Coinbase Identifies Signs of Potential Crypto Winter Amid Economic Headwinds

A new crypto winter may be emerging, according to a recent report from Coinbase, as mounting structural and macroeconomic pressures begin to weigh heavily on the digital asset ecosystem.

The total cryptocurrency market capitalization – excluding Bitcoin – has plunged to $950 billion, which reflects a 41% drop from its December 2024 peak of $1.6 trillion. This decline places current valuations even lower than levels seen throughout much of the August 2021 to April 2022 period, suggesting that investor sentiment has sharply deteriorated.

Venture Capital Bailing on Crypto

The report pointed to global economic headwinds, particularly the resurgence of tariffs and ongoing fiscal tightening, as key contributors to the market’s decline. These factors have amplified uncertainty and triggered a risk-off attitude across financial markets, which, in turn, has fresh capital inflows into crypto.

Despite a modest quarter-over-quarter uptick in venture capital activity during Q1 2025, Coinbase observed that funding remains 50-60% below the heights of the 2021-22 bull cycle. This has especially hurt altcoin projects that rely on speculative inflows.

Further adding to the bearish signals, both Bitcoin and the COIN50 index, which tracks the top 50 tokens by market cap, have broken below their respective 200-day moving averages (200DMA), often seen as a technical sign of a prolonged downtrend.

As such, Coinbase’s global head of research, David Duong, believes that these converging indicators echo the onset of prior crypto winters and highlight the need for a “defensive stance.” While there is cautious optimism for stabilization in mid-to-late Q2 2025, the path to a broader recovery remains clouded by macroeconomic uncertainty and weak performance in traditional equity markets.

“For now, the challenges of the current macro environment require greater caution.”

‘No Demand, No Rally’

Ecoinometrics highlighted similar concerns from an institutional perspective, pointing to weak demand and tightening financial conditions, and the Fed showing no signs of a pivot. This, as per the crypto data platform, is in no way a bullish backdrop.

ETF flows reflect this, with persistent outflows since late March and only occasional, modest inflows. Net flows over the past 30 days hover around zero. As such, short-term upside remains limited. This fragile backdrop could leave Bitcoin’s price vulnerable if market volatility returns.