How Close Are We to a Crypto Bear Market? Analysts Weigh In

The cryptocurrency market capitalization just printed its first bearish change of character on a weekly timeframe since June. As uncertainty reigns supreme across all financial markets, digital assets have been collecting a streak of daily losses over the past week. 

Since October 10's escalations in the trade war between the U.S. and China, crypto has been down to worst. Most currencies have dropped by over two digits since that date, with Bitcoin now trading 15% lower than its most recent ATH.

Bitcoin traded as low as $103K today, while the entire cryptocurrency market erased over $200 billion from its market capitalization overnight, causing a wave of liquidations across all cryptocurrency exchanges. 

Data from CoinGlass reveals that nearly $1 billion was drained from the market today in the form of liquidations. Once again, the overwhelming majority of forced market exits were by investors betting that the market would gain value. 

U.S. Regional Bank Crisis Causes More Uncertainty

The ongoing crisis in U.S. regional banks has added a fresh layer of uncertainty to an already fragile financial landscape. This morning, Zions Bancorporation and Western Alliance Bancorp both revealed significant loan impairments.

Banking stocks in the U.S. woke up in the red, with the KBW Regional Banking Index dropping over 6% by midday. Zions disclosed a $50 million charge-off tied to two commercial loans from its California Bank & Trust division, citing “material misrepresentations”, while Western Alliance is facing lawsuits and internal investigations related to loan fraud, adding more pressure to an already stressed sector.

As a result, cryptocurrencies tumbled once again. Investors fled to gold as a safe haven amidst the uncertainty, as an already weak market could not react well to a potential rerun of the 2008 crisis. 

The Good News: Crypto Did Recover Today

Despite the major setback at the start of the day, digital assets did their best to recover from their daily losses from the afternoon onward. Most of the top cryptocurrencies in the market are closing in at a breakeven, or even a small margin of profit, over the last 24 hours. 

Well, it's not much, but it's honest work. While buyers have been mostly on the wrong side of a beatdown over the past seven days, today the market showed some resilience in refusing to go $3.45 trillion in market capitalization.

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Are We in a Bear Market?

Financial analysts only start considering the possibility of a bear market once an asset drops more than 20% below its ATH. Under that logic, we have good and bad news to share.

The good news: Crypto is not there yet.

The bad one: We're very, very close.

On October 6th, the market hit a total value of $4.26 trillion, the highest it has ever been. At the time, "Uptober" seemed like it was going into full effect, and the idea of ending 2025 with Bitcoin above $130k was not at all far-fetched. 

Only four days later, however, Trump's announcement of new tariff taxes on China caught everyone by surprise. This led the market to lose (momentarily) $1 trillion in value, with the total capitalization of digital assets going as low as $3.3T. 

While crypto has somewhat recovered after that major setback, the market is still down by over 16% since its previous ATH. The "20% from ATH" margin served as a sort of support zone for crypto today, opening the idea that bulls will fight tooth and nail to remain above that margin.

Bitcoin's aggregated open interest fell to June levels this week. As pointed out by CryptoQuant analyst @JA_Maartun, the current zone has served as a point of exhaustion by bears, making it a strong metric for whether the selling force will wane or crypto will indeed enter a bear market.

While it's tough to say whether crypto will flip bearish or not, the answer will most likely rely on macro and geopolitical developments. Upcoming news about a potential less-retaliatory stance between the Chinese and American governments could set markets back on track. But if that will happen remains to be seen.