Benzinga - Morgan Stanley (NYSE: MS) has detailed the signs investors should look for that may indicate "crypto winter" is coming to an end, potentially signaling brighter days ahead for cryptocurrency enthusiasts.
The term "crypto winter" refers to a period of severe market downturns in the cryptocurrency space, which has historically happened in a cyclical manner.
Denny Galindo, an executive director within Morgan Stanley's Equity Model Portfolio team, discussed the pivotal role of Bitcoin's (CRYPTO: BTC) halving event in dictating these market cycles, with the next halving estimated to occur around April 2024.
This insight comes at a time when the crypto discourse is gaining momentum, especially with events like Benzinga's Future of Digital Assets conference scheduled for Nov. 14, where industry leaders will converge to discuss the tangible value and applications of blockchain and cryptocurrencies.
Galindo's post highlights the "halving" process, a unique feature of Bitcoin aimed at reducing the rate at which new coins are created, thereby causing a scarcity to maintain value.
Historically, Bitcoin, which accounts for about 50% of the total value of digital assets, has seen substantial gains post-halving, marking the beginning of a bull run.
The strategist likens the four-year cryptocurrency cycle to the four seasons of the year, indicating that we might be entering the 'crypto spring', a period of recovery and potential growth.
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The firm breaks down the cryptocurrency market's behavior into four phases: Summer, Fall, Winter, and Spring.
Each phase represents a unique stage in the crypto market cycle, from bull runs post-halving to bear market declines when investors opt to lock in gains.
Morgan Stanley further delves into indicators that might signal the end of crypto winter, such as the time elapsed since the last peak, the magnitude of Bitcoin drawdown, miner capitulation, and exchange-related problems.
They also introduce metrics like the Bitcoin price-to-thermocap multiple to gauge the market's position within the cycle.
While the firm acknowledges that past performance doesn't guarantee future results and points out potential disruptors like software bugs or government actions, it emphasizes that understanding these cyclical tendencies is crucial for investors navigating the crypto space.
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