The cryptocurrency market is showing signs of a significant downturn, as Bitcoin and the top 50 tokens have entered bear market territory, signaling the onset of what many are referring to as a crypto winter. Coinbase’s institutional arm suggests that the recent crypto bull run may have concluded, indicating that the market could be entering a winter phase marked by extended losses and stagnation.
The 200DMA model indicates that Bitcoin’s recent sharp decline marks the beginning of a bear market cycle that commenced in late March. David Duong, the global head of research at Coinbase Institutional, stated in a note released on Monday that an analysis of the COIN50 index, which comprises the top 50 tokens by market capitalization, indicates that the asset class has been firmly entrenched in bear market territory since the end of February.
Bitcoin fell beneath its 200-day simple moving average (SMA) on March 9 and has since maintained a position below this threshold, indicating a potential long-term bearish shift in momentum. The 200-day simple moving average (SMA) is a key indicator for assessing long-term market trends. Sustained movements above this threshold are indicative of a bullish market, while movements below suggest a bearish trend.
Duong highlighted this observation while discussing the difficulties associated with pinpointing a crypto bear market, characterized by routine corrections of 20% or more. A 20% decline is commonly recognized as the threshold for defining bear markets within the stock market landscape. The report contended that the arbitrary 20% threshold frequently overlooks the impact on investor sentiment and the subsequent portfolio adjustments triggered by smaller, more intense sell-offs.
Recent observations indicate that declines driven by sentiment frequently lead to defensive adjustments in investment portfolios, even when they do not reach the conventional 20% benchmark. Duong emphasized that bear markets signify fundamental shifts in market structure, marked by weakening fundamentals and decreasing liquidity, rather than merely reflecting their percentage declines. In a recent analysis, Duong emphasized the significance of the 200-day simple moving average (SMA) while also pointing out the importance of bitcoin’s risk-adjusted performance. This performance is quantified using standard deviations, or z-scores, in relation to the average performance observed over the past 365 days, serving as a valuable tool for pinpointing crypto bear markets.
The latest analysis from our z-score model suggests that the most recent bull cycle concluded in late February. However, it has now categorized all following activities as “neutral,” underscoring its possible delay in adapting to swiftly evolving market conditions,” Duong stated, advocating for a cautious approach to risk assessment for the time being. The upcoming winter could pose significant challenges for alternative cryptocurrencies, particularly in light of the recent decline in venture capital funding.
Despite Bitcoin reaching new heights earlier this year, surpassing the previous peak of $70,000 from 2021, the optimistic momentum did not translate into increased risk appetite within the venture capital sector. As a result, overall funding remains significantly lower, approximately 50% to 60% beneath the levels seen in 2021 and 2022. Duong indicated that the cryptocurrency market could potentially establish a support level in the middle to late second quarter of 2025, paving the way for improved conditions in the third quarter of 2025.