Banks Are Flipping Bullish on Bitcoin Again, and Here's Why It's Concerning.

In recent months, the banking industry has taken a noticeable turn towards optimism, making bullish forecasts about the cryptocurrency market. It brings to mind the greed we witnessed during the peak of the 2021 crypto bubble. In this edition, we delve into these forecasts, share our perspectives, and explore potential consequences.

Morgan Stanley: A Bullish Outlook

To start off, in more recent news, Morgan Stanley just put out a new report titled “Will Crypto Spring Ever Come?”, which talks mainly about the four-year cryptocurrency cycle and the significance of Bitcoin’s halving events on market cycles in shaping the crypto landscape.

In the report, their team predicts that the crypto winter is officially over, and Bitcoin’s next halving will kick off a new bull run as it has in the past.

Morgan Stanley analyst Denny Galindo — author of the report — wrote:

The Four Seasons of Crypto

While many of us can agree, Galindo likens the cryptocurrency cycle to the changing seasons, with four distinct phases:

1. Summer (Euphoria Phase): Begins with the halving event, driving Bitcoin price higher, attracting attention, and sparking interest, much like a summer season.

2. Fall (Bull Market Climax): Follows the summer phase, marked by Bitcoin surpassing its old high and the peak of the bull market, resembling the transition from summer to fall.

3. Winter (Bearish Phase): Similar to the onset of winter, this phase sees market cooling down as investors lock in profits and Bitcoin's price declines significantly.

4. Spring (Recovery Phase): Preceding the next halving event, Bitcoin rebounds with cautious optimism, akin to early spring, preparing for the next bull run.

Morgan Stanley claims that each crypto winter often lasts around 13 months and coincides with Bitcoin halving events, driving its value.

Differing Perspectives

While Morgan Stanley places great emphasis on the halving event's role in driving crypto market growth, we have reservations about this theory. As evident in the chart below, market trends were on the rise before and after halving events, owing to various factors such as Tether price manipulation, global economic concerns, and the COVID-19 pandemic's impact, which we saw during the last halving in 2020.

Moreover, the halving event affects only the production of new Bitcoin, not the existing supply. Consequently, if demand wanes, as it has been, the halving's impact diminishes. We were bullish during previous halving events, as those were times when the market was undervalued and global attention on Bitcoin was limited.

In the upcoming fourth halving event, market manipulation by entities like Tether, Binance, and FTX will not be rigging the markets as regulators crack down.

Relying on three weak data points and colorful charts to justify another bull run appears more as an emotional plea to investors rather than grounded reasoning. We believe it's imperative to consider various factors, with the halving event as a supplementary element.

In the report, Morgan Stanley mentions 5 Signs of Crypto Spring:

• Trough typically surfaces 12-14 months after the peak.

• Bitcoin's value declines about 83% from its all-time high.

• Miner capitulation as mining difficulty decreases.

• Bitcoin Price-to-Thermocap Multiple indicates market peak or trough.

• A substantial 50% price increase from the lowest point signals a trough.

Standard Chartered's Bold Predictions

Standard Chartered, one of the United Kingdom's largest banks, has made headlines with its predictions for Bitcoin's price. They forecast a price of $50,000 by the end of 2023 and $120,000 by the end of 2024, citing recent market activity and its implications for miners. While this prediction appears ambitious, history has shown that banks often promote extreme price forecasts, potentially harboring ulterior motives.

This prediction seems extremely outlandish, a common occurrence during previous bubbles. Banks often entice investors with extravagant price predictions, only to offload their holdings once there is sufficient exit liquidity.

We witnessed a similar scenario in 2008 when Goldman Sachs promoted Mortgage-Backed Securities as the "next big thing" while secretly shorting behind the scenes, ultimately contributing to the economic downturn.

In 2021, this bank made similar predictions, claiming that Bitcoin would surpass $100,000. However, shortly after reaching all-time highs, Bitcoin's price plummeted from $68,000 to $15,000 within a year, just as we had foreseen.

While many crypto investors may become enthusiastic when banks release such predictions, I view it as a significant red flag, signalling an impending collapse.

JP Morgan predicts long-term Bitcoin price will reach $150,000

Global investment bank JPMorgan has issued a recent report predicting that Bitcoin's long-term price may reach $150,000, up from the $146,000 prediction they made last year.

JPMorgan strategists acknowledged that Bitcoin faces its biggest challenge in terms of volatility and the boom-and-bust cycles that hinder further institutional adoption.

As Bitcoin neared all-time highs, JP Morgan actively promoted price targets of $140,000+ and even encouraged people to "buy the dip" in their reports. What followed was a monumental collapse across the crypto sector.

Why Banks Cannot Be Trusted

When I first joined the crypto space nearly a decade ago, the community had a pervasive sense of resentment and distrust toward banks, and this sentiment was justified. After all, banks were the primary culprits behind the 2008 recession, responsible for numerous regulatory violations that enriched themselves while leaving society impoverished.

The banking system can be likened to a giant Ponzi scheme, and its continued growth isn't due to a superior understanding of society but rather to naivety. Over time, I observed that many cryptocurrency enthusiasts became increasingly accommodating of banks. Banks initially urged everyone to avoid Bitcoin at its all-time lows, only to turn bullish at its peak, which some Bitcoin enthusiasts appreciated because it seemed to validate their narratives. People tend to praise those who share similar views, even when they are egregiously mistaken.

Unlike most of the crypto community, who exhibit short-term attention spans, I remember many instances where banks let people down. For instance, near the peak, JP Morgan promoted incredibly optimistic targets that many trusted and invested in.

Goldman Sachs also infamously advised people to divest from crypto and predicted it would plummet to zero, just as the COVID-19 pandemic began. However, we witnessed a historic bull run that propelled prices beyond $60,000, after which they switched to a bullish stance. Predictably, prices dropped shortly thereafter.

While many like to call out Jim Cramer and others for being contraindicators, I believe that banks are the easiest to follow. When they advise buying, it's often a signal to sell, and when they advise selling, it's often a cue to buy. Following this strategy has proven very successful for me over the years.

In conclusion, banks are now displaying a notably bullish outlook on Bitcoin. This will likely receive praise from so-called "crypto-influencers," and hope will spread throughout the space. However, it's important to remember that we are still in the early stages of a bear market, which has already become the longest one in Bitcoin's history, as I predicted. We have not yet experienced a fraction of the fear that usually precedes all-time highs. We have dozens of X posts and articles explaining why we believe we are still in a bear market, and will continue sharing them for our viewers.

As always, the short-term future remains uncertain, but I must note that the stock market appears to be teetering on the edge of a cliff. Despite common belief, stock and crypto markets have exhibited a close correlation over the last decade. If mainstream financial markets ultimately plummet due to economic weaknesses, it's reasonable to expect a similar decline in the crypto market. Retail investors may experience despair, but banks will likely short the market and profit from the downturn.

Share Your Thoughts

As always, our goal with this newsletter isn't to criticize Bitcoin or encourage people to sell; instead, it's to provide education. We want everyone, including those who disagree, to make money, and it’s very important to lesson to all perspectives.

Best of luck everyone - thank you for reading. I really enjoy creating this articles for you, and sharing my insights. If you have any future things you would like me to discuss, please reach out on X and I will be happy too! Also, if you want to support us, please subscribe to our premium newsletter so we can continue making these posts!

We would also love to hear your thoughts on the increasing trend of banks becoming bullish? Do you agree with them, or think they have other plans. Let us know!

Stay informed, and stay tuned for more updates from WhaleWire!