There’s a bit of confusion surrounding this year’s market conditions.
A bear market usually means the market has dropped at least 20% from its recent peak. With this standard, a popular discussion lately has suggested that the bull market in the crypto realm ended in January, with 2025 being largely viewed as a bear market for the industry.
This notion feels plausible since many crypto portfolios are seeing declines. Key assets like Bitcoin, Ethereum, Solana, XRP, and even Cardano and Dogecoin have struggled while the stock market, led by top tech firms, is experiencing gains this year. So, is 2025 truly a bear market for crypto? And if it isn’t, what actions should we take?
What will the drawdown actually be in 2025?
To start, let’s assess cryptocurrencies collectively rather than focusing on individual coins.
The global cryptocurrency market cap was about $3.8 trillion in mid-January but took a nosedive during the spring. It saw a recovery, peaking at $4.3 trillion in early October, but then faced a significant drop and is now around $3.2 trillion.
This current value reflects a decrease of roughly 16% since the year’s start and around 23% from the October high. From a stock market perspective, this suggests the crypto sector is caught somewhere between a sharp correction and the onset of a bear market.
Yet, on a per-coin basis, the situation feels much grimmer.
Just look at the data.
Bitcoin’s performance has disappointed many investors. Ethereum briefly showed signs of life but has since fallen back into a slump. Meanwhile, Solana has struggled, even with an influx of tokenized real-world assets.
In sharper contrast, the stock market is expected to rise about 16% in 2025, despite challenges like early-year tariffs and ongoing economic uncertainty. Watching big stock index funds climb while crypto assets take a hit definitely gives an impression of a bear market.
Labels are not as important as playbooks
Moving forward, there are two scenarios to think about.
First, the current downturn might just be a brief reset within a broader uptrend. In this case, the sharp drops in October and the loss of $1 trillion in market value are painful but likely temporary, not heralding a prolonged decline. If this holds true, continuing to buy quality coins may yield positive results over time.
On the flip side, it’s also possible that a proper bear market is on the horizon. The crypto landscape has just experienced new exchange-traded funds (ETFs) and supportive measures. Without promising developments, investors might withdraw their funds and seek opportunities elsewhere. If that scenario plays out, the market risks heading into what crypto enthusiasts humorously call “Goblin Town,” potentially seeing Bitcoin drop another 50% and altcoins plummeting by over 80%.
If the current economic downtrend levels off into a mere slump in the coming weeks, it would suggest that the first scenario is more likely. The best move could be to keep dollar-cost averaging in anticipation of a recovery for Bitcoin, Ethereum, Solana, and XRP. If your risk appetite permits, buying other undervalued altcoins might also be a good strategy.
However, if the downturn worsens or becomes firmly established, the second scenario could be more accurate. In this situation, being overexposed to major cryptos or exploring altcoins could lead to losses for your portfolio. The wiser course of action would be to be cautious and selective, focusing on robust assets like Bitcoin, which tends to endure adverse conditions.
Whichever way it goes, bear in mind that low prices for all crypto assets won’t last forever. If you plan to be in the market for at least five years, it’s generally better to invest rather than wait on the sidelines, even if lower prices are daunting. Bear markets often feel like the worst times to seek opportunities, yet prospects are always present if you prepare properly.
