Why is Crypto Crashing? Bitwise Says Q4 May Mark Crypto’s Bear Market Bottom

Ben Graham · January 22

For bulls, here is some hope: crypto asset manager Bitwise released a report indicating that the fourth quarter of 2025 marked the end of the bear market. Why is Q4 being labelled the bottom of a bear market? Price and activity didn’t match.

Bitcoin prices decreased during this period, while on-chain metrics increased. Investors examined economic risks, exchange-traded fund movements, and changes in US regulations for 2026. This analysis occurs as people search for answers to why crypto is crashing.

The latest Bitwise Crypto Market Review just dropped—and it’s the most important one we’ve ever published.

Why? Because it shows a tension in crypto markets that has historically signaled a bear-market bottom (see Q1 2023).

Receipts: During Q4 2025…

– ETH’s price fell 29% ……

— Bitwise (@BitwiseInvest) January 21, 2026

DISCOVER: Top Solana Meme Coins to Buy in 2026

Hidden Strength Behind Weak Prices in Q4 2025

Bitwise Chief Investment Officer Matt Hougan identified a disconnect between market prices and network activity. Ethereum prices dropped 29%, yet transaction volumes on Ethereum and its layer-2 networks reached all-time highs of 2.23 million daily in late December. Smart contract deployments on Ethereum hit a record 8.7 million in the quarter.

(Source: Token Terminal)

Crypto company revenues expanded at a rate three times higher than other sectors. Stablecoin market capitalization exceeded 311 billion dollars by the end of 2025, up 48.9 percent from the previous year, with transfer volumes on Ethereum surpassing 8 trillion dollars in Q4.

Decentralized exchange trading volumes grew significantly, with perpetual DEXs recording 12.09 trillion dollars for the year, nearly tripling from prior levels. Uniswap and other DEXs processed higher volumes than centralized platforms like Coinbase in certain metrics.

Bitcoin prices fell 23.5% in Q4, resulting in a 6.3% decline for 2025. On-chain activity for Bitcoin included over 7.7 million Ordinals minted, showing continued network use despite price weakness.

Why is Crypto Crashing?

The market decline in 2025 stemmed from multiple factors. A 19 billion dollar liquidation event in October followed US tariff announcements on China, triggering a cascade of leveraged position closures. High leverage amplified losses, with over 20 billion dollars in notional positions liquidated in Q4. Macroeconomic pressures, including trade tensions and interest rate uncertainty, contributed to reduced investor participation. Bitcoin and other assets underperformed compared to equities and precious metals, with silver up 149% and gold up 67% annually.

Internal crypto issues, such as project failures and security concerns, eroded confidence. Institutional selling and tax-loss harvesting toward year-end added downward pressure.

These elements combined to erase earlier gains, leaving the total crypto market capitalization at 3 trillion dollars, down 10.4 percent for the year.

What is happening in crypto?

Over the last 41 days, crypto has erased -$1.1 trillion in market cap, or -$27 billion PER DAY.

Crypto market cap is now ~10% BELOW levels seen during the record -$19 billion liquidation on October 10th.

This is a structural move. Let us explain. pic.twitter.com/5JXKFSCPXV

— The Kobeissi Letter (@KobeissiLetter) November 16, 2025

So, What is Next For Crypto? Unlocking the Path to Recovery in 2026

Analysts hold varied views on the timeline for recovery. Fundstrat predicts a challenging period through most of 2026, with improvement later in the year. VanEck expects positive developments early in 2026 as regulatory clarity emerges. BlackRock highlighted crypto and tokenization as key themes for markets in 2026.

Potential positive factors include advancements in US crypto regulations, a new Federal Reserve leadership, and expanded Bitcoin ETF availability. Institutional adoption grew, with digital asset treasuries holding 134 billion dollars, up 137 percent in 2025. Stablecoin transactions reached 33 trillion dollars for the year, indicating sustained demand.

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