The cryptocurrency market may be poised for a turnaround as Wall Street becomes more involved and the upcoming Bitcoin halving event approaches, signaling the end of the prolonged “crypto winter.” According to a recent analysis by Morgan Stanley, titled “Will Crypto Spring Ever Come?”, the cyclical behavior of the cryptocurrency market can be compared to the four seasons.
The report, authored by analyst Denny Galindo, highlights the impact of the Bitcoin halving event on the market. The halving event, which occurs every four years, involves reducing the rate of new Bitcoin creation by half. Historically, this event has led to significant price increases for Bitcoin.
After reaching new highs, Bitcoin attracts media attention and new investors, marking the peak of the bull market. However, the market then enters a bearish phase or “crypto winter,” characterized by price declines and consolidation. Before each halving event, Bitcoin’s price typically rebounds from its lowest point, similar to the cautious optimism of early spring.
The report emphasizes that there have been three crypto winters since 2011, each lasting approximately 13 months. Galindo also points out that most of Bitcoin’s gains historically come directly after a halving event.
Signs of a Bull Phase
The report provides statistical indicators that suggest the cryptocurrency market may enter a bull phase:
- In previous crypto winters, the lowest point of Bitcoin’s value typically occurs around 12 to 14 months after its peak.
- Bitcoin prices have historically declined by approximately 83% from their previous highs during crypto winters.
- The “bitcoin difficulty” metric, which measures mining ease, decreases as the market approaches its lowest point.
- The “Bitcoin Price-to-Thermocap Multiple” is another important metric, with a lower ratio indicating a market trough and a higher ratio suggesting a market peak.
- A significant 50% increase in Bitcoin’s price from its lowest point often signals a market trough, although there have been instances of subsequent price declines.
Recent developments in the cryptocurrency market also suggest a potential turnaround. Bitcoin has experienced a 28% surge in the past month, and BTC exchange-traded funds (ETFs) are on the horizon. Cryptocurrency investment funds have seen significant inflows, and meme coins are regaining popularity. Additionally, the legal proceedings involving Sam Bankman-Fried are nearing completion, providing an opportunity for the crypto industry to start fresh.
Meanwhile, Wall Street’s involvement in Bitcoin and cryptocurrencies is increasing, with billions of dollars being channeled into the sector through ETFs. The emphasis is on ensuring investor security and regulatory oversight. These developments contrast with the previous surge in meme coins and NFTs and are supported by the increasing interest of institutional investors seeking reliable assets during uncertain times.
Bernstein’s Bullish Bitcoin Prediction and the Rise of North American Miners
Financial brokerage firm Bernstein predicts that Bitcoin’s price could soar to $150,000 by mid-2025, based on the cyclical nature of Bitcoin price cycles and the upcoming halving event in 2024. The report also highlights the dominance of North American miners in the Bitcoin mining industry, surpassing China. Factors contributing to this shift include operational efficiency, affordable electricity, high liquidity, and strong balance sheets among North American miners.
Bernstein has an “outperform” rating for Riot Platforms (RIOT) and CleanSpark (CLSK), citing their self-mining models, low power costs, and minimal debt as competitive advantages. However, Marathon Digital (MARA) received a “market-perform” rating due to relatively high production costs and a lack of distinct operational advantages.
The cryptocurrency market appears to be entering a new phase of growth and mainstream integration, driven by Wall Street’s involvement, statistical indicators pointing to a market rebound, and the upcoming Bitcoin halving event. While there may be criticisms of the evolving narrative, the increased interest in the sector is influenced by global issues and the search for reliable assets during uncertain times.
What is the Bitcoin halving event?
The Bitcoin halving event occurs approximately every four years and involves reducing the rate of new Bitcoin creation by half. This event has historically led to significant price increases for Bitcoin.
What is a crypto winter?
A crypto winter refers to a bearish phase in the cryptocurrency market, characterized by price declines and consolidation. It is often preceded by a bull market and typically lasts for several months.
Why is Wall Street becoming more involved in Bitcoin?
Wall Street institutions are increasingly interested in Bitcoin and cryptocurrencies due to their potential as reliable assets during uncertain times. They are also focusing on ensuring investor security and regulatory oversight in the digital asset domain.
What is the significance of North American miners in the Bitcoin mining industry?
North American miners are emerging as dominant players in the Bitcoin mining industry, surpassing China. This shift is attributed to factors such as operational efficiency, affordable electricity leading to low production costs, high liquidity, and strong balance sheets among North American miners.
What are some recommended investments in the cryptocurrency market?
According to Bernstein’s report, Riot Platforms (RIOT) and CleanSpark (CLSK) are recommended investments due to their self-mining models, low power costs, and minimal debt. However, Marathon Digital (MARA) received a less optimistic rating due to relatively high production costs and a lack of distinct operational advantages.