Morgan Stanley Says Bitcoin’s 50% Correction Is Nothing New

The slide is within historical norms, the bank’s analysts said.

Jan 31, 2022 at 10:25 a.m. UTC
Updated Feb 7, 2022 at 2:28 p.m. UTC

Will Canny is CoinDesk's finance reporter.

Bitcoin's 50% drop from November's record high is nothing new and the correction is within historical norms, Morgan Stanley said in a research note entitled “State of the Bear Market.”

Estimating the fair value of cryptocurrencies is difficult because they trade in a speculative manner, helped by the large availability of U.S. dollars and central bank liquidity, the bank’s head of cryptocurrency research, Sheena Shah, wrote in the report published last week.

If bitcoin trades below $28,000 the market may expect further weakness as this is around last year’s lows. On the upside, $45,000 is the level to watch because that would suggest the recent downtrend may be turning around, the report said.

The bank notes that bitcoin has witnessed 15 bear markets since its creation in 2009, and the correction seen in recent months is within the range of what has happened before.

“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 said.

Crypto investors may need to be patient if we are in the middle of a bigger risk market correction, the bank said. Alternatively, leverage in the crypto market would need to rise for a bullish trend to begin as central bank liquidity is removed, it said.

Regulation, non-fungible-tokens (NFT) and stablecoin issuance are areas to watch in the coming months, according to the note.


Read more about
The Festival for the Decentralized World
Thursday - Sunday, June 9-12, 2022
Austin, Texas
Save a Seat Now

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

CoinDesk - Unknown

Will Canny is CoinDesk's finance reporter.

CoinDesk - Unknown

Will Canny is CoinDesk's finance reporter.

Trending

1
CoinDesk - Unknown
San Francisco NFL Player Alex Barrett Taking His Salary in Bitcoin

The most valuable crypto stories for Thursday, May 20, 2022.

The most valuable crypto stories for Thursday, May 20, 2022.

CoinDesk - Unknown
2
CoinDesk - Unknown
Justin Sun Still Thinks Algorithmic Stablecoins Are a Good Idea

The crypto mogul also said LUNA and UST might make good "meme coins," he said on CoinDesk TV’s “First Mover.”

The crypto mogul also said LUNA and UST might make good "meme coins," he said on CoinDesk TV’s “First Mover.”

CoinDesk - Unknown
3
CoinDesk - Unknown
Former BitMEX CEO Arthur Hayes Sentenced to 2 Years Probation

Hayes pleaded guilty to one count of violating the Bank Secrecy Act (BSA) in February, and faced a sentence of up to 12 months in prison.

Hayes pleaded guilty to one count of violating the Bank Secrecy Act (BSA) in February, and faced a sentence of up to 12 months in prison.

CoinDesk - Unknown
4
CoinDesk - Unknown
Market Wrap: Cryptos Decline Amid Choppy Trading, DeFi Tokens Underperform

Aversion to risk remains as volatility returns to stocks and cryptos.

Aversion to risk remains as volatility returns to stocks and cryptos.

CoinDesk - Unknown