Coinbase: Crypto Bear Market Signals, 41% Altcoin Drop, Recovery Possible by 2025

Coinbase's global head of research, David Duong, has identified signs of a long-term bear market in the cryptocurrency space. According to his analysis, both Bitcoin (BTC) and the Coinbase 50 Index (COIN50), which tracks the performance of the 50 largest digital assets by market capitalization, have recently fallen below their respective 200-day moving averages (200DMA). This technical indicator is often interpreted as a bearish signal, suggesting potential long-term declines in the overall market.

Duong emphasizes that as Bitcoin's role as a 'store of value' continues to grow, a more comprehensive evaluation of the crypto market's aggregate activity will be necessary to define bull and bear markets accurately. The recent decline in the total crypto market cap and the decrease in venture capital funding for the space further support the notion of an impending crypto winter.

Despite the bearish signals, Duong suggests that a bullish reversal could begin to take shape between July and September. He advises taking a defensive stance on risk for the time being but remains optimistic that crypto prices may find their floor in mid-to-late second quarter of 2025, setting up a better third quarter.

Coinbase's analysis highlights that the traditional definition of a bear market—a 20% decline from recent highs—may not be as applicable to the cryptocurrency market due to its frequent significant price swings. Instead, the 200DMA provides a more reliable framework for identifying sustained market trends. While Bitcoin has experienced a decline of less than 20% from its December highs, the broader crypto market has seen a more substantial drop, with the total market cap of altcoins falling by 41% from its December peak. This disparity underscores the higher volatility and risk premium inherent in lower-cap cryptocurrencies compared to Bitcoin.

The bearish trend in the crypto market is also influenced by broader macroeconomic factors, including extreme negative sentiment due to global tariffs and potential escalations. These tensions, combined with uncertainty in the wider economic environment, have created a challenging investment landscape. Traditional risk assets have been under pressure from fiscal budget cuts and trade policies, leading to what the report terms "paralysis in investment decision making" that affects both traditional and crypto markets.

During downturns in traditional markets, crypto markets suffer amplified effects due to their 24/7 trading nature and their tendency to act as a proxy for general risk sentiment. Venture capital investment in crypto, while increasing in the first quarter of 2025 from the previous quarter, remains significantly below levels seen during the 2021-22 cycle peak. This decline constrains the onboarding of new capital into the ecosystem, particularly on the altcoin side.

Despite the current bearish signals, Coinbase's analysis suggests that there could be a recovery in the latter half of 2025. The report advises investors to take a short-term approach during times of uncertainty, as previous crypto plunges have been more connected to issues in traditional markets than initially realized. For example, during the Federal Reserve's interest rate hikes from January to November 2022, US stocks fell by 22%, while Bitcoin plummeted by 76%—nearly 3.5 times the decline in stocks.

The report concludes that while caution is advised in the short term, the prognosis for crypto investors is not entirely bleak. The team at Coinbase remains constructive for the second half of 2025, anticipating a potential recovery phase that could set up a better third quarter. This forecast is consistent with the historical pattern of cryptocurrency markets, where recovery phases have occurred with more velocity than in traditional markets.