Asset management firm Bitwise points out in its latest Q4 2025 market report that the current crypto market is exhibiting several “high contrast” divergence phenomena commonly seen at bear market bottoms in history: prices falling while on-chain activity hits new highs, sentiment turning pessimistic but stablecoin market cap reaching record levels. Bitwise emphasizes that the last time similar divergence occurred was in Q1 2023, after which crypto asset prices rose significantly over the following two years.
(Background recap: Bitwise: Ethereum is in the “most undervalued zone in recent years” and may rebound to $3,000 soon)
(Additional background: Bitwise’s 2025 top 10 predictions: BTC, ETH, SOL hit new highs, countries holding Bitcoin double, 5 crypto unicorns IPO)

Table of Contents

• Three major divergence signals: prices and fundamentals diverging
• Historical analogy: the similar script in Q1 2023
• Analysis: why might divergence indicate a bottom?
• How should investors interpret this?

Asset management company Bitwise, in its Q4 2025 market report, reveals an intriguing phenomenon: the current market is showing multiple “high contrast” divergences that are historically common at bear market bottoms. These signals last appeared together in Q1 2023, after which crypto asset prices surged notably over the next two years.

Three major divergence signals: prices and fundamentals diverging

Bitwise highlights three key divergence phenomena in the report:

1. Ethereum: falling price vs on-chain activity hitting new highs

In Q4 2025, Ethereum’s price dropped 29%, yet during the same period, Ethereum’s on-chain transaction volume reached all-time highs. This suggests that despite weak prices, actual network usage and adoption are increasing.

2. Crypto stocks: falling stock prices vs revenue growth leading

Crypto-related stocks declined about 20% in Q4, but Bitwise notes that revenue growth for crypto companies is expected to be 3 times that of other industries. The divergence between stock prices and fundamentals often signals value investment opportunities.

3. Market sentiment: turning pessimistic vs stablecoin market cap hitting new highs

Market sentiment has clearly turned pessimistic, but the assets under management (AUM) and trading volume of stablecoins have both hit record highs. Recent data shows stablecoin market cap has surpassed $300 billion, with an annual trading volume of $46 trillion, about 2.5 times that of Visa.

Historical analogy: the similar script in Q1 2023

Bitwise emphasizes that the last occurrence of similar divergence was in Q1 2023. At that time, the market was also filled with pessimism, but on-chain data and fundamentals showed resilience.

What was the result? Over the two years following Q1 2023, crypto asset prices surged significantly. Bitcoin rose from about $20,000 to break $100,000 by the end of 2024, an increase of over 400%.

Analysis: why might divergence indicate a bottom?

This “price decline, fundamentals strengthening” divergence phenomenon is also often seen as a potential bottom signal in traditional financial markets. The logic is:

• Short-term prices are heavily influenced by sentiment and capital flows, prone to overreaction
• Long-term value is determined by actual adoption and fundamentals
• When both diverge extremely, it often indicates market mispricing

Bitwise also released a report earlier this year stating that Ethereum is in “one of the most undervalued zones in recent years,” consistent with the views in this Q4 report.

How should investors interpret this?

Bitwise does not give direct investment advice, but the implicit message of the report is quite clear: when market sentiment is most pessimistic and prices are continuously falling, it is often the time for value investors to start positioning.

Of course, history does not repeat simply; the rally after Q1 2023 was also driven by major positive catalysts like Bitcoin ETF approvals. But for long-term investors, this report provides a noteworthy contrarian indicator.