Coinbase Institutional reports that the cryptocurrency market is entering a bear phase, with Bitcoin falling below its 200-day average indicating a prolonged downturn. Traditional metrics may not fully capture the changes in market sentiment. The COIN50 index also shows signs of a bear market since February, with declining VC funding expected to further impact the crypto landscape into 2025.
According to Coinbase Institutional, the cryptocurrency market is experiencing a bear phase with significant price declines and market stagnation ahead. The recent dip of Bitcoin below its 200-day simple moving average (SMA) signals the onset of a crypto winter, indicating prolonged losses. Traditional metrics used for identifying bear markets may not fully encapsulate the current shifts in investor sentiment and market structure within the crypto landscape.
Coinbase’s analysis highlights that Bitcoin’s fall below its 200-day SMA on March 9 marks a critical bearish trend. Generally, when an asset trades consistently below this average, it indicates a bear market. David Duong, head of research at Coinbase, noted that the COIN50 index, representing the top 50 cryptocurrencies by market capitalisation, has similarly been in bear territory since late February, reflecting a broader market downturn.
The report points out the challenges in defining a crypto bear market, considering that corrections of 20% or more are common. Unlike traditional markets, where a 20% drop indicates a bear market, the cryptocurrency market is characterised by more frequent sentiment-driven corrections that may not meet this threshold. Duong emphasised that bear markets often represent shifts in market structure, which involve declining fundamentals and reduced liquidity, rather than merely percentage declines.
Duong further mentioned an alternative metric, the z-score, to assess Bitcoin’s risk-adjusted performance over the previous 365 days, revealing that the last bull cycle ended in late February. Current market activity has been deemed “neutral,” indicating a potential lag in response to rapid changes in market dynamics which necessitates a more defensive investment strategy.
The anticipated crypto winter may pose harsher challenges for alternative cryptocurrencies, especially given the slowdown in venture capital (VC) funding. While Bitcoin reached new highs earlier this year, enthusiasm for new investments in the VC sector has notably decreased, with funding levels falling 50%-60% below those seen in 2021-22. Duong forecasts the possibility of the crypto market hitting a floor by mid-to-late 2025, potentially setting up for a more favourable environment in the third quarter of 2025.
