- Morgan Stanley’s wealth management division anticipates the end of the crypto winter, projecting a promising future with the next Bitcoin halving expected to trigger a substantial bull market.
- The bank’s analysis draws parallels between the cryptocurrency market’s four-year cycles and the changing seasons, emphasizing the critical role of Bitcoin halving events in shaping market dynamics.
In a detailed report aptly titled
“Will Crypto Spring Ever Come?”,
Morgan Stanley, a stalwart on Wall Street, has expressed a strong belief that the crypto market has bid adieu to its winter phase. The report anticipates the upcoming Bitcoin halving to be the catalyst for a new bull run, a pattern historically consistent with previous market cycles.
Understanding the Cryptocurrency Seasons
Denny Galindo, a Morgan Stanley analyst and the report’s author, notes,
“Signs indicate that ‘crypto winter’ — bitcoin’s cyclical bear-market decline — may be in the past.”
He meticulously outlines the cryptocurrency market’s cyclical nature, drawing an analogy to the four seasons of a year.
The report identifies four distinct phases in the cryptocurrency cycle:
- Summer: Initiated by the eagerly awaited Bitcoin halving event, this phase is characterized by a substantial surge in Bitcoin’s price, fueled by increased scarcity. The climax is reached when Bitcoin hits a new all-time high, ushering in a state of market euphoria.
- Fall: Following the peak, heightened media attention and an influx of new investors mark this phase. The market remains buoyant, riding the momentum from the summer’s bull run.
- Winter: This phase represents a market cooldown, with investors securing profits and reducing their Bitcoin holdings. Historically lasting about 13 months, this period is marked by significant price corrections and a sense of market consolidation.
- Spring: Preceding the next halving, this phase sees a rebound in Bitcoin’s price, though investor enthusiasm typically remains measured. This period sets the stage for the ensuing bull run.
Galindo emphasizes the recurring nature of these cycles, with three crypto winters since 2011, each lasting around 13 months. He underscores the pivotal role of Bitcoin’s halving events in driving the cryptocurrency’s value.
Signs of Spring: Deciphering the Market’s Shift
The report delineates several key indicators to ascertain the advent of crypto spring:
- Historical patterns suggest the trough in Bitcoin’s price occurs 12 to 14 months following its peak.
- A decline of approximately 83% from its all-time high is a common trend observed in past crypto winters.
- Miner capitulation serves as a crucial barometer, often ceasing operations when financial viability is threatened. This is monitored through the “bitcoin difficulty” metric.
- The “Bitcoin Price-to-Thermocap Multiple” offers insight into market peaks and troughs, with a lower ratio indicating a potential market bottom.
Conclusively, while a significant 50% rebound in Bitcoin’s price from its lowest point has historically signaled a trough, the market has also witnessed instances of substantial price retractions following such rebounds. This nuanced view underlines the complexity and dynamic nature of cryptocurrency markets, as the industry eagerly anticipates the arrival of the next crypto spring.