The Blancos find themselves in an unfortunate position which sees European glory providing the only path to major silverware this season.
Another continental crown does, however, remain up for grabs and Ancelotti believes that a forgettable season for Real and star turns such as Ronaldo can be salvaged by securing a fourth success in the space of five dominant years.
"I don't think they are in crisis. The only competition that Real Madrid can now win is the Champions League, so they will focus on that.
"We must be aware of what [Zinedine] Zidane does in the Champions League.
"If they beat [Unai] Emery [and PSG], it will be difficult to stop them because they have a player in their squad who never wants to lose: Cristiano Ronaldo."
Ronaldo has managed just eight La Liga goals this season as Real have slipped into a top-four tussle, but he has contributed nine goals in six Champions League outings.
He will be the man Zidane looks to for inspiration once again when European action resumes at the last-16 stage.
In order for the Blancos to remain in contention for another continental triumph, they will first have to negotiate a testing two-legged tie with Ligue 1 heavyweights Paris Saint-Germain.
While Ancelotti believes they are capable of doing that, he has also acknowledged the strength of another of his former clubs who have spent big in the pursuit of major honours.
The Italian added: "PSG have everything to win the Champions League.
"They have Neymar and [Kylian] Mbappe.
"They have more experience and quality than they had last year. They are more mature and dangerous."
PSG fell at the last-16 stage last season, in a thrilling contest with Barcelona, and have failed to make it beyond the quarter-finals since rejoining the European elite in 2012-13.