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Signs of Crypto Summer on the Horizon, According to Morgan Stanley

Morgan Stanley believes historical patterns and key indicators indicate the end of the crypto winter and potential opportunities in the cryptocurrency market.

Morgan Stanley says a crypto summer is in the near future.
Credit: Mike_O/Shutterstock. Copyright: 2018.

NEW YORK, NY – In a recent article, Morgan Stanley examined the history of cryptocurrencies to determine the four seasons of crypto. According to the article, current signs in the crypto market indicate the beginning of the crypto spring.

The Impact of "Halving" on Crypto Supply

Bitcoin plays a pivotal role in setting the tone for the entire crypto market. It undergoes a process known as "halving" every four years, which reduces the rate at which new bitcoins are created. This mechanism is designed to create scarcity and maintain the value of Bitcoin.

It's estimated that by the next halving event, which could occur around April 2024, there will be 21 million Bitcoins in existence. This scarcity, induced by the halving, has historically triggered bull runs in the cryptocurrency market, with each lasting 12 to 18 months after the event.

Referring to this cycle, Morgan Stanley's report states:

"Just as a farmer avoids planting seedlings in the winter or too late in the spring, crypto investors want to know when crypto spring has arrived to maximize their investment 'growing season'."

The Four Phases of Cryptocurrency Prices

The cryptocurrency market can be divided into four distinct phases, each likened to a season:

  1. Summer: Historically, bitcoin experiences its most significant gains shortly after a halving event, initiating a bull run that lasts until it reaches its previous peak.

  2. Fall: After surpassing the previous peak, bitcoin tends to attract media attention, new investors, and businesses, further propelling prices.

  3. Winter: The bear-market decline follows as some investors cash out, causing prices to fall and discouraging new investments.

  4. Spring: This period precedes each halving, with the price recovering from the cycle's low point, but investor interest remains subdued.

Is Crypto Spring Here?

Morgan Stanley provides a set of key indicators to determine whether crypto spring is truly upon us:

  • Time since the last peak, which typically occurs 12 to 14 months before the trough.

  • The magnitude of bitcoin drawdown, historically around 83% off the peak.

  • Miner capitulation, when miners shut down due to losses, affects "bitcoin difficulty."

  • Bitcoin price-to-thermocap multiple, indicating peaks and troughs.

  • Exchange problems can signal a trough due to price declines.

  • Price action, with a 50% increase from the low indicates a potential trough.

Estimates suggest that the next bitcoin halving may occur around April 2024, and current data hints at the end of crypto winter and the beginning of crypto spring.

However, it's crucial to remember that past performance doesn't guarantee future results. Risks such as encryption vulnerabilities, software issues, economic downturns, or government regulations could disrupt the crypto market's cycles.


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