Crypto’s Turning Point: Bear Market Hangover or the Start of a New Bull Cycle?

Introduction to the Market Context

Crypto does not move in isolation. Even though it is a distinct asset class, it remains deeply influenced by global liquidity, interest rates, and broader risk sentiment. Over the past few years, traditional markets such as the S&P 500 and Nasdaq have recovered strongly from their 2022 lows, supported by moderating inflation, continued economic growth, and renewed enthusiasm around artificial intelligence.

Crypto, however, told a very different story in 2025.

While equities and gold pushed to new all-time highs, the crypto market declined sharply. Total market performance was down roughly 12–15% for the year. A handful of tokens, such as Zcash and HYPE, performed well, but more than 95% of altcoins lost over half of their value. That divergence has forced investors to ask an uncomfortable question: are we on the verge of a new crypto bull market, or has the bear market quietly resumed?

Investing always involves risk. Past performance offers no guarantees. Still, understanding cycles, liquidity, and historical behavior helps cut through noise and emotion — especially in a market as volatile as crypto.

Characteristics of Bull Markets in Crypto

Crypto bull markets share some similarities with equity bull markets, but they also have unique characteristics. They are faster, more volatile, and far more sensitive to changes in liquidity.

In equities, a bull market is often defined by sustained economic growth, rising earnings, and increasing investor confidence. In crypto, the defining force has historically been liquidity. When liquidity expands, capital flows into risk assets, and crypto tends to outperform. When liquidity contracts, crypto usually suffers first and hardest.

Previous crypto bull cycles have delivered extraordinary returns, but they have also followed prolonged periods of compression. Sharp drawdowns, extended sideways ranges, and deep underperformance relative to other assets are often the preconditions for explosive upside later on.

This is why the recent weakness in crypto, despite strength elsewhere, is not necessarily a bearish signal on its own. It may simply reflect where we are in the liquidity cycle.

Historical Context: Cycles, Not Straight Lines

Much of the current debate within the crypto community revolves around cycles.

One camp believes the familiar four-year cycle remains intact. From this perspective, Bitcoin’s peak near 126k marked the top of the cycle, and the market has already transitioned into a new bear phase.

The other camp sees 2025 differently. Rather than being a post-bull collapse, they view it as an extension of a broader bear phase that never truly resolved. For nearly four years, global liquidity was flat to declining. The Federal Reserve ran quantitative tightening, steadily draining liquidity from the system. Historically, this environment has been hostile to altcoins and speculative assets.

From that angle, the absence of a classic blow-off top — something that appeared in every prior crypto cycle — is notable. Instead of euphoria, the market experienced exhaustion.

Crypto history suggests that cycles are not just time-based. They are liquidity-based.

Key Indicators of a New Bull Market

If crypto is on the verge of a new bull phase, the signals will not come from price alone.

The most important indicator to watch is global liquidity. Conditions are starting to shift. The Federal Reserve appears to be moving away from aggressive tightening, and expectations are building around lower interest rates under the incoming Fed leadership. Liquidity expansion has historically acted as a tailwind for crypto markets.

Fiscal policy matters as well. New tariffs are expected to generate significant government revenue, with plans to return a large portion of that capital to households through stimulus measures. Estimates exceed $450 billion. Whether directly or indirectly, stimulus increases system-wide liquidity.

Beyond the U.S., major economies such as China and Japan are also stimulating their markets. Taken together, these moves set the stage for 2026 as a potentially strong year for global liquidity — a condition that has consistently benefited crypto in the past.

Institutional behavior is another key signal. 2025 already showed increasing institutional involvement, but expectations are growing for further participation from large asset managers and even sovereign wealth funds in Bitcoin and Ethereum. This kind of capital tends to move slowly, but it is structurally supportive once it arrives.

Sector Leadership Within Crypto

Just as equity bull markets are led by specific sectors, crypto cycles have their own internal leadership.

Bitcoin and Ethereum typically lead first, absorbing institutional capital and setting the tone. Only later does liquidity rotate into higher-risk segments of the market. The extreme underperformance of most altcoins in 2025 reflects a market that has not yet entered that rotation phase.

This pattern is not unusual. In previous cycles, long periods of altcoin weakness were followed by rapid repricing once liquidity conditions improved. The key is not short-term performance, but whether capital is beginning to move down the risk curve.

For now, leadership remains concentrated, suggesting a market that is early rather than late in its potential cycle.

Inflation, Liquidity, and Market Reaction

Inflation has been a dominant macro force across all markets, including crypto. High inflation forces central banks to tighten policy, which reduces liquidity and pressures speculative assets.

Recently, inflation data has shown signs of moderation. The Consumer Price Index has been rising more slowly, and while labor markets remain strong, momentum is cooling. This gives policymakers more room to ease financial conditions.

For crypto, this matters more than almost any other factor. When inflation falls and liquidity rises, crypto tends to respond disproportionately. When inflation re-accelerates, crypto usually pays the price first.

The Catch-Up Trade

One final element worth watching is relative performance.

Gold has risen roughly 60% from its prior lows. The Nasdaq and S&P 500 are trading at or near all-time highs. Historically, Bitcoin has moved broadly in line with these assets during expansionary phases. In the current cycle, it has lagged.

That creates a simple, but powerful dynamic. Either Bitcoin catches up, or other risk assets correct. In an environment where liquidity is expanding rather than contracting, history suggests the adjustment is more likely to come from crypto moving higher.

This is not a prediction. It is a probability assessment based on past behavior.

Conclusion: Watching Liquidity, Not Headlines

The question is not whether a bull market has officially started. Labels tend to arrive late.

What matters is whether the conditions that historically fuel crypto bull markets are falling into place. Liquidity is stabilizing and potentially expanding. Institutional interest is growing. Relative valuations remain compressed compared to other risk assets.

That does not eliminate risk. Volatility will remain high, and setbacks are inevitable. But cycles are built on structure, not sentiment.

For investors willing to look beyond short-term price action, the more important question is not whether crypto will move — but whether the foundations for a new cycle are being quietly rebuilt.

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