Bitcoin Price Swings Resemble Dotcom Crash: Morgan Stanley

Bitcoin Price Swings Resemble Dotcom Crash: Morgan Stanley”

American banking giant Morgan Stanley has predicted a dire end to the bitcoin phenomenon, comparing it to the tech bubble of 2000.

Morgan Stanley's retail investors have put most of their cash balances at the bank to work in the market, and are bringing more money into those accounts, Kelleher said at a financial industry conference in London.

Bitcoin is behaving a lot like how the Nasdaq did around the dot-com bubble, but the timeline is unfolding 15 times faster, according to research published by Morgan Stanley on Monday.

"Just that the bitcoin rally was around 15 times the speed", said Sheena Shah, strategist at Morgan Stanley, as quoted by CNBC.

For instance, Shah looked to market rallies, where both the Nasdaq and bitcoin advanced between 250% and 280% during their peaks foreshadowing declines.

Trading volume could be another red flag.

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The following is an illustration from the Morgan Stanley report that was subsequently Tweeted by a WSJ reporter. If it's a harbinger of things to come, the BTC price has not yet reached a floor.

Perhaps most intriguing to bitcoin enthusiasts will be Morgan Stanley's finding that these types of weak spots have historically preceded rallies in the underlying asset. During those pullbacks, the price has dropped anywhere from approximately 30% to more than 90% at its worst.

Bitcoin and other cryptocurrencies are moving on speculation, and their trading volume continues declining with sideways movement.

The most recent declines have seen the bitcoin price tumble some 70% from its highs of almost $20,000 at year-end 2017 to less than $7,300 in recent days. The analyst noted that bitcoin's trade volumes surged 300 percent since December, but keep falling each rally ahead of the bear markets.

Since it launched in 2009, bitcoin has experienced four bear markets, during which it lost 45% of its value. It's also true that increasing trading volume doesn't suggest higher trader interest; the higher volume could also be an indication of higher selling activities. And based on the chart below - which overlays bitcoin's one-year performance over a 15-year Nasdaq line - they have some serious similarities. In the report, they highlighted the risks associated with bitcoin investing, ranging from a lack of deposit insurance to the absence of regulation.

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