Morgan Stanley Report Suggests Crypto Winter Could End Soon
A recent report by global investment bank Morgan Stanley indicates that the long-lasting bear market in the cryptocurrency industry, known as the “crypto winter,” may finally be coming to an end. The report examines the historical pattern of Bitcoin’s performance following halving events, which occur approximately every four years. It also predicts that the next halving event could take place around April 2024.
The Cyclical Nature of Crypto Markets
According to the report, Bitcoin serves as a barometer for the overall crypto market. One unique aspect of Bitcoin is its halving process, which reduces supply and helps maintain its value. Every four years, the number of new Bitcoins generated every 10 minutes is halved. This deliberate reduction in supply has historically influenced Bitcoin’s price, often leading to a bullish market rally.
Previous cycles have seen three significant bull runs lasting 12 to 18 months after each halving event.
The Four Seasons of Crypto Markets
The report introduces a framework to understand market behavior based on the four-year cryptocurrency cycle, which aligns with the seasons:
1. Summer
This phase immediately follows a halving event and is characterized by observed price gains in Bitcoin until it reaches a new peak.
2. Fall
In this phase, Bitcoin surpasses its previous high, attracting media attention, new investors, and businesses. It indicates that the bull market is nearing its end.
3. Winter
Winter represents the bear-market decline initiated by profit-taking and selling pressure from investors, resulting in price drops. This phase continues until the next market trough, typically around 13 months later.
4. Spring
Spring is the phase leading up to the next halving event, during which Bitcoin’s price generally recovers from the cycle’s low point. However, investor interest tends to remain relatively weak during this period.
Gauging Indicators for the Transition from Winter to Spring
Determining whether crypto spring has truly arrived requires considering several factors, including the time since the last peak, the magnitude of Bitcoin’s drawdown from its high, miner capitulation, the Bitcoin price-to-thermocap multiple, exchange-related issues, and price action. These indicators can provide insights into whether the market has reached a trough or is still experiencing crypto winter.
The Importance of Understanding Cyclical Tendencies
While the report suggests that crypto winter may be coming to an end and crypto spring is on the horizon, it emphasizes the importance of learning more about the cyclical nature of the crypto market.
Hot Take: Bitcoin Shows Modest Recovery After Recent Volatility
Bitcoin is currently trading at $28,500, indicating a slight recovery in the past 24 hours. It experienced an unsuccessful attempt to stabilize above $30,000 on Monday, followed by a subsequent decline to $28,000. Despite this volatility, Bitcoin has maintained substantial gains across various time frames with a surge of 7.4% over the past seven days, 4% over the past fourteen days, 5% over the past thirty days, and an impressive 49% surge over one year.
Featured image from Shutterstock, chart from TradingView.com
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