The Crypto Winter May Be Over: Morgan Stanley Wealth Management

The crypto winter may be over, Morgan Stanley Wealth Management said in a post on its website examining whether the recent bear market in digital assets has run its course.

“Based on current data, signs indicate that crypto winter may be in the past and that crypto spring is likely on the horizon,” the Tuesday post said.

The investment manager notes that the trough of bitcoin (BTC) in previous crypto winters has occurred 12 to 14 months after the peak. The cryptocurrency reached an all-time high of around $68,000 in November 2021 and bottomed out a year later.

“A 50% increase in price from bitcoin’s low is typically a good sign that the trough has been achieved,” strategist Denny Galindo wrote. The world’s largest cryptocurrency has risen 70% year-to-date and 77% from last year’s lows.

The magnitude of the bitcoin drawdown is also important, the wealth manager said, noting that previous price troughs were about 83% off their respective highs. BTC had dropped nearly 77% to about $16,000 by November 2022.

Most of bitcoin’s gains come directly after the halving, Galindo wrote, and this “bull-run period starts with the halving event and ends once the price of bitcoin hits its prior peak.” Roughly every four years the reward for successfully mining a bitcoin block is cut in half, an event known as the halving, and this reduces inflationary pressure on BTC.

“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,” Galindo said, adding that there have been “three such runs on bitcoin since its inception, each lasting 12 to 18 months after the halving.”