The Four Price Cycles: Morgan Stanley Says the Crypto Winter May Be Over

Wealth management firm, Morgan Stanley opined that the crypto winter may be over ushering in the spring which indicates a slight boost in market activity.

The company explained key market concepts in a blog post aimed at analyzing the bear market, its implications, and incoming cycles before and after next year’s halving event.

According to the release, Bitcoin (BTC) was used in the market analysis because it remains the largest cryptocurrency with about 50% of the market share and is often used as a key determinant by investors and the media.

Historically, Bitcoin's largest gains are recorded after each halving which occurs every four years reducing miner rewards by 50%.

“Just as a farmer avoids planting seedlings in the winter or too late in the spring, crypto investors want to know when crypto spring has arrived to maximize their investment 'growing season.” 

BTC halving and the crypto spring

For months, the digital asset market has been plagued with declining prices which saw the price of Bitcoin fall from a record high above $65,000 to sharp lows in 2022. 

The report explained that the process of halving creates scarcity giving BTC more value after the event and can spur the next bull run. Since 2011, the market has recorded 3 bull runs that lasted an average of 12 to 18 months after halvings.

Crypto summers are recorded after halving events and continue until the price of the asset hits the previous cycle's high then the market enters the fall.

The fall is characterized by huge interest from the media and investors because BTC just beat its all-time high, set a new one, and signaled an end to the bull season.

Digital asset winter follows with investors looking to make a profit from their holdings leading to a fall in prices as a result of massive sales. 

This period is riddled with reduced investments, miner's downturn, web3 collapses, etc. There have been three winters since 2011 spanning about 13 months before ushering in the crypto spring.

Are we in the spring?

Although several observers describe present market conditions as signs of the winter based on tightening conditions and industry woes, analysts at Morgan Stanley believe the winter may have phased out.

The spring is described as a period before the halving which serves as a pickup point from the winter but is still plagued with low institutional numbers.

In the present market, BTC has soared over 70% year-to-date (YTD), and with a slight recovery and a potential halving date set for April 2024, the signs of spring trickle in. 

“50% increase in price from bitcoin’s low is typically a good sign that the trough has been achieved, although there have been examples of such a gain being followed by significant declines.”