Nikolas Sargeant
Coinbase Research has signaled that a convergence of technical breakdowns, weakening investor confidence, and macroeconomic challenges may herald the arrival of a new crypto winter, potentially echoing the severe downturn that dominated digital assets from late 2021 through early 2023.
In a Tuesday report, David Duong, head of institutional research at Coinbase, highlighted several concerning indicators. Both Bitcoin and the Coinbase COIN50 index have dropped below their 200-day moving averages, a threshold widely considered the boundary between bull and bear market territories.
Alternative Cryptocurrencies Face Steep Decline While VC Funding Remains Sluggish
The broader cryptocurrency ecosystem is already exhibiting distress signals. Excluding Bitcoin, the total crypto market capitalization has contracted to $950 billion, representing a 41% decline from its December 2024 peak of $1.6 trillion. This valuation sits below levels observed throughout most of the August 2021 to April 2022 timeframe.
Simultaneously, venture capital investment, though marginally improved since late 2024, continues to lag 50 to 60 percent behind the heights achieved during the 2021-2022 bull market cycle.
Economic Headwinds Freeze Investment Activity Across Markets
According to Coinbase, these downturns are being exacerbated by unfavorable macroeconomic conditions. Escalating global tariffs and sustained fiscal tightening have diminished investor risk appetite, halting capital flows into alternative cryptocurrencies and early-stage blockchain ventures. Duong characterized the investment climate as "paralysed," with both traditional and digital asset classes under pressure.
"We think this warrants taking a defensive stance on risk for the time being," Duong wrote, suggesting the market might establish a bottom between mid-to-late Q2 of 2025, potentially paving the way for recovery in the year's second half.
Current Downturn Mirrors Previous Crash With Recovery Potential Later in 2025
While the report carefully employed the term "crypto winter," the indicators parallel conditions witnessed during the previous major market contraction, which followed the collapse of several prominent crypto enterprises and erased nearly $2 trillion in value over 18 months. The current environment, though less tumultuous, exhibits similar signs of liquidity constraints and investor exhaustion.
Nevertheless, Coinbase maintains cautious optimism. The research team believes a strategic approach will be crucial, as market sentiment could pivot rapidly once external pressures diminish. "When the sentiment finally resets, it's likely to happen rather quickly," Duong observed, indicating potential for a more favorable market landscape in the latter half of 2025.
