Key Points Summary:
- As of mid-April, the total market value of cryptocurrencies excluding Bitcoin has dropped from the December 2024 high of $1.6 trillion to $950 billion, a decline of 41%. Additionally, venture capital investment has decreased by 50% to 60% compared to 2021-2022 levels.
- We believe a conservative risk management strategy should be adopted at this stage. However, we anticipate that crypto market prices may stabilize in the second half of the second quarter of 2025, laying the foundation for a rebound in the third quarter.
Overview
Multiple factors are converging that may signal the arrival of a new Crypto Winter. As global tariff policies are gradually introduced and may further escalate, market sentiment has significantly deteriorated. As of mid-April, the total market value of cryptocurrencies excluding Bitcoin has dropped to $950 billion, a 41% decline from the $1.6 trillion high in December 2024, and a 17% year-on-year decrease. Notably, this level is even lower than the market value performance during almost the entire period from August 2021 to April 2022.
In the first quarter of 2025, venture capital in the crypto industry has slightly rebounded compared to the previous quarter but remains 50% to 60% below the peak levels of 2021-2022. This significantly limits new capital entering the ecosystem, with a particularly pronounced impact on the Altcoin sector. These structural pressures primarily stem from current macroeconomic uncertainties. Fiscal tightening and tariff policies continue to suppress traditional risk assets, leading to investment decision paralysis. Although the regulatory environment provides some support, the path to recovery for the crypto market remains challenging against the backdrop of overall stock market weakness.
Multiple intertwining factors present a severe cyclical prospect for the digital asset market, requiring caution in the short term (estimated next 4-6 weeks). However, we believe investors should adopt flexible tactical approaches to market volatility. Once market sentiment is repaired, a rapid rebound may be triggered. We remain optimistic about market performance in the second half of 2025.
Defining Bull and Bear Markets
In stock markets, a 20% rise from recent lows or a 20% drop from highs is typically used as an empirical standard for determining bull or bear markets. However, this standard is inherently subjective and not applicable to the highly volatile crypto market. Crypto assets often experience price fluctuations exceeding 20% in short periods, which does not necessarily indicate a fundamental market trend change. Historical data shows that Bitcoin can drop 20% in a week while still maintaining a long-term upward trend, and vice versa.
Moreover, the crypto market operates 24/7, making it a global barometer of risk sentiment during traditional financial market closures (such as nights or weekends). Consequently, crypto asset prices tend to react more intensely to global sudden events. For example, during the Federal Reserve's aggressive interest rate hikes from January to November 2022, the US stock market (represented by the S&P 500 index) declined cumulatively by 22%, while Bitcoin, which started declining earlier in November 2021, fell approximately 76% during a similar cycle, about 3.5 times the decline of US stocks.
Truth Amidst Contradictions
It must be noted that the "20% rule" traditionally used to define bull and bear markets is essentially just an empirical guideline, with no unified standard to date. As US Supreme Court Justice Potter Stewart said when commenting on "what is obscene": "I can't define it, but I know it when I see it." Similarly, identifying market trends often relies more on experience and intuition rather than strict calculation models.
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Multiple intertwining factors present a severe cyclical prospect for the digital asset market, requiring caution in the short term (estimated next 4-6 weeks). However, we believe investors should adopt flexible tactical approaches to market volatility. Once market sentiment is repaired, a rapid rebound may be triggered. We remain optimistic about market performance in the second half of 2025.
- When the price consistently stays above the 200DMA with upward momentum, it is typically considered a bull market;
- When the price remains below the 200DMA for an extended period with downward momentum, it often indicates the formation of a bear market.
This method not only aligns with the trend signals reflected by the "20% rule" and z-value model, but also enhances the practicality and forward-looking insights in a dynamic market environment. For example, it successfully captured key downward cycles such as the early stages of the COVID-19 pandemic in 2020, the Federal Reserve's rate hike cycle from 2022 to 2023, the Crypto Winter of 2018-2019, and the pullback triggered by China's mining ban in 2021.
In our view, this approach is consistent with the broad trend signals in the "20% rule" and z-value model, while improving the precision of extracting actionable insights in a dynamic market environment.
Additionally, we discovered that the 200DMA better reflects the dramatic fluctuations in investor sentiment across different periods. See Charts 5 and 6 for details.
Crypto Winter?
Are we entering a crypto bear market? Previous analyses primarily focused on Bitcoin due to its sufficient historical data, making it easier to compare with traditional markets like the US stock market. However, as crypto asset categories continue to expand into emerging fields (such as MEME coins, DeFi, DePIN, AI agents, etc.), Bitcoin can no longer comprehensively represent the overall market trend.
For instance, Bitcoin's 200DMA model shows that since late March, it has sharply corrected and entered a bear market zone. Applying the same model to the COIN50 index (covering the top 50 tokens by market cap) reveals that these assets have been clearly in a bear market state since late February. This aligns with the trend of total crypto market cap (excluding Bitcoin) dropping 41% from its December 2024 peak to $95 billion, compared to Bitcoin's decline of less than 20%. This gap reflects the higher volatility and risk premium of Altcoins at the risk curve's end.
Conclusion
As Bitcoin's "store of value" attribute continues to strengthen, we believe that in the future, a more systematic and comprehensive approach will be needed to assess the overall crypto market performance, especially in the context of increasingly diverse asset categories. Nevertheless, both Bitcoin and the COIN50 index have fallen below their respective 200-day moving averages, signaling that the market may be in the early stages of a long-term downward trend. This is consistent with the decline in total market cap and venture capital contraction, which are key characteristics of an impending Crypto Winter.
Therefore, we recommend maintaining a defensive risk management strategy at this stage. Although we still anticipate crypto asset prices to stabilize in the second half of Q2 2025 and lay the groundwork for improvement in Q3, the complex macroeconomic environment currently requires investors to remain highly cautious.
