Crypto winter may be coming to an end, as Morgan Stanley Wealth Management has recently suggested on its website. The investment manager points to several signs indicating that the bear market in digital assets has run its course, and a crypto spring is on the horizon. This optimistic outlook is based on factors such as the timing of bitcoin’s trough, the magnitude of its drawdown, and the impact of the halving event.
Timing of Bitcoin’s Trough
In previous crypto winters, the trough of bitcoin has occurred around 12 to 14 months after the peak. Bitcoin reached an all-time high of approximately $68,000 in November 2021 and hit its lowest point a year later. A 50% increase in price from bitcoin’s low is typically a positive sign that the trough has been reached. So far, Bitcoin has seen a 70% increase year-to-date and a 77% increase from last year’s lows, which suggests that the crypto winter may be over.
Magnitude of Bitcoin’s Drawdown
The magnitude of the bitcoin drawdown is also important. Previous price troughs have been around 83% off their respective highs. By November 2022, BTC had dropped nearly 77% to about $16,000. This decrease is in line with previous crypto winters, further supporting the idea that the bear market has run its course.
Impact of the Halving Event
Morgan Stanley Wealth Management notes that most of bitcoin’s gains come after the halving event, which occurs roughly every four years. The halving cuts the reward for successfully mining a bitcoin block in half, reducing inflationary pressure on BTC. This intentional limitation of supply can potentially spur a bull run. There have been three such runs on bitcoin since its inception, each lasting 12 to 18 months after the halving.
Previous Halving Events and Bull Runs
The first halving event took place in 2012, followed by a bull run that lasted until 2013. The second halving occurred in 2016, with the subsequent bull run continuing until 2017. The most recent halving happened in 2020, and if history repeats itself, a bull run could be on the horizon.
Optimism for a Bullish Trend in the Digital Asset Market
With bitcoin’s price increase and the impact of the halving event, there is optimism for a bullish trend in the digital asset market. The end of the crypto winter may bring renewed interest from investors, as well as increased adoption of digital assets by businesses and consumers.
Factors That Could Influence the Crypto Spring
Several factors could influence the crypto spring, such as regulatory developments, technological advancements, and macroeconomic factors. Positive regulatory changes could encourage more institutional investors to enter the market, while technological advancements could make digital assets more accessible and user-friendly. Macroeconomic factors, such as inflation and global economic growth, may also impact the digital asset market.
Conclusion
In conclusion, Morgan Stanley Wealth Management’s analysis suggests that the crypto winter may be in the past, and a crypto spring is likely approaching. The timing of bitcoin’s trough, the magnitude of its drawdown, and the impact of the halving event all point to a potential end to the bear market in digital assets. As the crypto spring unfolds, investors and market participants should keep an eye on regulatory developments, technological advancements, and macroeconomic factors that could influence the digital asset market.
