Crypto Assets Market Trends: How to Define Bear Market?

With the changes in the global economic situation, the crypto assets market is facing a new round of adjustments. As of mid-April, the total market capitalization of crypto assets, excluding Bitcoin, has fallen from last December's peak of $1.6 trillion to $950 billion, a decline of 41%. At the same time, the scale of industry venture capital has also significantly decreased by 50% to 60% compared to previous years.

At the current stage, adopting a conservative risk response strategy seems more prudent. However, the market expects that the prices of crypto assets may stabilize in the late second quarter of next year, laying the foundation for a rebound in the third quarter.

Multiple factors suggest that a new round of market adjustment may be on the way. The introduction and potential escalation of global tariff policies have significantly deteriorated market sentiment. It is noteworthy that the current market capitalization level is even lower than the performance during most of the period from August 2021 to April 2022.

Despite a rebound in venture capital in the first quarter, it remains far below peak levels, significantly limiting new capital entering the ecosystem, especially impacting small market cap coins. Macroeconomic uncertainty, fiscal tightening, and tariff policies continue to suppress risk assets, leading to a stagnation in investment decisions. Although the regulatory environment provides some support, the recovery path for crypto assets remains challenging against the backdrop of an overall market downturn.

Traditional financial markets typically use a 20% price fluctuation as the dividing line between bull and bear markets. However, this standard does not apply to the highly volatile crypto market. Crypto assets often experience price fluctuations exceeding 20% in a short period, but this does not necessarily indicate a fundamental change in market trends.

The around-the-clock trading feature of the crypto market makes it a barometer of global risk sentiment, often reacting more strongly to sudden events. For example, during the Federal Reserve's aggressive interest rate hikes, Bitcoin's decline was about 3.5 times that of the US stock market.

In order to more accurately reflect the relationship between price trends and investor psychology, it may be considered to use alternative indicators such as risk-adjusted return performance and the 200-day moving average. These indicators can better capture structural changes in the market rather than just focusing on the magnitude of price declines.

According to the current data, both Bitcoin and the COIN50 index (which covers the top 50 tokens by market capitalization) have fallen below their respective 200-day moving averages, indicating that the market may be in the early stages of a long-term downtrend. This aligns with the trends of declining total market capitalization and shrinking venture capital, both of which are significant indicators that a market adjustment may be approaching.

In summary, it is recommended to maintain a defensive risk management strategy at the current stage. Although it is expected that crypto assets prices will stabilize in the latter half of the second quarter of next year, laying the groundwork for improvement in the third quarter, the complex macro environment still requires investors to remain highly cautious.