The financial firm says knowing the “4 seasons” of bitcoin cycles is essential.
Morgan Stanley: “Crypto spring may be on the horizon.” Financial firm Morgan Stanley released a report detailing the “four seasons” that cryptocurrency prices go through based on bitcoin (BTC) behavior. And it warned that the market may face one of the most attractive times for investors. First of all, there is the summer. According to the bank, this bullish period begins with halving, i.e., the halving of bitcoin (BTC) issuance scheduled every four years or so. This stage ends when said digital currency reaches its previous maximum price.
Bitcoin Spring is Coming
Then follows the autumn, which represents a sharpening of the bullish streak, in which the price of bitcoin surpasses the old high and reaches a new one. At this point, he says, it tends to attract interest from the media, new investors, and companies, which drives the price upward. Once investors en masse take profits by selling their bitcoin, the third market season occurs in winter. The supply pressure over demand during this time causes the price to fall, scaring off new investment.
Fourth and finally comes the spring of the market. This period precedes each halving and usually shows bitcoin price recovering from its lowest point in the cycle, while there is generally weak interest among investors. Morgan Stanley warns that, just as a farmer avoids planting in winter or too late in spring, investors want to know when crypto-spring has arrived to maximize their investment “growing season.”
With this in mind, he argues that the question is whether the market is currently in this season of the cycle, as bitcoin’s price has appreciated 80% since the bottom it stepped on at $15,500 late last year. It trades around $28,000, about 60 percentage points below its all-time high (ATH) of $69,000.
Growing Factors, according to Morgan Stanley
The financial multinational explains that it is necessary to consider the following factors to understand whether the spring of cryptocurrencies is really here or whether the market is still in the middle of crypto winter. In principle, one should look at the time elapsed and the magnitude of the drop since the last peak. According to historical data, bitcoin’s lowest point in crypto winters has been between 12 and 14 months after its previous all-time high, dropping around 83%. The situation repeated in this cycle, and now the market is 23 months away from the peak.
In addition, he mentions that when Bitcoin approached the low point of past cycles, many miners closed their operations because they were losing money, which made it easier for those who remained to do business. In parallel, he points out that at this time, cryptocurrency exchanges usually have problems or go bankrupt due to lower trading volume and new regulations, as happened last year with LocalBitcoins and other companies.
Morgan Stanley suggests it’s essential to consider the “thermocap” metric, which measures the amount invested in money. A result lower than the price may indicate a valley, while the opposite can signal upward momentum. Additionally, a 50% increase in the price of BTC is usually a positive sign that we have reached the bottom.
Morgan Stanley summarized that this data “indicates that crypto winter may be in the past and that crypto spring is likely on the horizon.” It also highlights that the market is in the run-up to having, which is estimated to occur around April 2024.
Morgan Stanley Cautions
However, he cautions that, so far, there have only been three cycles in the Bitcoin market, so there is still a lot to learn. And he also stresses that, as with any investment, past performance does not indicate future results. Therefore, historical data serves as a guide to what might happen but does not guarantee it. Investors should be mindful of potential risks.
“While no one can say whether now is the right time to buy or sell cryptocurrencies, today is the right time to learn more about cyclical trends in the cryptocurrency market so you can ask questions, monitor trends, and determine for yourself whether the cycle will repeat itself for a fourth time and whether to invest.”
Morgan Stanley, investment and financial services bank.
Morgan Stanley, founded in New York in 1985, is a multinational entity that develops as an investment and financial services bank. And it currently has $1.4 trillion (trillions) in assets under management (AUM), according to its third quarter 2023 report.
The NYSE lists the company under the symbol “MS.” It is part of the S&P 500 stock index, which compiles the shares of the top 500 companies in the United States. Morgan Stanley’s wealth management practice published this report on Bitcoin and market cycles. The institution provides an advisory service to help individuals and families achieve their financial goals.