Coinbase Forecasts Potential Crypto Bear Market with Recovery Hopes for 2025

Coinbase warns of a potential crypto bear market, suggesting investors adopt a defensive posture due to falling market caps and negative trends. However, they predict a possible market recovery in 2025. They argue traditional market definitions fail to capture crypto volatility and urge consideration of alternative performance metrics. Current macroeconomic pressures are affecting investments but may ease, allowing for a quicker market turnaround once sentiment improves.

Coinbase Institutional Research has urged investors to take a cautious approach to cryptocurrency markets, suggesting a potential “crypto winter” due to recent price drops and negative sentiment. Their report indicates that Bitcoin and the COIN50 Index have dipped below their 200-day moving averages, signalling bearish market conditions.

Recent data reveals that the total cryptocurrency market cap, excluding Bitcoin, has decreased by 41% since December 2024, now standing at $950 billion, a level not reached since early 2022. With venture capital funding still 50-60% lower than its 2021 peak, the report advocates for a defensive investment strategy during this downturn.

Despite the challenges, Coinbase maintains a cautiously optimistic outlook for the latter half of 2025, suggesting that the market could find stability by mid-to-late Q2. This may position investors to seize opportunities in Q3, assuming market sentiment improves.

The firm critiques traditional bull and bear market definitions, asserting they do not adequately account for the volatility in cryptocurrencies. Instead, they highlight the significance of metrics including risk-adjusted performance and the 200-day moving average for better market insight.

While the sell-off is most evident in altcoins, Bitcoin has not been immune. Although it has not declined more than 20% from its highs, it has breached critical support levels, reflecting a broader loss of momentum. The COIN50 Index has been in bear market territory since late February.

Additionally, macroeconomic influences, including rising tariffs, fiscal tightening, and stagnant equity markets, are contributing to a challenging investment environment for cryptocurrencies. Coinbase notes these factors complicate efforts for digital assets to achieve independent growth.

Nevertheless, the report suggests that a rapid recovery could occur once negative macroeconomic factors and sentiment improve, emphasizing the need for strategic positioning ahead of a potentially stronger Q3 for crypto assets.