Why Bitwise Believes Crypto Bear Market Bottom Formed in Q4 2025

Trade Now

This article was first published on The Bit Journal.

Bitwise Asset Management has published a new report, concluding that the fourth quarter of 2025 showed crypto bear market bottom signals, even if price performance was disappointing. 

Bitwise Chief Investment Officer Matt Hougan directly likened the present disconnect between weak prices and strong industry fundamentals to the early 2023 recovery period that followed the FTX collapse, noting that market conditions may be ripe for a powerful recovery in 2026.

Advertisement Banner

Conflicting Q4 Signals: Prices Weak, Fundamentals Strong

Bitwise’s Q4 2025 analysis revealed that prices across crypto assets remained flat, despite deeper adoption and usage metrics. Hougan noted that this kind of divergence, where sentiment goes lower, but data gets better,r has always been characteristic 

“At the time, we were starting to rebound post-FTX, and the data was topsy-turvy; some up, some down, some sideways. In the two years that followed, crypto prices soared. That’s happening again here,” he said, likening early 2023 to late 2025.

Ethereum, along with layer 2 protocols, recorded an all-time high transaction throughput in Q4, even though ETH prices fell steeply at certain periods. 

Stablecoins issuance and on-chain activity also hit new records, again with total stablecoin market capitalization piercing above $300 billion. DeFi usage saw concurrent growth as decentralized exchange Uniswap reached transaction volumes comparable to those of the top centralized platforms.

Early 2023 Parallels

In the report, Bitwise explicitly compared the present market to an early-2023 ecosystem in which FTX had collapsed. 

During that time, crypto prices lagged while network activity and usage metrics surged. Those circumstances were followed by a rebound that lifted Bitcoin from around $16,000 to about $98,000 by early 2025. 

Hougan’s analysis emphasizes that the presence of strong fundamentals amid price weakness is a consistent indicator of crypto bear market bottoms.

Importantly, this framework differentiates between the sentiment that price tends to represent and the health of the crypto ecosystem at large, measured by on-chain and adoption measures. 

The report added that the type of split seen has only been witnessed during big market turning points.

Noteworthy Drivers Behind the Crypto Bear Market Bottom Signals

Bitwise has shared four trends from Q4 2025 that have contributed to its outlook on signs indicating the crypto bear market bottom.

First, Ethereum and layer-2 networks saw record user activity, which speaks to true utility growth outside of short-term trading. 

Second, Stablecoin transactions and capitalization reached all-time highs, indicating mass usage of fiat-pegged digital assets. 

Third, Revenue at companies native to the crypto world grew faster than many traditional sectors, even as equities broadly struggled. 

Fourth, DeFi gained more users than ever before, with platforms such as Uniswap dealing with large volumes of transactions.

These conditions, according to Bitwise, are a form of structural strengthening that often happens before market recoveries, even if price charts do not yet show it.

Analyst Views on the Near-Term Outlook

While Bitwise focuses on these crypto bear market bottom signals, industry analysts remain divided over the shape of 2026. 

Tom Lee, head of research at Fundstrat, cautioned that macroeconomic headwinds  like trade tariffs and geopolitical tensions could slow market moves for most of the year before a late resurgence. 

On the other hand, asset manager VanEck said anticipated clarity around U.S. fiscal policy and stabilization efforts may be conducive to “risk-on” assets like crypto in Q1 2026.

Bitwise also mentioned policy developments, including progress on the CLARITY Act, as well as increased access to crypto exchange-traded funds by major wirehouses, could serve as potential catalysts that may amplify these fundamental signals into sustained growth. 

Conclusion

In its report on Q4 2025, Bitwise provides good reasons to look closely at crypto bear market bottoms based on the divergence between weak price behavior and improving fundamentals. 

Looking at today in contrast to the recovery phase of early 2023, Matt Hougan highlights how wide adoption, stablecoin expansion, and DeFi utilization could lead to a structural switch for crypto markets. 

Analyst sentiment towards 2026 is mixed, but the fact that several indicators are growing at once, supports the argument that the market may be transitioning out of its bear phase 

Glossary

Crypto bear market bottom signals: Signs that a market has hit its lowest point during a downcycle, often marked by fundamentals like usage, new users or transaction volume increasing despite lagging prices.

On-chain activity: Crypto transactions and blockchain interactions that happen publicly and are recorded on a network.

Stablecoin market capitalization: the sum of total value of all available stablecoins.

DeFi adoption: Usage of decentralized financial applications and platforms such as DEXs and lending protocols. 

Frequently Asked Questions About Crypto Bear Market Bottom Signals

What does Bitwise mean by “bear market bottom signals?”

Bitwise refers to market conditions where fundamental metrics like transaction volumes, revenues, and stablecoin usage strengthen while prices remain weak, a move that has preceded major recoveries.

How is Q4 2025 compared to early 2023?

According to Bitwise, both periods feature market prices and usage indicators diverge before rallying, most notably in 2023 following the FTX occurrences.

Why are stablecoin metrics important?

Stablecoin market cap and transaction volume reveal a demand for digital liquidity and payments, providing valuable data about real-world activity even when asset prices plummet.

What does vibrant DeFi usage say?

Rise in DeFi reflects wider use of decentralized financial services Stress which supports long-term ecosystem health beyond speculative trading. 

Do these crypto market signals mean the market will be higher in 2026?

No set of indicators by itself promises anything, although Bitwise’s analysis indicates that when fundamental and usage metrics trend away from price performance in a positive manner, previous patterns have frequently lined up with reversals subsequently.

References

Bitget
Cryptonews
Cointelegraph
Phemex