According to a report by the global investment bank Morgan Stanley, signs indicate that the cyclical “crypto winter” bear market, which has plagued the cryptocurrency industry, may finally end.
The report explores the historical pattern of Bitcoin’s (BTC) performance following halving events that occur approximately every four years. Furthermore, the report estimates that the next halving event could occur around April 2024.
The Cyclical Nature Of Crypto Markets Per the report, Bitcoin, the dominant cryptocurrency, is a barometer for the overall crypto market. One distinctive feature of Bitcoin is its halving process, which creates scarcity and helps maintain its value.
Every four years, the number of BTC generated every 10 minutes is halved. This deliberate reduction in supply has historically affected Bitcoin’s price, often triggering a bullish market rally.
Previous cycles have witnessed three notable bull runs that lasted 12 to 18 months after each halving event.
The four-year cryptocurrency cycle aligns with the seasons, providing a framework to understand market behavior:
According to Morgan Stanley, summer represents the phase immediately following a halving event, during which Bitcoin’s price gains are typically observed until it reaches a new peak.
Fall signifies when Bitcoin surpasses its previous high, attracting media attention, new investors, and businesses. This phase indicates that the bull market is nearing its end.
Winter characterizes the bear-market decline, initiated by profit-taking and selling pressure from investors, resulting in price drops. This phase persists until the next market trough, typically around 13 months.
Spring is the phase leading up to the next halving event, during which Bitcoin’s price generally recovers from the cycle’s low point. However, investor interest tends to remain relatively weak during this period.
Gauging Indicators To Ascertain The Transition From Winter To Spring Determining whether crypto spring has truly arrived requires considering several factors. These include the time elapsed since the last peak, the magnitude of Bitcoin’s drawdown from its high, miner capitulation, the Bitcoin price-to-thermocap multiple, exchange-related issues, and price action.
These indicators can provide insights into whether the market has reached a trough or is still experiencing crypto winter.
While the report suggests that crypto winter may be in the past and crypto spring is on the horizon, it emphasizes the importance of learning more about the crypto market’s cyclical tendencies.
The daily chart shows BTC’s sideways price action over the past 24 hours. Source: BTCUSDT on TradingView.com BTC is trading at $28,500, showing a modest recovery in the past 24 hours after an unsuccessful attempt to stabilize above $30,000 on Monday, followed by a subsequent decline to the $28,000.
Notwithstanding this recent volatility, Bitcoin has maintained substantial gains across various time frames. It has experienced a notable surge of 7.4% over the past seven days, 4% over the past fourteen days, 5% over the past thirty days, and an impressive 49% surge over one year.
Featured image from Shutterstock, chart from TradingView.com