Bitwise Says Crypto Has Likely Bottomed, Echoing Q1 2023 Setup

Overview

Bitwise Asset Management has presented an analysis suggesting that the current downturn in the cryptocurrency market may indicate a cyclical low, characterized by declining prices alongside improving on-chain and business fundamentals. This scenario mirrors conditions observed in Q1 2023, a period that preceded a significant multi-year market rally.

Current Market Analysis

In its Q4 2025 “Crypto Market Review,” Bitwise’s Chief Investment Officer, Matt Hougan, emphasizes the importance of the current quarter as a potential turning point. He notes that the signals from the market are mixed, which he believes is a crucial indicator. This mixed signal is reminiscent of Q1 2023 when the market began to recover following the FTX collapse, despite having fluctuating data metrics.

Bitwise outlines a stark contrast between the performance of cryptocurrencies and their usage metrics in Q4. For instance, while Ethereum experienced a 29% decrease in price over the quarter, both Ethereum and Layer 2 transactions reached all-time highs, increasing by 24.5%. Additionally, crypto equities saw a decline of 20% in Q4, yet the revenues of the underlying companies were projected to grow at a rate three times faster than any other sector in the stock market.

Despite the heavy price decline, the Bitwise 10 Large Cap Crypto Index dropped by 26.29% in Q4 and closed 2025 down by 10.64% year-to-date. Bitcoin and Ethereum also faced significant losses, with Bitcoin falling by 23.48% and Ethereum by 28.59% in Q4. However, the total crypto market capitalization remained substantial, estimated at approximately $2.78 trillion as of December 31, with Bitcoin accounting for 63.6% and Ethereum 12.9%.

Bitwise identifies positive trends in the market, particularly regarding stablecoins. The report highlights that both the assets under management (AUM) for stablecoins and their transaction activity have reached new all-time highs, indicating a robust wave of adoption is underway.

From author

The insights provided by Bitwise Asset Management suggest that, while the market is experiencing a downturn, there are underlying factors that may indicate a potential recovery. The divergence between price movements and usage metrics, along with the strong performance of stablecoins, presents a complex but potentially optimistic picture for the future of the crypto market.

Impact on the crypto market

• Cyclical Low Indication: The mixed signals in the market could suggest a potential bottom, similar to the situation in Q1 2023.
• Strong Fundamentals: Increasing transaction volumes and stablecoin adoption may support future price recoveries.
• Market Capitalization Stability: Despite price declines, the overall market capitalization remains substantial, indicating resilience.
• Catalysts for Growth: Legislative developments, stablecoin dynamics, and macroeconomic changes could influence the market positively in the near future.
• Investment Sentiment: The potential for regulatory clarity and improved market structure may attract new investments into the crypto space.