It can be difficult at times to ascertain the difference between signal and noise in any financial market, but figuring out whether a dip is simply an aberration or is a sign of a wider market trend can be especially tricky in cryptocurrency.
This is part of its appeal in some respects; people convert cash into cryptocurrency thanks to easy-to-use platforms and either use it for specific purposes or intend to convert it back into a liquid asset if it suddenly accumulates in price.
This volatility is an important characteristic of the appeal of tokens such as Bitcoin, but is this possibly masking a more concerning long-term trend for the market as a charging bull rapidly turns into a more timid bear?
Is Cryptocurrency In A Recession?
Senior commodity strategist at Bloomberg Intelligence, Mike McGlone, made the astonishing claim on LinkedIn that the world’s most valuable cryptocurrency could plummet from its peak of over $125,000 down to as low as $10,000.
The last time Bitcoin traded close to that was in mid-2020, long before the cryptocurrency boom, before the NFT boom and before anything close to the regulatory framework we see today.
Bitcoin is down 13 per cent on the year, underperforming the S&P 500 (up 17 per cent) and far underperforming gold prices (up 64 per cent) during the same period.
All of this is concerning, but does it mean that cryptocurrency is in a recession? No, or at least not yet.
A recession is traditionally defined as two quarters (or six months) of consecutive negative growth, and since the downturn of Bitcoin only began in mid-October 2025, it will take until at least April before we can start to make a judgment.
Why Is The Cryptocurrency Market Struggling?
As cryptocurrency has become more integrated into the wider economy, Bitcoin and other major tokens have become less of a hedge against the traditional financial market but more a part of the lucrative and volatile technology sector.
This means that some of the concerning market sentiment is less about the blockchain itself and more about a wider downturn in the technology sector sparked by concerns about an AI Bubble.
AI Bubble
Concerns such as those reported by the BBC regarding Oracle are that the vast sums of money being invested into AI companies, not only directly through a cycle of investment but through the focus of technology companies towards data centre customers, will be impossible to make back.
This concern has had wide-reaching ramifications, with the concern being less about the lowered price of Bitcoin and more about lower volatility and lower market activity, both signs of a bear market.
The Risks Of A Wider Recession
Another aspect is that the rise of digital asset treasuries, a huge reason for Bitcoin’s surge in 2025, has likely come to an end, with some market analysts suspecting that exchange-traded funds will be the primary driver of large-scale Bitcoin purchases and, by extension, price rises.
Finally, concerns about an upcoming recession create market pressures that lead to a flight to secure and stable assets, most commonly gold. Whilst Bitcoin was envisaged initially to be used as a similar store of value, at present it has more in common with the high-yield technology stocks currently at risk.
Because of the earlier shutdown of the US Government, one that affected a number of cryptocurrency-related laws, important economic data that now similarly affects crypto could create further uncertainty as the market is trying to manage wider economic trends.
Are There Reasons To Be Optimistic About The Cryptocurrency Market?
By contrast, whilst there are reasons to be concerned with the crypto market, there are reasons to be optimistic.
For the past month, prices have reached a type of equilibrium, hovering between $80,000 and $90,000. They have not reached the historic lows of 2022, when prices last dipped below $20,000, nor even the lowest prices this year.
Whilst this stabilisation is bad news for people hoping for a $200,000 valuation for Bitcoin as was ambitiously hypothesised earlier in the year, returning to $100,000 is as possible as the price falling substantially below $75,000.
Another hypothesis is that the downturn is less of a market trend and more of a liquidity event; Bitcoin is the most liquid cryptocurrency, and many investors are cashing out now to pay for operating expenses and tax bills over the next few months.
The Biggest Warning Signs Of An Impending Crypto Crash
- Lower trading volume and liquidity issues.
- Increased inflation or rising interest rates.
- Flights to quality, both in and out of crypto.
- Wide, sustained negative market sentiment.