Key takeaways
- The total crypto market cap (ex-BTC) has seen a steep 41% decline from its December 2024 high of $1.6T to $950B as of mid-April, while VC funding is down 50-60% from 2021-22 levels.
- We think this warrants taking a defensive stance on risk for the time being, though we believe that crypto prices may find their floor in mid-to-late 2Q25 – setting up a better 3Q25.
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. The total crypto market cap (excluding BTC) now stands at $950B, a steep 41% decline from its December 2024 high of $1.6T and 17% below levels from the same period last year. To put this into perspective, it’s even lower than almost the entire period from August 2021 through April 2022.
Simultaneously, venture capital funding in crypto picked up in 1Q25 from the previous quarter, but it's still down 50-60% from the levels observed during the peak of the 2021-22 cycle. This significantly limits the onboarding of new capital into the ecosystem, particularly on the altcoin side. 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. With equities struggling, the path to recovery for crypto remains challenging even with the idiosyncratic tailwinds from the regulatory environment.
The interplay of these factors paints a difficult cyclical outlook for the digital asset space, which may continue to warrant caution in the very short-term - perhaps through the next 4-6 weeks. However, we also believe investors need to take a tactical approach to markets because we expect that when the sentiment finally resets, it’s likely to happen rather quickly and we remain constructive for the second half of 2025.
Bull vs bear markets
A commonly cited threshold for defining bull and bear markets in equities is a move of 20% or more from a recent market low or high, respectively. That figure is somewhat arbitrary and certainly less applicable to crypto markets, which routinely experience 20% price swings in short periods that don't necessarily signal true changes in the market regime. That is, historical data shows that cryptocurrencies like bitcoin can drop 20% in a week but still trade within a broader uptrend, or vice versa.
Moreover, crypto trades 24/7, which means it often acts as a proxy for broader risk sentiment during those hours when traditional markets are closed (e.g. evenings and weekends). That can amplify crypto price reactions to external events globally. For example, US equities (proxied by the S&P 500) experienced a 22% decline between January and November 2022 during the Federal Reserve’s (rather aggressive) rate hiking cycle. Comparatively, the fall in bitcoin prices – which arguably started earlier (November 2021) – culminated in a decline of 76% over a similar period, a magnitude nearly 3.5 times greater than the sell-off in stocks.
