Wall Street giant Morgan Stanley believes the crypto winter is over and that Bitcoin’s next halving will usher in a new bull market, similar to previous ones.
In a recent report,Will crypto spring come?The bank’s wealth management division delved into the four-year crypto cycle and the importance of the Bitcoin halving event in the market cycle in shaping the crypto landscape.
The report’s author, Morgan Stanley analyst Denny Galindo, wrote:
“Signs indicate that Bitcoin’s cyclical bear market decline, the ‘crypto winter’, may be a thing of the past.”
four seasons of crypto
Galindo began by drawing parallels between the four-year cryptocurrency cycle and the four seasons of the year. He details his four different phases of the cryptocurrency cycle, and each phase is similar to a season.
According to the report, the summer phase will begin with the long-awaited halving event, where the rate of new Bitcoin creation will be halved.
Historically, this phase has been marked by significant price increases for Bitcoin as scarcity drives demand. It typically culminates when Bitcoin surpasses its all-time high, causing euphoria in the market.
After Bitcoin hits new highs, it gains media attention, attracts new investors, and piques corporate interest. This phase is reminiscent of summer, but it is turning into autumn as the crypto market soaks in the heat of renewed interest. This refers to the period between breaking a previous high and establishing a new peak, marking the culmination of a bull market.
After the peak, the market enters a bearish phase similar to the beginning of winter. The market cools as investors take profits and exit Bitcoin.
This phase has historically lasted about 13 months, with prices falling significantly from their highs. This is a time of consolidation, correction, and introspection for the cryptocurrency community.
Before each halving event, Bitcoin price typically rebounds from its lowest point. However, investor enthusiasm is likely to remain relatively subdued, similar to the cautious optimism of early spring.
This is the time for the cryptocurrency market to regain its footing and prepare for the next halving event and subsequent bull run. Galindo highlighted that since 2011, there have been three crypto winters, each lasting approximately 13 months. He also pointed out that the Bitcoin halving event plays an important role in increasing the value of the flagship cryptocurrency.
According to Galindo,
“Historically, most of Bitcoin’s rallies have occurred immediately after a ‘halving’ event, which occurs every four years.”
This observation lends credence to the idea that crypto spring may be on the way.
signs of spring
The report states that there are several important factors to consider when determining whether crypto spring has arrived. Historical patterns show that Bitcoin’s bottoms during past crypto winters typically surface about 12 to 14 months after the peak, providing a timeline of market cycles.
Another important factor is measuring how far Bitcoin’s value has fallen from its all-time high. Bitcoin prices have plunged about 83% from the cryptocurrency’s previous winter highs.
Miner capitulation is also a noteworthy indicator, as many miners cease operations due to financial losses when Bitcoin approaches the bottom of past cycles. Miners’ behavior is monitored through the “Bitcoin Difficulty”, an index that measures the ease of mining. Decreasing difficulty means approaching a valley.
“Bitcoin price and Thermocap multiple” is also an important indicator. “Thermocap” measures the total amount invested in Bitcoin since its creation. A low price to thermocap ratio indicates a trough, and a high ratio indicates a peak in the market trajectory.
The report added that price movements can also signal the end or beginning of a new cycle. A significant 50% increase in Bitcoin price from its lowest point typically indicates a bottom.
However, there are also examples where such increases have been followed by significant price declines.
