Is a new round of winter coming to the crypto market? In-depth analysis of the definition of Bear Market and future outlook.

Recently, the crypto market has shown a significant downward trend. By mid-April, the total market value of crypto assets, excluding Bitcoin, has fallen from a high of $1.6 trillion last December to $950 billion, a drop of 41%. At the same time, the scale of venture capital has also decreased by 50% to 60% compared to the peak period of 2021-2022.

Multiple factors indicate that a new round of "crypto winter" may be approaching. Global tariff policies are being rolled out one after another and there is a trend of further escalation, with market sentiment clearly worsening. It is worth noting that the total market capitalization of crypto assets, excluding Bitcoin, is even lower than the levels during most of the period from August 2021 to April 2022.

The uncertainty of the macroeconomy is the main reason for the structural pressure mentioned above. Fiscal tightening and tariff policies continue to suppress traditional risk assets, leading to a stagnation in investment decisions. Although the regulatory environment provides some support, the recovery path of the crypto market is still full of challenges against the backdrop of an overall weak stock market.

Considering the intertwining of multiple factors that pose a severe cyclical outlook for the digital asset market, caution is still required in the short term (expected in the next 4 to 6 weeks). However, we believe that investors should adopt flexible tactics to respond to market fluctuations. Once market sentiment is repaired, a rebound may start rapidly. We remain optimistic about the market performance in the second half of 2025.

When defining the bull and bear cycles of the crypto market, the traditional "20% rule" does not apply. Crypto assets often experience price fluctuations of over 20% in a short period, but this does not necessarily indicate a fundamental change in market trends. For example, Bitcoin can drop by 20% in a week while still being in a long-term upward trend.

The characteristic of 24/7 trading in the crypto market makes it a barometer of global risk sentiment during the closures of traditional financial markets. As a result, the prices of crypto assets tend to react more strongly to global emergencies. For example, from January to November 2022, during the Federal Reserve's aggressive interest rate hike policy, the US stock market fell by a cumulative 22%; whereas Bitcoin experienced a cumulative decline of 76% during the same period, approximately 3.5 times the decline of the US stock market.

To systematize the judgment, we refer to the high and low closing prices of the S&P 500 index over a rolling one-year time window to identify key market reversals. According to this method, the US stock market has roughly experienced four bull markets and two Bear Markets in the past decade. However, this method still overlooks some important market adjustments, such as the turmoil in the Chinese stock market at the end of 2015 and the market turbulence caused by the escalation of global trade friction in 2018.

We believe that a Bear Market is essentially a manifestation of a change in market structure, characterized by deteriorating fundamentals and liquidity contraction, rather than merely the extent of price decline. Therefore, we attempt to find alternative indicators that can more accurately reflect the relationship between price trends and investor sentiment.

We prefer to adopt two types of risk-adjusted metrics: risk-adjusted return performance measured by standard deviation and the 200-day moving average (200DMA). The 200DMA provides a more concise and robust method for identifying persistent market trends. When prices consistently stay above the 200DMA accompanied by upward momentum, it is typically seen as a Bull Market; when prices remain below the 200DMA for an extended period accompanied by downward momentum, it often indicates the formation of a Bear Market.

So have we entered a round of Bear Market in the crypto market? An analysis using the 200DMA model on the COIN50 index (which covers the top 50 tokens by market cap) shows that since the end of February, these assets have clearly been in a Bear Market state. This trend is consistent with the total market cap of crypto, excluding Bitcoin, which has fallen by 41% to $950 billion from its peak in December 2024.

In summary, both Bitcoin and the COIN50 index have fallen below their respective 200-day moving averages, indicating that the market may be in the early stages of a long-term downtrend. This aligns with the trends of declining total market capitalization and shrinking venture capital, which are important characteristics that suggest a "crypto winter" may be approaching.

Therefore, we recommend that a defensive risk management strategy should still be maintained at this stage. Although we still expect that the prices of crypto assets are likely to stabilize in the latter part of the second quarter of 2025, laying the groundwork for improvement in the third quarter. Currently, the complex macro environment still requires investors to remain highly cautious.