Coinbase: Bear Market Dip, Q3 Rebound Predicted
Coinbase's April 2025 market review reveals a contraction in the cryptocurrency market, yet suggests a potential upswing in the third quarter. The report, aimed at institutional investors, highlights significant market shifts.
Market Contraction and Funding Decrease
The altcoin market capitalization experienced a 41% drop from its December 2024 peak of $1.6 trillion to $950 billion by mid-April, briefly touching a low of $906.9 billion on April 9th. Venture capital funding for crypto projects also significantly decreased by 50-60% compared to 2021-2022. Coinbase's global head of research, David Duong, suggests these factors indicate the onset of a new crypto winter, largely attributed to global tariff uncertainties and macroeconomic headwinds.
Duong states: "Several converging signals may be pointing to the start of a new ‘crypto winter’ as some extreme negative sentiment has set in due to the onset of global tariffs and the potential for further escalations."
Macroeconomic Factors and Market Outlook
Reduced venture capital interest, primarily impacting the altcoin sector, stems from the current macroeconomic environment. The report notes: "All of these structural pressures stem from the uncertainty of the broader macro environment, where traditional risk assets have faced sustained headwinds from fiscal tightening and tariff policies, contributing to the paralysis in investment decision making."
While the next four to six weeks warrant caution, Coinbase anticipates a rapid market turnaround. Duong states: "When the sentiment finally resets, it’s likely to happen rather quickly and we remain constructive for the second half of 2025."
Market Indicators and Bitcoin's Role
The report analyzes several metrics to gauge market trends, including risk-adjusted performance and the 200-day moving average. The Bitcoin Z-score, comparing market and realized value, is also considered, although its slow reaction time limits its effectiveness in stable markets. Coinbase's analysis, based on these indicators, suggests a transition from a bull to a neutral market.
However, Coinbase emphasizes the limitations of using Bitcoin as a sole indicator for the entire crypto market. The expanding crypto landscape, encompassing DeFi, DePIN, and AI, presents independent market forces beyond Bitcoin's influence.
Bear Market Confirmation?
The 200-day moving average suggests Bitcoin entered bear market territory in late March. Applying the same model to Coinbase's Coin50 index (top 50 crypto assets) indicates a bear market since late February. While Bitcoin's resilience to macroeconomic factors is noted, its role as a generalized indicator for the broader crypto market is diminishing. Duong concludes: "As Bitcoin’s role as a ‘store of value’ continues to grow, we think a holistic evaluation of crypto’s aggregate market activity will be needed to better define bull and bear markets for the asset class."
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