Is cryptocurrency winter over? Could Bitcoin Halving Lead to $100,000 for BTC?

The cryptocurrency landscape is undergoing a transformation, with increased participation from Wall Street and the anticipated Bitcoin halving event signaling the potential end to the prolonged “crypto winter.”

A recent analysis by Morgan Stanley titled “Will there be a cryptocurrency spring?” provides a comprehensive look at the cyclical behavior of cryptocurrency markets.

The report, written by analyst Denny Galindo, shows similarities between the four-year cryptocurrency cycle and the four seasons. Historically, the summer phase of this cycle begins with the Bitcoin Halving event, in which the rate of new Bitcoin creation is halved. This event continued to result in significant price increases for Bitcoin.

After reaching new highs, Bitcoin often attracts media attention and attracts new investors and companies. This bullish phase usually culminates when Bitcoin surpasses its previous all-time high, marking the peak of the bull market.

However, after this peak, the market enters a bearish phase similar to winter. This phase historically lasted about 13 months and saw the price of Bitcoin fall significantly from its peak.

It is a time of market integration, correction, and reflection. But before each halving, the price of Bitcoin typically rebounds from its lows, even as investor enthusiasm has subsided, reminiscent of the cautious optimism of early spring.

Galindo highlighted that since 2011, there have been three cryptocurrency winters, each lasting about 13 months. He also highlighted the pivotal role of the Bitcoin halving event in boosting Bitcoin’s value, noting that historically most of Bitcoin’s gains have occurred immediately following a halving event.

Signs that we may be entering a bullish phase

Statistical indicators in the report provide additional insights.

• During previous crypto winters, troughs in Bitcoin’s value typically surface about 12 to 14 months after the peak.
• Bitcoin prices have historically plummeted about 83% from their previous highs during cryptocurrency winters.
• The “Bitcoin difficulty” metric, which measures the ease of mining, is very important. This decrease in difficulty often means we are nearing the bottom of the market.
• “Bitcoin Price-to-Thermocap Multiple” is another important indicator. Lower ratios indicate market lows, while higher ratios indicate market peaks.
• A significant 50% rise in the price of Bitcoin from its lows often marks a market low, but there have also been instances of such rises being followed by significant price declines.

Bitcoin has surged 28% over the past month. BTC Exchange Traded Fund (ETF) will be launched soon. Last week, cryptocurrency investment funds recorded their largest weekly inflows since mid-2022. Meme coins are becoming popular again. Additionally, the rigorous legal process involving Sam Bankman-Fried is almost complete, giving the cryptocurrency world an opportunity for a fresh start.

Meanwhile, Wall Street is making significant headway into the Bitcoin space, with billions of dollars invested in the sector through ETF products. There is widespread discourse about the pivotal role of traditional institutions in powering the digital asset space. Their strategy is two-fold: ensure token security for investors and strengthen regulatory oversight. Particularly in light of major upheavals such as the FTX scandal, reliance on proven and effective strategies is being emphasized again. Wall Street’s current trajectory is geared toward uncovering long-lasting products, with a focus on ETFs, tokenized securities and stablecoins. This approach stands in stark contrast to the previous surge in meme coins and NFTs, which were noticeably overvalued at the height of the pandemic.

While some may be critical of the evolving narrative, it is undeniable that there is a rekindling of interest in the sector as they feel it has strayed from the original intent of cryptocurrencies (to provide an alternative to traditional finance). These changes are influenced by broader global issues, such as unrest in the Middle East and concerns about looming inflation. BlackRock CEO Larry Fink attributed Bitcoin’s recent surge to investors seeking reliable assets in uncertain times, calling it a “flight toward quality.”

In an interview with Fox Business earlier this month, Fink said: “In times of uncertainty, people are drawn to assets they believe are trustworthy, such as government bonds, gold and cryptocurrencies. “I see cryptocurrencies increasingly serving as that haven.” It’s notable that Fink, once a cryptocurrency critic primarily concerned about Bitcoin’s impact on the environment, is now openly supporting Bitcoin in the mainstream media.

Bernstein’s Optimistic Bitcoin Prediction and the Rise of North American Miners

Financial brokerage firm Bernstein has made an optimistic forecast, predicting that the price of Bitcoin will surge to $150,000 by mid-2025. This forecast is based on the cyclical nature of the Bitcoin price cycle, which often coincides with the four-year pattern of Bitcoin halving events. The next halving is scheduled for April 2024, and Bernstein suggests this event could be a significant catalyst for the expected price surge.

The report also details the evolving landscape of Bitcoin mining. This highlights the transformation of Bitcoin miners into industrial-scale enterprises, with North America emerging as the dominant player, surpassing China. This change in dominance is due to factors such as operational efficiency, cheap power leading to low production costs, high liquidity, and strong balance sheets among North American miners.

Bernstein expressed favorable views on Riot Platform (RIOT) and Cleanspark (CLSK), giving them both an ‘outstanding’ rating. Bernstein analysts Gautam Chhugani and Mahika Sapra highlighted the competitiveness of these companies, citing their proprietary mining model, low power costs and minimal debt. Conversely, the report is less bullish on Marathon Digital (MARA), assigning it a “Market Perform” rating with a $8.30 price target.

Despite its status as the industry’s largest miner, Marathon Digital’s production costs are relatively high and it lacks a clear operating advantage. Interestingly, while some miners are diversifying into areas such as AI and high-performance computing, Riot and CleanSpark remain committed to Bitcoin mining. Bernstein believes this counter-cyclical investment strategy will yield dividends as the Bitcoin price cycle shifts in his favor.

To summarize

In summary, with increased interest from Wall Street, statistical indicators pointing to a market rebound, and the upcoming Bitcoin halving event, the cryptocurrency market appears poised for a new phase of growth and mainstream consolidation.

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