Morgan Stanley Strategists Warn of Crypto 'Harvest Season' Before Potential Winter

Introduction

Morgan Stanley strategists are cautioning cryptocurrency investors that the market may have entered a 'fall season' within Bitcoin's four-year cycle, urging them to harvest their gains before a potential 'crypto winter' sets in. According to Morgan Stanley's strategists, historical data indicates a consistent pattern of three upward movements followed by one downward movement in Bitcoin's price cycles.

The Crypto Harvest Season

In a podcast episode titled 'Crypto Goes Mainstream,' Denny Galindo, an investment strategist at Morgan Stanley Wealth Management, explained that now is the time to secure profits. He stated, 'We are in the fall season right now. Fall is the time for harvest. So, it’s the time you want to take your gains. But the debate is how long this fall will last and when the next winter will start.'

Bear Market Indicators

On November 5, Bitcoin's price fell below $99,000, breaking a key indicator and sparking debate about the market's current state. This drop placed BTC below its 365-day moving average, according to CryptoQuant's head of research, Julio Moreno. The drop is widely seen as a strong bearish signal, with the 365-day moving average considered an important technical indicator reflecting the overall market direction.

Liquidity Stagnation

In addition to Bitcoin's recent dip, crypto market maker Wintermute reported that key drivers of market liquidity have stalled. They noted that stablecoins, ETFs, and digital asset treasuries have been major sources of crypto liquidity, and that inflows across all three components have plateaued.

Institutional Perspective

Despite Bitcoin's volatility, institutional investors remain optimistic. Michael Cyprys, Head of US Brokers, Asset Managers and Exchanges at Morgan Stanley Research, stated that institutional investors have begun to view Bitcoin as a legitimate component of diversified portfolios, despite its volatility. He added, 'Some institutional investors view Bitcoin as digital gold or a macro hedge against inflation and monetary debasement,' noting that ETFs have made exposure easier. However, he pointed out that institutional allocations tend to be slower-moving due to internal processes, risk committees, and long-term mandates.

Growing Adoption

Cyprys noted that adoption is expanding as regulation and ETF infrastructure have lowered barriers to entry. He highlighted that spot Bitcoin and Ether ETFs have brought billions of dollars in assets under management (AUM) into the space. SoSoValue data indicates that US spot Bitcoin ETFs currently have total net assets exceeding $137 billion, while spot Ether ETFs hold $22.4 billion.

Conclusion

As investors navigate the evolving landscape of the cryptocurrency market, Morgan Stanley's insights offer valuable perspective on potential market dynamics. However, thorough research and risk assessment are crucial before making any investment decisions.