Bitcoin and crypto-related stocks remain underrated and are ripe for institutional inflection as pessimism from past regulatory hurdles fades, the analysts wrote in a note on Thursday.
“We remain convinced in our Bitcoin new cycle thesis,” the analysts wrote, adding that Bitcoin has been increasingly adopted by institutional investors and global asset managers. This adoption, they believe, is just the beginning, with the next wave of demand expected to come from crypto bystanders.
The note highlights that Bitcoin ETFs are far from done. Since BlackRock (NYSE:BLK) filed its Bitcoin ETF application on June 15, 2023, Bitcoin has surged by 150%. While early Bitcoin ETF allocations were driven by retail investors, with institutional share at 22%, Bernstein sees strong growth ahead. “We see Bitcoin ETFs as on the cusp of approvals at major wirehouses and large private bank platforms in Q3/Q4,” the analysts noted.
The report also addresses the skepticism from bears who argue that ETF flows are not genuine, pointing out that institutional interest is initially driven by the basis ‘cash & carry trade’ rather than ‘net long’ positions. However, Bernstein views this basis trade as a “trojan horse” for adoption, with these investors gradually evaluating ‘net long’ positions as they become comfortable with improving ETF liquidity. They expect Bitcoin ETF inflows to accelerate in the third and fourth, viewing the current market as offering new entry levels before the next wave of institutional demand picks up.
Bernstein’s analysis also reveals that Bitcoin’s portfolio allocations have ample headroom for growth. Thirteen-F filings show that 22% of AUM is driven by institutional investors, with hedge funds accounting for about 36% of the institutional allocation. The analysts believe that the next step for these investors is to evaluate ‘long’ positions. They also highlight that financial advisors, primarily small to mid-sized with 0.1-0.3% of their portfolio allocated to Bitcoin ETFs, are beginning to drive actual demand.
“We believe growth will be driven by larger advisors approving ETFs and substantial allocation headroom within existing portfolios,” the note said.
Bernstein draws a parallel between Bitcoin’s current price levels and previous cycles, suggesting that Bitcoin in the $60Ks today is equivalent to Bitcoin under $10K in June 2020. “Bitcoin, despite its rally, is still in an early cycle and we see it as attractive here,” they noted.
Asset managers have every incentive to push harder on marketing and distribution to scale their crypto business,” the note concluded.
Source: Cryptocurrency - investing.com
