Coinbase Insights: Bear Market Conditions with Rebound Potential for Q3

Coinbase’s market report reveals a significant contraction in the cryptocurrency market, with altcoin capitalisation falling by 41% recently. Despite venture capital funding dropping by 50-60%, a potential rebound in Q3 2025 is anticipated. Analysts highlight macroeconomic pressures and propose using the 200-day moving average to better assess market trends, as Bitcoin’s role as a market indicator is diminishing due to the diversification of cryptocurrency use cases.

Coinbase’s recent monthly market review indicates that although the cryptocurrency market is currently experiencing a downturn, there are signs that a rebound may occur in the third quarter of 2025. The report reveals that the altcoin market capitalisation has decreased by 41% from its December 2024 peak of $1.6 trillion to approximately $950 billion by mid-April 2025. Recent data from BTC Tools shows an even lower market cap of $906.9 billion as of April 9, before slightly rebounding to $976.9 billion at the time of writing.

Venture capital funding for crypto projects has declined significantly, down by 50% to 60% compared to 2021–22. David Duong, Coinbase’s global head of research, warns of extending “crypto winter” conditions due to the increase in negative sentiment driven by global tariffs and escalating tensions in international trade. This adverse sentiment is adding pressure on the market and restricting capital inflow, significantly affecting altcoins.

The report attributes the difficulties in the crypto space to a challenging macroeconomic environment, where traditional risk assets face headwinds due to fiscal tightening and tariff policies. Such factors are creating paralysis in investment decisions, making the outlook for digital assets difficult in the short term. Duong advises caution for the next four to six weeks but notes that a shift in market sentiment could happen rapidly in the latter half of 2025.

Coinbase’s analysis includes various metrics to identify shifts between bull and bear markets, such as risk-adjusted performance and the 200-day moving average. The Bitcoin Z-score is also benchmarked to compare market and realised value, indicating oversold or overbought conditions. Although the Z-score accounts for crypto volatility, it is slow to react and produces fewer signals in stable markets. Currently, it suggests a neutral market since the bull market concluded in late February.

Duong indicates that the 200-day moving average is more effective in interpreting overall market trends, filtering out short-term fluctuations while being grounded in 200 days of trading data. Furthermore, the report derides the diminishing reliability of Bitcoin as a market indicator, as the crypto landscape diversifies into areas like decentralised finance (DeFi) and artificial intelligence.

According to Duong, the 200-day moving average has classified Bitcoin’s recent drop as a bear market in late March. When considered against the Coin50 Coinbase index, which tracks the top 50 crypto assets, a bear market has been in place since late February. Notably, Bitcoin appears to be showing resilience to broader macroeconomic challenges, experiencing a lesser decline compared to traditional markets as price levels return to those around the US election period.

Due to Bitcoin’s evolving perception as a store of value, Duong suggests a comprehensive evaluation of the entire cryptocurrency market is necessary to define bull and bear phases effectively.