Morgan Stanley Calls Bitcoin's 50% Retracement Normal, Tells Crypto Investors To Be Patient

Investment banking giant Morgan Stanley MS believes that Bitcoin’s BTC/USD 50% correction over the past three months is nothing new.

What Happened: In a research note titled “State of the bear market” seen by CoinDesk, the bank’s head of cryptocurrency research Sheena Shah said that the correction is within historical norms.

Shah pointed out that Bitcoin has seen 15 bear markets since it was first created in 2009 and the most recent correction was still well within the range of previous downtrends.

“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,” she 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.”

Also Read: Bitcoin, Ethereum, Dogecoin Expected To Remain Muted With Lunar New Year — Is It Time To Buy When 'Bulls Become Bears?'

Why It Matters: Bitcoin hit an all-time high of $68,789.63 on Nov. 10, 2021 but is currently trading 46% lower at a price of $37,056.12. The leading digital asset fell to a low of $33,184 earlier this month and triggered large-scale liquidations across the wider crypto market.

However, as Morgan Stanley’s cryptocurrency research unit pointed out, Bitcoin’s dramatic decline may not be a reason to panic as some investors think it to be.

Benzinga reported earlier this week that historically, Bitcoin has taken an average of 64 days to recover from every major price crash, excluding bear markets. When bear markets are included, Bitcoin has taken an average of 257 days to reach a new high.

Data also shows that Bitcoin has gained an average of 362% after every major correction.

Photo: Courtesy of CryptoWallet.com Images on Flickr