“Signs indicate that crypto winter may be in the past and that crypto spring is likely on the horizon,” said a Morgan Stanley analyst.
Many will agree that this crypto winter has been particularly brutal, but one leading financial institution believes the ice may finally be thawing.
Morgan Stanley, an American multinational investment bank, recently highlighted key signs that suggest the crypto market is emerging from a prolonged bear market, based a range of factors.
“Based on current data,” wrote strategist Denny Galindo, “signs indicate that crypto winter may be in the past and that crypto spring is likely on the horizon.”
Galindo presented a range of key points to consider.
#1 Market downturn and recovery timeline
Historically, after each peak in the crypto market, a downturn or “trough” occurs approximately 12 to 14 months later. This trough marks a low point in the market cycle before a potential recovery, and it’s usually around 83% lower than its respective high.
Bitcoin reached an all-time high of $69,000 in November 2021 and dropped to $16,000 in the following November, approximately in line with Galindo’s analysis.
Since November 2022, Bitcoin has gained nearly 50% (58% down from its all-time high), suggesting that the trough has passed.
#2 Miner capitulation
When the market enters a downturn, miners sometimes shut down operations due to financial losses. As miners shut down, competition eases and mining difficulty decreases.
“When [mining] difficulty decreases, it is a sign the trough may be near,” Galindo wrote.
This event is known as miner capitulation. Throughout 2023 however, mining difficulty has increased month-on-month, again suggesting that the trough has passed.
#3 The halving
The words ‘the halving’ will be creeping up more and more in media throughout the coming months.
The Bitcoin halving is an event that occurs every four years, and it reduces the number of Bitcoin in circulation by halving miner rewards. The market tends to have a major upswing after the halving occurs, typically lasting 12 to 18 months after each halving event.
“One unique aspect of bitcoin is that it is designed to go through a process called “halving” that creates scarcity, so that bitcoins can maintain their value,” Galindo wrote. “By intentionally limiting the supply of new bitcoin, the shortage caused by the halving can affect the price of bitcoin to potentially spur a bull run. There have been three such runs on bitcoin since its inception in 2011, each lasting 12 to 18 months after the halving.”
Galindo emphasised that various extraneous factors can influence the market, from software bugs to government disruption.
“While no one can tell you if now is the right time to buy or sell cryptocurrency, today is the right time to learn more about the crypto market’s cyclical tendencies so that you can ask questions, monitor trends and determine for yourself if the cycle will repeat a fourth time and whether to invest,” he said.
Disclaimer: CryptoPlug does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.