Bitcoin's 50% drop from the all-time high in November is nothing new and the correction is within historical norms, Morgan Stanley said in a research note titled "State of the Bear Market."
It is difficult to estimate the fair value of cryptocurrencies because they are traded speculatively, aided by the wide availability of US dollars and central bank liquidity, Sheena Shah, the bank's head of cryptocurrency research, wrote in the report published on Tuesday. last week.
If bitcoin trades below €28,000, the market can expect further weakness as it sits around last year's lows. On the upside, €45,000 is the level to watch as this would suggest that the recent downtrend may be reversing, according to the report.
The bank notes that bitcoin has seen 15 bear markets since its inception in 2009, and the correction seen in recent months is well within the range of what has gone before.
“Until bitcoin is commonly used as a currency for transactions in goods and services (whether in the crypto or non-crypto world), it is difficult to value bitcoin in fundamental demand beyond asset speculation,” Morgan Stanley said.
Crypto investors may need to be patient if we are in the midst of a larger risk-on market correction, the bank said. Alternatively, leverage in the crypto market would need to increase for an uptrend to begin as central bank liquidity is removed, he said.
Regulation, non-fungible tokens (NFTs), and stablecoin issuance are areas to watch in the coming months, according to the note.
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