that this level is even lower than the market capitalization performance for almost the entire period from August 2021 to April 2022.

In the first quarter of 2025, venture capital in the crypto industry rebounded compared with the previous quarter, but was still 50% to 60% lower than the peak period from 2021 to 2022. This significantly limits the entry of new capital into the ecosystem, especially the impact on the altcoin sector is more prominent. The above structural pressures mainly stem from the uncertainty of the current macroeconomic. Fiscal austerity and tariff policies continue to suppress traditional risky assets, resulting in stagnation of investment decisions. Although the regulatory environment provides some support, the road to recovery of the crypto market remains challenging against the backdrop of overall weak stock markets.

The interweaving of multiple factors has put the digital asset market in a severe cyclical outlook, and caution is still needed in the short term (expected to be in the next 4 to 6 weeks). However, we believe that investors should adopt flexible tactics to deal with market volatility. Because once market sentiment is repaired, the rebound may start quickly. We are still optimistic about the market performance in the second half of 2025.

The division between bull market and bear market

In the stock market, a 20% rise from a recent low or a 20% fall from a high is usually used as an empirical standard for judging a bull or bear market. However, this standard is subjective in nature and is not applicable to high volatility crypto markets. Crypto assets often experience more than 20% price fluctuations in a short period of time, but this does not necessarily mean that the market trend has undergone fundamental changes. Historical data show that Bitcoin, for example, can fall 20% in a week, but is still in a long-term upward trend and vice versa.

In addition, the crypto market is traded 24/7 (24/7), making it a barometer of global risk sentiment during traditional financial markets (such as nights or weekends). Therefore, crypto asset prices tend to react more strongly to global emergencies. For example, during the period when the Federal Reserve adopted a radical interest rate hike policy from January to November 2022, the U.S. stock market (represented by the S&P 500 Index) fell by 22% in total; while Bitcoin began to fall from earlier in November 2021, with a cumulative decline of 76% in similar cycles, about 3.5 times the decline of U.S. stocks in the same period.

The truth in contradiction

It should be pointed out that the "20% rule" traditionally used to define bull markets and bear markets is essentially just a rule of thumb, and there is no unified standard so far. As Justice Porter Stewart of the U.S. Supreme Court said in his commentary on "What is obscene": "I can't define it, but I know it when I see it." Similarly, the identification of market trends often relies more on experience and intuition than on strict computational models.

Nevertheless, to make judgments more systematic, we refer to the closing highs and lows of the S&P 500 within the rolling year window to identify key market reversals. According to this approach, the U.S. stock market has roughly experienced four bull markets and two bear markets over the past decade - not including the latest decline from late March to early April (our model has begun to signal bear markets). See Figure 1 for details.

However, the "20% threshold" also ignores at least two pullback events that have had a major impact on market sentiment but have a decline of between 10% and 20%. For example, the fluctuations caused by the turmoil in China at the end of 2015 and the market turmoil caused by the intensification of global trade frictions in 2018 (the rising Fed's global trade policy uncertainty indicator). See Figure 2 for details.

In the past we have seen that sentiment-driven market declines often trigger defensive adjustments in portfolios, although their declines do not reach the artificially set 20% threshold. In other words, we believe that the bear market is essentially a reflection of the transformation of the market structure, characterized by deterioration in fundamentals and liquidity contraction, not just the extent of price decline. In addition, the “20% rule” poses a risk of paralysis because it ignores some early warning signals such as deep market declines and defensive sector rotations, which are often precursors of major downward cycles in history.

Alternative indicators

Therefore, we try to find alternative indicators that can more accurately reflect the relationship between price trends and investor psychology, suitable for stocks and crypto assets. The definition of a bear market not only involves asset returns, but is also closely related to market sentiment -the latter often determines whether investors believe that the downward trend will continue and adjust their strategies accordingly. This concept is more complicated because what we observe is not a simple continuous rise or fall, but a turning point in the long-term trend. For example, the COVID-19 pandemic is a typical case, and the market rebounded rapidly after a rapid and violent decline. Of course, the reason why this bear market lasted for a short period of time is largely due to the large-scale fiscal and monetary stimulus policies introduced by governments, which prevented investors from falling into a long-term drawdown.

