Crypto Winter Pushes Bitcoin Into Bear Market

Bitcoin investors have settled in for a new crypto winter.

With a president sympathetic to digital assets in the White House, the crypto sector assumed it was on the verge of a more prosperous period driven by a friendlier regulatory environment.

The first several months of 2025 were a boon for the industry as prices reached record levels.

Bitcoin topped $127,000 for the first time, while Ethereum eyed $5,000.

The rally among the major cryptocurrencies was the hallmark of a lift-all-boats effect, as millions of other digital assets also surged to levels never seen before.

As summer transitioned to fall, cold temperatures began to permeate through crypto markets.

The price of bitcoin, which accounts for almost 60 percent of the global market cap, cratered to as low as $60,000. It has since recovered—the top crypto asset is hovering around $70,000—but remains down 21 percent year-to-date.

Unsurprisingly, stocks closely tied to cryptocurrency have also been hammered.

Strategy, for example, provides investors with enormous exposure to the premier digital currency as it owns more than half a million bitcoin.

Shares have collapsed nearly 60 percent over the past 12 months, trading at around $140.

Coinbase Global, the largest U.S.-based cryptocurrency exchange, is also down more than 40 percent in the past year.

According to the CMC Crypto Fear and Greed Index, the market is firmly entrenched in “extreme fear” territory.

Crypto neophytes might not be accustomed to periodic downturns in the $2.35 trillion space.

“These kinds of ups and downs in the crypto world have become so common they actually have a name for them: Winter,” Federal Reserve Governor Christopher Waller said at a Feb. 9 Global Interdependence Center event.

“So when you start saying something is a season, you know it’s going to be a regular phenomenon. That’s part of the game: You get in, you make some money—you might lose some money—that’s the nature of the beast.”

Several crypto winters have already formed since 2011, driven by regulatory pressures, exchange failures, and a burst in the initial coin offering (ICO) bubble.

These selloffs were followed by sharp rebounds.

Whether there will be six more weeks of a crypto winter or an early spring may depend on several factors, including legislation relating to regulation.

Separating Euphoria From Clarity

The latest crypto euphoria was fueled by the current administration’s stance.

However, the excitement has since faded, with Waller pointing to the failure to move ahead with the Clarity Act.

The Clarity Act—specifically designated as the Digital Asset Market Clarity Act of 2025—is crypto market structure legislation that has sought to establish clear regulatory jurisdiction between the Commodity Futures Trading Commission and the Securities and Exchange Commission.

The legislation has stalled in Congress, frustrating current administration officials.

In an interview with Fox Business on Feb. 9, Treasury Secretary Scott Bessent argued that the current movement in crypto markets is a signal that regulatory clarity is needed more than ever.

“We need clarity, and we need to get this across the line this spring,” Bessent said. “We had a few recalcitrant actors who said, ‘Well, be better to have no legislation than the legislation we don’t want.'”

“Under President [Donald] Trump’s leadership, the United States is becoming the crypto capital of the world,” he continued.

“With our best practices, best regulation, and for crypto to remain a viable digital asset and move forward, we need to get this Clarity Act done.”

Stablecoin issuers offering yield is ostensibly the main sticking point in Washington.

Financial institutions say it would amplify deposit outflows, potentially triggering stress in the conventional banking system.

The Bank Policy Institute urged lawmakers to close the “interest loophole” to prevent these digital assets from serving as alternatives for bank deposits or money market funds.

“Banks power the economy by turning deposits into loans. Incentivizing a shift from bank deposits and money market funds to stablecoins would end up increasing lending costs and reducing loans to businesses and consumer households,” the Bank Policy Institute said in an Aug. 12 report.

Crypto firms argue it would harm innovation. They add that such claims are unsubstantiated, as research suggests stablecoins have had little effect on deposit flows.

“Stablecoins operate under rigorous reserve, operational, and supervisory requirements, and their reserves largely remain in the traditional financial system, continuing to support liquidity and lending,” the Blockchain Association wrote in a letter to lawmakers this past summer.

The ‘Digital Gold’ Narrative

While bitcoin has been marketed as a hedge against market turmoil, economic uncertainty, or geopolitical tensions, the crypto industry has traded similarly to the broader equities arena—responding to similar developments.

The latest selloff is likely a “liquidity and risk appetite story,” says Gracy Chen, CEO of universal exchange Bitget.

“As uncertainty rises and geopolitical tensions put more pressure, liquidity tightens, and investors cut exposure to high-beta assets first,” Chen said in a note emailed to The Epoch Times.

“Even with stronger institutional rails and adoption, crypto still trades in that bucket, so it often gets hit first in a risk-off phase.”

Liquidation volumes have been intense during the selloff.

On Feb. 6, crypto liquidations totaled $1.4 billion in 24 hours, according to CoinGlass data.

They have slowed, reaching $266 million as of Feb. 10.

Outflows in bitcoin exchange-traded funds (ETFs) have also accelerated in recent weeks as retail traders headed for the exit.

A reversal could happen similar to past winter events, but some market watchers believe the narrative that bitcoin is “digital gold” has likely ended.

Gold is a conventional haven asset, used as a store of value and a shield against inflation or chaos.

Despite the selloff in the metals market, conditions have stabilized, with gold staying above $5,000 per ounce on the COMEX division of the New York Mercantile Exchange.

Silver is hovering around $80 an ounce.

Both precious metals remain up 16 percent and 13 percent this year, respectively.

Moving forward, crypto can likely be better compared to a “high-beta asset,” says David Miller, senior portfolio manager at Catalyst Funds.

As other assets boom, many are competing for investors’ attention, which could be driving much of the capital outflows.

“I think crypto is a very binary story, and it’s unclear what the future will look like,” Miller said in a note emailed to The Epoch Times.

“It could be much, much higher 10 or 20 years from now, or it could turn out that Bitcoin was a fad, get hacked, or simply lose its appeal over time. It’s just too hard to predict.”