Investment banking giant Morgan Stanley asserted that Bitcoin’s imminent halving, slated for six months from now, could launch a new bull market. Drawing parallels with Bitcoin’s “four seasons,” the report speculates that the era of “crypto winter” might already be in the rearview.
Defined by Morgan Stanley Wealth Management, cryptocurrency “winter” encapsulates a phase in the “four-year cryptocurrency cycle.” It commences after Bitcoin reaches an all-time high, prompting investors to divest and discouraging fresh investments. Typically lasting approximately 13 months, this period extends from the peak to the subsequent price trough.
This phase succeeds the crypto Spring, during which Bitcoin gradually rebounds from its trough, accompanied by subdued investor interest. Denny Galindo, the report’s author, stated, “Based on current data, signs indicate that crypto winter may be in the past and that crypto spring is likely on the horizon.”
Galindo highlighted the importance of considering both the timing and magnitude of Bitcoin’s drawdown when determining the conclusion of crypto winter. He noted, “Previous troughs were about 83% off their respective highs.”
Bitcoin, reaching its all-time high of $69,000 in November 2021, experienced a 77% drawdown to $15,500 in November 2022 after the FTX crypto exchange filed for bankruptcy. According to Morgan Stanley, exchange issues, including bankruptcies, serve as indicators of a trough. As of now, Bitcoin trades at $28,600, marking a 72% increase year to date. The report indicates, “A 50% increase in price from bitcoin’s low is typically a good sign that the trough has been achieved.”
The impending Bitcoin halving, where the supply issuance rate is halved every four years, presents a crucial factor in Morgan Stanley’s analysis. This reduction, cutting the coins earned per block from 6.25 BTC to 3.125 BTC, is believed to contribute to the four-year cryptocurrency cycle. By intentionally limiting the supply of new Bitcoin, the resultant scarcity caused by halving events can potentially catalyze a bull run, the report contends.
