- Analysts at Bernstein projected that Bitcoin ETFs will soon be approved by big wirehouses and significant private bank platforms.
- The analysts reiterated their projected price of $200,000 for Bitcoin by the end of 2025 and stated that the institutional base trade is a Trojan horse for acceptance.
Analysts at research and brokerage firm Bernstein said that although proponents of bitcoin bears contend that the spot Bitcoin exchange-traded fund trade is complete, they are omitting two important details.
Gautam Chhugani and Mahika Sapra wrote in a note to clients on Tuesday that the arguments against the Bitcoin ETF trade center on the fact that early allocations were driven by retail investors and that institutional involvement was limited to the basis cash and carry trade rather than net long positions, implying that the ETF flows are not real.
The analysts at Bernstein concurred that the institutional involvement in spot Bitcoin ETF participation was just 22%, as disclosed by recent 13F filings, and that increasing liquidity in CME bitcoin futures contracts following the debut of the ETF was proof of the basis trade.
But what the bears are missing, according to Chhugani and Sapra, is that Bitcoin ETFs are about to get approved by significant wirehouses and big private bank platforms in Q3 or Q4 of this year. This is in line with previous opinions expressed by Bitwise CIO Matt Hougan and Bloomberg ETF analyst Eric Balchunas.
The institutional basis trade, according to Bernstein analysts, is a Trojan horse for adoption, and as investors gain comfort with better ETF liquidity, they are now assessing net long holdings.
Here, “basis trade” refers to a tactic used by institutional investors to profit from price spreads when futures contracts mature by purchasing spot Bitcoin ETFs and selling CME bitcoin futures contracts. This is known as arbitraging the difference between spot and futures prices.
About 36% of the institutional allocation, or hedge funds, are the main force behind the “basis trade,” in our opinion. However, the analysts stated that following the basis trade, the next stage is to evaluate “long” positions based on their talks with investors who are dabbling in Bitcoin ETFs.
Additionally, the allocations made by financial advisers reflect actual demand, and according to 13F reports, the majority of small- to mid-sized advisors have 0.1-0.3% of their portfolio invested in Bitcoin ETFs. The larger advisors who approve ETFs and the significant allocation headroom in the current portfolios, they said, are what we think will propel growth.
The growing acceptance of Bitcoin as a treasury reserve asset is another cause. New FASB guidelines facilitate the accounting for mark-to-market gains rather than only impairment losses, which makes it simpler for firms to maintain the asset on their balance sheets.
In 2024, we anticipate a new wave of demand from corporate treasuries, led by miners of Bitcoin and MicroStrategy at the moment. Chhugani and Sapra reported that Block recently announced a monthly purchase of Bitcoin from gross revenues tied to Bitcoin for the following 12 months.
ETFs for bitcoin are “not done.”
Although there has been a net outflow of $714.4 million from U.S. spot Bitcoin ETFs over the past four days, with a further $154.4 million leaving the funds on Tuesday, Bernstein analysts anticipate that net inflows will pick up speed once more.
Before the subsequent leg of institutional demand picks up, we anticipate that Bitcoin ETF inflows will rise once more in Q3/Q4. In the meantime, the erratic markets are offering new entry points. They suggested that tactically, low to mid-60Ks/high $50Ks (if we reach there) could be intriguing entry points.
For Bitcoin, $60,000 is the new $10,000
Because of the anticipated surge in demand for bitcoin through the spot Bitcoin ETFs and the modeling of the marginal cost of production for bitcoin miners, Chhugani and Sapra increased their price target for the cryptocurrency last week from $150,000 to $200,000. In the end, economists expect bitcoin to hit $1 million by 2033 and $500,000 by the end of 2029.
The Bernstein analysts reiterated those predictions to clients today, stating that a bitcoin in the current $60,000 area is equal to less than $10,000 in June 2020, the same time frame following the halving of the cryptocurrency.
The researchers also noted that although bitcoin has had a substantial 53% gain since the beginning of the year, it might still be early in the cycle.
This time, the difference is that institutional demand is being driven by the ETFs, and top asset managers are pushing the organization’s marketing efforts.
Blackrock, for example, which has $20 billion in AUM in Bitcoin ETFs, has recognized the opportunity and is probably aware of the potential for a $80-100 billion cryptocurrency market over the course of the cycle, they wrote. We believe that in order to grow their cryptocurrency company, asset managers have every reason to work more on marketing and distribution.
Disclaimer : This article was created for informational purposes only and should not be taken as investment advice. An asset’s past performance does not predict its future returns. Before making an investment, please conduct your own research, as digital assets like cryptocurrencies are highly risky and volatile financial instruments.
