Coinbase COIN Institutional Research has cautioned investors to adopt a more defensive approach to crypto markets in the near term, warning that recent price declines and deteriorating sentiment suggest a potential “crypto winter” may be underway.

What Happened: In its report published on April 15, the research team highlighted that both Bitcoin BTC/USD and the COIN50 Index have fallen below their 200-day moving averages, a classic indicator of bearish market conditions.

“The total crypto market cap (excluding BTC) has declined 41% since December 2024,” the report noted, bringing the figure down to $950 billion, a level not seen since early 2022.

Coupled with venture capital funding still down 50-60% from its 2021 peak, the report argues these signs "warrant taking a defensive stance on risk for the time being."

Despite the current downturn, Coinbase remains cautiously optimistic about the second half of the year.

"We believe that crypto prices may find their floor in mid-to-late 2Q25 – setting up a better 3Q25," the team wrote, suggesting that a tactical approach now could lead to opportunities once sentiment resets.

Coinbase further argued that traditional definitions of bull and bear markets, such as a 20% drop in prices, fail to adequately capture crypto's unique volatility profile.

Instead, the firm emphasized the relevance of alternative metrics like risk-adjusted performance (in standard deviation terms) and the 200-day moving average (200DMA).

“This approach enhances the precision needed for actionable insights in dynamic market conditions," the report explained.

Also Read: Bitcoin To Outperform Gold In Coming Months, Says Anthony Pompliano

Why It Matters: The sell-off, while most apparent in altcoins, has not spared Bitcoin.

Though BTC has declined by less than 20% from its recent highs, it has still broken below key technical support levels, signaling a broader shift in momentum.

Meanwhile, the COIN50 Index, representing the top 50 tokens by market cap, has "been unequivocally trading in bear market territory since the end of February."

Broader macroeconomic factors are also weighing on digital assets.

Global tariff escalations, fiscal tightening and sluggish equity markets have led to "paralysis in investment decision making," Coinbase said, noting that these conditions make it difficult for crypto to decouple and rally on its own.

Nonetheless, the report concludes that investors should not ignore the potential for a rapid turnaround once macro and sentiment headwinds ease.

"When sentiment finally resets, it's likely to happen rather quickly," the analysts wrote, noting the importance of positioning strategically now to benefit from a stronger Q3.

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