- 2023 has been a volatile year for the cryptocurrency market. Bitcoin got off to a hot start, surging from $16,200 to nearly $32,000 over the first few months on the back of several major developments including the largest banking crisis since 2008, but has since struggled to regain that momentum.
“Bitcoin is the leading cryptocurrency, accounting for about 50% of total digital assets by market capitalization, and, in many ways, acts as a proxy for the overall crypto market,” Morgan Stanley analyst Denny Galindo said. “One unique aspect of Bitcoin is that it is designed to go through a process called ‘halving’ that creates scarcity, so that Bitcoins can maintain their value.”
During a crypto summer, “Historically, most of Bitcoin’s gains come directly after the halving,” Galindo said. “This bull-run period starts with the halving event and ends once the price of Bitcoin hits its prior peak.” Galindo outlined several points to consider “when trying to determine whether crypto spring is truly here, or if the market is still in the midst of crypto winter.”
Galindo said that one technical analysis tool that is helpful in determining the crypto season is the Bitcoin price-to-thermocap multiple. “‘Thermocap’ measures how much money has been invested in Bitcoin since its inception,” he said. “A lower Bitcoin price-to-thermocap multiple indicates a trough, while a higher multiple indicates a peak.”
“Based on current data, signs indicate that crypto winter may be in the past and that crypto spring is likely on the horizon,” Galindo said. “However, keep in mind that there have only been three crypto springs to date. In other words, there is still a lot to learn.” They cited Monday’s price swing in Bitcoin – which was caused by an erroneous report that BlackRock’s spot BTC ETF application had been approved – as proof that the market is primed to move higher.
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