Coinbase Institutional warns of converging signs that suggest 'crypto winter' is coming

Several converging signals may be pointing to the start of a new "crypto winter," according to Coinbase Institutional, amid extreme negative sentiment following Trump's recent tariff turmoil and the potential for further escalation.

The total crypto market cap, excluding bitcoin, now stands at $950 billion, Coinbase Institutional Head of Research David Duong noted in a Tuesday report — representing a substantial 41% decline from its December 2024 high of $1.6 trillion and 17% below levels from the same period last year. To put it in perspective, that's even lower than most of the period between August 2021 and April 2022, he highlighted.

However, in a sign of its increasing dominance, bitcoin has fallen less than 20% over the same period.

Simultaneously, while venture funding in the space picked up slightly in Q1, it's still down 50% to 60% from the peak levels observed in the 2021-2022 cycle, Duong added — significantly limiting the onboarding of new capital into the ecosystem, particularly on the altcoin side.

Quarterly venture funding by category. Image: The Block Pro.

Bull or bear?

Crypto winter refers to an extended period of depressed cryptocurrency prices and reduced market activity — similar to a bear market in traditional finance.

A 20% move is often used to define bull or bear markets in equities, but that's less useful in crypto, where such swings are common and don't always reflect a true trend shift — something Duong suggests can lead to complacency. Crypto also trades 24/7, making it a proxy for global risk sentiment when traditional markets are closed, which can amplify reactions to external events.

Instead of "rule-of-thumb" measures, Duong said risk-adjusted performance using standard deviation (z-scores) and 200-day moving averages provide clearer signals of broader market trends across both asset classes. "For example, we saw bitcoin decline 1.4 standard deviations between November 2021 and November 2022 relative to its average performance in the previous 365 day period," he noted. "That's comparable to the 1.3 standard deviation move in equities over the same timeframe, which speaks to the equivalency of bitcoin's 76% fall and the S&P 500's 22% decline, when measured in risk-adjusted terms."

Naturally, accounting for crypto's larger volatility makes the metric particularly well-suited. However, it tends to generate fewer signals in stable markets and may not react as quickly to changes in the broader trend, Duong warned — pointing to Coinbase Institutional's model indicating that the most recent bull cycle ended in late February but has since classified all subsequent activity as "neutral."

Bull and bear cycles in BTC by z-score. Image: Bull and bear cycles in BTC by z-score. Image: Coinbase Institutional.

In comparison, the 200-day moving average offers a simpler way to spot market trends by smoothing short-term noise, Duong argued, capturing crypto winter, mid-cycle corrections and investor sentiment more effectively. A bull market typically sees prices consistently trading above the 200DMA with upward momentum, while a bear market sees the opposite, he said.

Bull and bear cycles in BTC by 200DMA. Image: Coinbase Institutional.

However, while bitcoin has often been used as a proxy for the broader crypto market, that is becoming less practical as institutional adoption of the asset grows while crypto expands into more new sectors.

"For example, the 200DMA model on bitcoin does suggest that the token's recent steep decline qualifies this as a bear market cycle starting in late March. But the same exercise performed on the COIN50 index (which includes the top 50 tokens by market capitalization) shows the asset class as a whole has been unequivocally trading in bear market territory since the end of February," Duong said.

Bull and bear cycles in COIN50 by 200DMA. Image: Coinbase Institutional.

So, is crypto winter already here?

Despite the divergence, both bitcoin and the COIN50 index recently fell below their 200DMAs, signaling possible long-term bearish trends — and, combined with the drop in total crypto market cap and VC funding, shows hallmarks of a potential crypto winter, according to Duong.

"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," he said. "With equities struggling, the path to recovery for crypto remains challenging even with the idiosyncratic tailwinds from the regulatory environment."

However, while this warrants a defensive stance in Duong's view, he argued that crypto prices may still be able to find a floor in mid-to-late Q2 — setting up for a better Q3 this year. "When the sentiment finally resets, it's likely to happen rather quickly and we remain constructive for the second half of 2025."

Coinbase and its employees may have financial interests in some of the assets discussed.