In a recent report, investment banking giant Morgan Stanley has suggested that crypto winter is on the way out, and a spring is likely coming early next year. The report — Will Crypto Spring Ever Come? — written by Denny Galindo, a stock analyst with Morgan Stanley, says the crypto winter will most likely come riding the Bitcoin halving expected in April 2024.
“Estimates of when exactly the next halving will occur vary, but history indicates it has the potential to occur sometime around April 2024. Based on current data, signs indicate that crypto winter may be in the past and that crypto spring is likely on the horizon. However, keep in mind that there have only been three crypto springs to date. In other words, there is still a lot to learn,” the report stated.
A unique aspect of Bitcoin, which accounts for about 50% of the total crypto market valuation, goes through the halving process every four years. Bitcoin is designed this way to create scarcity and maintain its value.
“Specifically, every four years, the number of bitcoins created every 10 minutes is cut in half… 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. There have been three such runs on bitcoin since its inception in 2011, each lasting 12 to 18 months after the halving,” Galindo explains.
The Morgan Stanley analyst further says that while no one can tell if it’s the right time to buy or sell cryptocurrencies, the unique opportunity that Bitcoin halving brings and how it can impact the crypto market’s cyclical tendencies is worth monitoring.
Galindo says that the cryptocurrency market goes through different seasons — summer, fall, winter, and spring — and their characteristics: “In the previous cycles, the bear-market decline came when investors decided to lock in their gains and sell bitcoin.”
This period takes place between the new peak and the subsequent trough. He adds that three winters have been since 2011, lasting about 13 months each.
However, he cautions that akin to any investment, past performance should not be construed as a guarantee of future results. Potential risks, from encryption vulnerabilities and software bugs to economic downturns or coordinated government interventions, may surface unexpectedly before the anticipated halving, potentially disrupting the established market cycle.
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