James Richardson
Coinbase Institutional has raised cautionary flags, suggesting that the cryptocurrency market could be entering another “crypto winter”, driven by declining altcoin valuations, weakened venture capital activity, and escalating geopolitical tensions โ notably following recent tariff-related uncertainty under Donald Trump.
In a report released Tuesday, David Duong, Head of Institutional Research at Coinbase, highlighted that the total crypto market cap excluding Bitcoin has dropped to $950 billion, marking a 41% plunge from its December 2024 peak of $1.6 trillion. Compared year-on-year, this represents a 17% decline, placing valuations below levels seen even during much of the 2021-2022 downtrend.
Bitcoin Outperforms, Yet Market Faces Headwinds
While the broader market stumbles, Bitcoinโs performance has been comparatively resilient, with the leading asset experiencing a drawdown of less than 20% over the same period โ strengthening its dominance but not enough to offset overall bearish momentum.
Meanwhile, although venture capital investment showed a mild uptick in Q1, Duong noted that funding is still 50%โ60% lower than the highs reached during the 2021โ2022 bull cycle. This shortage of fresh capital is particularly detrimental to altcoin ecosystems, which rely heavily on VC inflows for innovation and growth.
Identifying Market Cycles: More Than Just Price Swings
In traditional markets, a 20% price change is often used to define bull or bear markets. However, Duong emphasized that such a threshold is inadequate for crypto, where volatility is inherently higher. Given the 24/7 nature of crypto trading, market reactions are also more immediate and globally driven.
To identify meaningful market shifts, Duong recommends using risk-adjusted metrics like z-scores and 200-day moving averages (200DMA) rather than relying on simplistic percentage drops. As an example, he pointed to Bitcoinโs 1.4 standard deviation decline between November 2021 and November 2022 โ nearly mirroring the 1.3 deviation in equities, which supports a parallel between BTCโs 76% fall and the S&P 500โs 22% loss on a risk-adjusted basis.
200DMA Offers Clearer Trend Analysis
While z-score models provide valuable insights, Duong cautioned that they may react slowly during sideways or stable market conditions. In contrast, the 200DMA offers a more intuitive and immediate indicator of market direction by filtering out short-term price fluctuations.
He stated that Bitcoinโs drop below its 200DMA in late March likely marks the beginning of a bear cycle. Moreover, when examining the COIN50 index โ tracking the top 50 cryptocurrencies by market cap โ the downtrend appears even more pronounced, with bearish trading patterns starting as early as late February.
Macro Factors Intensify Market Struggles
Duong pointed to broader macroeconomic uncertainty, including fiscal tightening and trade tensions, as major contributors to declining investor confidence across risk assets. These external pressures have created a hesitant investment environment, further stalling growth in the digital asset sector.
Despite the bearish signals, Duong remains cautiously optimistic. He believes that crypto markets may stabilize by mid-to-late Q2, potentially paving the way for a stronger recovery in Q3 2025.
โOnce sentiment resets, the rebound could be swift. We maintain a constructive outlook for the second half of 2025,โ Duong said.
Coinbase also disclosed that some of its employees may have financial exposure to the digital assets mentioned in the report.
