Crypto winter may be over, investment bank Morgan Stanley believes

Crypto winter may be over and crypto spring is 'probably just around the corner', writes investment bank Morgan Stanley in a recent analysis. “While no one can tell you if now is the right time to buy or sell cryptocurrency, this is the right time to learn more about the cyclical tendencies of the crypto market,” the analysis said.

October 23, 2023
Markets
crypto currencies
Crypto Winter

The phenomenon of halving

One of the drivers that Morgan Stanley emphasizes in its analysis is the so-called halving in bitcoin. One unique aspect of bitcoin is that it is designed to undergo a process called “halving” that creates scarcity, allowing bitcoins to maintain their value. Specifically, the number of bitcoins created every 10 minutes is cut in half every four years. Finally, when there are 21 million bitcoins in existence, no more bitcoins will be mined.

Three takeaways

Along with other trends in the market, Morgan Stanley translates this into three takeaways:

  • Historically, most of bitcoin's gains come directly after a “halving” event that occurs every four years.
  • Estimates vary, but history indicates the next halving could occur sometime in April 2024.
  • Signs suggest that the “crypto-winter” - bitcoin's cyclical decline in the bear market - may be over.

The Four Seasons

In Kaupr last autumn we asked the question whether there is crypto winter at Lillestrøm. While Morgan Stanley in its analysis goes through what characterizes the four seasons, or cycles that the crypto market likes to undergo.

  • Summer: Historically, most of the gains in bitcoin have come directly after the halving. This bull market period starts with the actual halving event and ends when the price of bitcoin reaches its previous peak.
  • Fall: When the price exceeds the old high, it tends to attract interest from media, new investors and businesses, which can then drive prices even higher. This period represents the time between when bitcoin passes the old peak and when it reaches a new one, signaling that the bull market has reached its end.
  • Winter: In previous cycles, bear market declines have come when investors have decided to hedge their gains and sell bitcoin, which has led to price falls and scared off new investment. This period takes place between the new high point and the next bottom. There have been three winters since 2011, each of which has lasted about 13 months.
  • Spring: During this period before each halving, the price of bitcoin generally tends to recover from the lowest point of the cycle, but investor interest tends to be weak.

Although Morgan Stanley's analysis is illustrated with four seasons, the investment bank pays significant attention to the psychology and sentiment of the market throughout the four cycles.

What do you think: Is the crypto spring approaching?

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