According to Coinbase’s facility arm, the market is ready for winter, featuring long losses and stagnation, and Crypto Bull Run may have ended.
“The 200DMA model of Bitcoin suggests that the recent sudden decline of tokens qualifies this as a bare market cycle beginning in late March. However, the same exercise that includes tokens containing the top 50 tokens by market capitalization has been clearly traded in the bare market regions since the Asset class was fully mentioned in the public realm.
Bitcoin fell below the 200-day Simple Moving Average (SMA) on March 9th, and later established the same foothold with signs of a long-term bearish change in momentum. The 200-day SMA is widely tracked to measure long-term trends, representing bull markets with lasting moves above the same and vice versa.
Duon pointed to this observation while addressing the challenge of identifying the crypto-bear market where corrections of over 20% are routine. In contrast, a 20% reduction is usually used to define the bear market in the stock market.
The report arbitrary 20% often do not consider spurring smaller, more intense sales, down to investor sentiment dents and the resulting portfolio adjustments.
“We have seen in the past that emotion-driven declines often lead to defensive portfolio adjustments despite not meeting the arbitrary 20% threshold. In other words, we believe that the bare market fundamentally represents a regime shift in market structure characterized by exacerbating the fundamentals and decreasing liquidity.
In addition to the 200-day SMA, Duon highlighted the risk-adjusted performance of Bitcoin as measured by standard deviation (Z-score) compared to average performance over the past 365 days as another effective way to identify the crypto-bear market.
“Our (Z-score) model shows that the latest Bull Cycle ended in late February, but since then, it has categorized all subsequent activities as “neutral” and highlights the potential delay in rapidly changing market dynamics,” Duon said, calling for a defensive attitude towards risk donkeys for the time being.
The imminent winter could be even more cruel for alternative cryptocurrencies, given the slowdown in venture capital (VC) funds.
BTC set a new high earlier this year, far surpassing the top 70K in 2021, but bullish trends were unable to take more risks in the VC space, with overall funding falling 50%-60% below the 2021-22 level.
Duon said the crypto market “could find a floor from mid- to late-225 years – maybe set a better 3Q25.”