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Banking giant Morgan Stanley reported that 50% price corrections in Bitcoin have been a thing of the past as well. It mentions some key levels on the upside and downside for investors to watch.
The world’s largest cryptocurrency Bitcoin (BTC) has already corrected by more than 50% from the all-time high levels of November 2021. As of press time, Bitcoin has been trading at $37,163 levels with a market cap of $704 billion. Banking giant Morgan Stanley has recently published a report dubbed “State of the bear market” wherein it notes that Bitcoin 50% price drop is nothing new. Morgan Stanley said that such corrections have also been a thing of the past.
As we know, Bitcoin and other cryptocurrencies are highly volatile assets. Thus, estimating their fair value is difficult as they trade in a speculative manner. Morgan Stanley writes that over the last year, the US Central Bank has been flushing heavy liquidity into the market. Reportedly, the Fed has nearly doubled its balance sheet since the pandemic time.
Now, the central bank has been initiating some quantitative tightening measures. Fed Chairman Jerome Powell has already stated that the first-rate hikes are coming as soon as this March. Morgan Stanley’s head of cryptocurrency research, Sheena Shah, explains that these measures will likely have an impact on the crypto market as well.
Key Levels to Watch for Bitcoin
Currently, bitcoin is trading in the range between $36,000-$38,000. On the downside, if the BTC price falls below $28,000 the market might see further weakness. On the upside, if Bitcoin breaches $45,000 once again, it might suggest the end of the downtrend as per the Morgan Stanley report.
Morgan Stanley also notes that Bitcoin has witnessed a total of 15 bear markets since its inception in 2009. Thus, it adds that the recent correction is quite in line with what has happened before. The banking giant stated:
“Until bitcoin is commonly used as a currency for goods and services transactions (in the crypto or non-crypto world), it is hard to value bitcoin on fundamental demand beyond the asset speculation”.
Morgan Stanley further added that crypto investors need to be patient as we could possibly be in the middle of another major market correction. Furthermore, it adds that as the central bank liquidity shrinks, the leverage in the market should rise for the BTC price rise to continue.
Morgan Stanley believes that regulations, NFTs and stablecoin issuance will be key areas to watch in the coming months.