The cryptocurrency sector remains in a downturn, but Coinbase expects a rebound by Q3.
With bearish signals and market contraction, Coinbase still believes a rebound could occur by the latter part of 2025.
While the crypto market has recently pulled back, Coinbase’s monthly report indicates that the quarter could turn more positive.
The altcoin market has seen a 41% contraction since its December 2024 high of $1.6 trillion, dropping to $950 billion by mid-April, according to Coinbase’s April 15 institutional outlook.
BTC Tools reported that this value dropped to $906.9 billion on April 9 before climbing to $976.9 billion at the time of writing.
Venture capital backing for crypto ventures has significantly reduced by around 50% to 60% since 2021–22.
In the report, Coinbase’s top researcher, David Duong, signaled that the industry could face the onset of another crypto winter.
“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,” he said.
As Duong stated in the report, diminished venture capitalist interest “significantly limits the onboarding of new capital into the ecosystem,“ a trend that affects the altcoin sector the most.
Duong believes that the macroeconomy’s current state largely drives this trend.
“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.“
Coinbase researchers noted that these factors have produced “a difficult cyclical outlook for the digital asset space,” warranting ongoing caution for the upcoming four to six weeks.
Still, the author of the report pointed out that a dramatic market turn could happen unexpectedly.
“When the sentiment finally resets, it’s likely to happen rather quickly and we remain constructive for the second half of 2025.“
Duong said that key metrics, including risk-adjusted performance and the 200-day moving average, can signal when the crypto market moves between bull and bear phases.
Duong also referenced the Bitcoin Z-score, which contrasts market value with realized value to identify when conditions are overbought or oversold, indicating how unusual current price movements are compared to historical data.
While the metric “naturally accounts for crypto’s larger volatility,” it reacts with a delay.
Read also: Coinbase’s CEO urges stablecoin regulation changes to include ‘onchain interest.’
When markets stabilize, the metric tends to issue fewer signals. According to Coinbase’s model, the bull market peaked in late February and shifted to a neutral stance since then.
Instead of relying on that metric, Coinbase’s analyst proposed the 200-day moving average as a better gauge for market trends.
This metric smooths out short-term market noise and remains relevant by factoring in the last 200 days of data.
With crypto expanding into fields like decentralized finance (DeFi), decentralized physical infrastructure networks (DePIN), and artificial intelligence agents, the market forces at play differ from Bitcoin’s own dynamics.
Duong said that Bitcoin’s recent decline, reflected in the 200-day moving average, marked its entry into bear market territory in late March.
When applied to the Coin50 Coinbase index, representing the top 50 crypto assets, the model shows that the market entered a bear phase at the end of February.
Bitcoin has demonstrated increasing resilience to macroeconomic pressures, a trend noted in recent reports, especially when compared to traditional markets.
“Bitcoin’s decline was comparatively modest, revisiting price levels from around the US election period, “according to Wintermute.
Duong observed that, due to this trend, Bitcoin is gradually moving away from being a general indicator for the entire crypto market. He wrote:
“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.“