Rather than relying on the “20% rule” rules, we prefer to adopt two types of risk adjustment indicators: (1) risk-adjusted returns performance measured by standard deviations; (2) 200-day moving average (200DMA). For example, from November 2021 to November 2022, Bitcoin's average performance decreased by 1.4 standard deviations compared with the previous 365 days; during the same period, the decline of US stocks also reached 1.3 standard deviations. From the perspective of risk adjustment, Bitcoin's 76% decline can be regarded as comparable to the S&P 500's 22% decline.

Since the standard deviation indicator naturally reflects the high volatility of the crypto market, the z-value (standard score) is very suitable for crypto asset analysis. Nevertheless, it also has certain limitations: on the one hand, the calculation is relatively complex; on the other hand, when the market trend is relatively stable, the signal may be less sensitive and the response to trend changes may be insufficient. For example, our model shows that the most recent bull market cycle ended in late February, after which the market status was classified as "neutral", reflecting the possible lag of the model during periods of severe market volatility.

By contrast, the 200-day moving average (200DMA) provides a more concise and robust way to identify ongoing market trends. Because it is calculated based on long-term data, it can effectively smooth short-term fluctuations and adjust in time according to the latest price trends, thereby providing a clearer momentum signal.

The judgment method is also relatively intuitive:

• When the price continues to be above 200DMA and is accompanied by rising momentum, it is usually considered a bull market;
• When the price is below 200DMA for a long time and the action energy is accompanied by it, it often means the formation of a bear market.

This method not only coincides with the generalized trend signals reflected by the "20% rule" and the z-value model, but also enhances the practicality and forward-looking insights in a dynamic market environment. For example, it successfully captured key downward cycles such as the early stages of the epidemic in 2020, the Fed rate hike cycle from 2022 to 2023, and also reflected the cryptocurrency winter from 2018 to 2019, and the pullback caused by China's mining ban in 2021.

In our view, this approach not only aligns with the generalized trend signals embodied in the “20% rule” and z-value models, but also improves the accuracy of extracting actionable insights in a dynamic market environment.

In addition, we also found that 200DMA can better reflect the violent fluctuations in investor sentiment in different periods. See Chart 5 and 6 for details.

Encrypted winter?

So have we entered a crypto bear market? Previous analysis mainly focused on Bitcoin because it has enough historical data to be convenient for comparison with traditional markets such as the US stock market. However, as crypto asset classes continue to expand to emerging fields (such as Meme Coin, DeFi, DePIN, AI proxy, etc.), Bitcoin is gradually no longer able to fully represent the overall market trend.

For example, Bitcoin’s 200DMA model shows that its sharp pullback has entered the bear market segment since late March. Using the same model for the COIN50 index (covering the top 50 tokens in market value) found that since the end of February, this type of asset has been significantly in a bear market overall. This is consistent with the trend of the total market value of cryptocurrencies falling 41% from its December 2024 high to $950 billion; by comparison, Bitcoin fell less than 20% over the same period. This gap reflects the higher volatility and risk premium at the end of the risk curve.

in conclusion

As Bitcoin’s “store of value” attributes continue to strengthen, we believe that the overall performance of the crypto market needs to be evaluated in a more systematic and comprehensive way in the future to more accurately define its bull or bear market status, especially in the context of increasingly diverse asset classes. Nevertheless, both Bitcoin and COIN50 indexes have fallen below their respective 200-day moving averages, a signal that the market may be in the early stages of a long-term downward trend. This is consistent with the trend of declining total market value and shrinking venture capital, and is both important features of the possible arrival of the "crypto winter".

Therefore, we recommend that defensive risk management strategies should still be maintained at this stage. Although we still expect crypto asset prices to stabilize in the mid-to-late second quarter of 2025 and lay the foundation for improvement in the third quarter. At present, investors still need to be highly cautious in the complex macro environment.