As the price of Bitcoin continuously hovers in a narrow range between $25,000 and $30,000, it has been observed that investors and institutions are actively participating in this price range and accumulating heavily. Currently, the thoughts of every investor and institution are focused on the upcoming halving event.
Will ‘Crypto Spring‘ ever come?
Morgan Stanley’s Wealth Management Division has released a report titled “Will Crypto Spring Ever Come?” focusing on the four-year cryptocurrency cycle and the role of Bitcoin’s halving events in shaping market trends.
Four Seasons of Crypto
The Four Seasons of Crypto Analyst Denny Galindo compares the cryptocurrency cycle to the four seasons, highlighting the following phases:
- Summer (Halving Phase): Starts with Bitcoin’s halving event, where new coin creation is halved. Historically, this phase sees significant price gains due to increased scarcity.
- Fall (Post-All-Time-High): Bitcoin surpasses its previous all-time high and attracts media attention as well as new investors. This phase marks the end of the bull market.
- Winter (Bearish Phase): The market cools down as investors book their profits from Bitcoin. It usually lasts around 13 months, involving significant price declines.
- Spring (Pre-Halving): Before each halving the price of Bitcoin is hovering in a small range which shows the preparation for the next halving and the following bull run.
Crypto analyst Galindo highlights that the significant movement of Bitcoin typically happens just after its halving event, as it’s going to happen on April 17, 2024, and happens every four years.
Key Factors in identifying the “Crypto Spring” phase
The Sign of “Crypto Spring” follows several key factors as per the Morgan Stanley report:
- Timing: Historical patterns show that the trough of previous crypto winters typically emerges around 12 to 14 months after the peak.
- Price Decline: A significant drop in Bitcoin’s value from its all-time high (historically about 83%) is an important indicator.
- Miner participation: Monitoring miner behavior, particularly “Bitcoin difficulty,” is critical. Decreasing difficulty indicates proximity to the trough.
- Bitcoin Price-to-Thermocap Multiple: A lower price-to-thermocap ratio signifies a trough, while a higher ratio suggests a market peak.
- Price Action: A substantial 50% increase in Bitcoin’s price from its lowest point often indicates a trough. However, it’s important to note that there have been instances where significant price declines followed such gains.
According to Morgan Stanley’s report, the positive trends in the crypto market may be attributed to the upcoming halving. Just as seasons change, the crypto market goes through cycles, and the periodic Bitcoin halving events have historically had a significant impact on its value.