Why Bitcoin, Ethereum Could Become A 'Trump Trade' Later This Year: Bernstein

Bernstein analysts suggest that if election sentiment shifts more Republican, crypto could become a primary “Trump trade.”

What Happened: In a note to clients on Monday, analysts Gautam Chhugani and Mahika Sapra highlighted a recent downturn in market sentiment following significant Bitcoin ETF euphoria, The Block reported.

They pointed to two main reasons: outflows from spot Bitcoin BTC/USD exchange-traded funds (ETFs) and concerns over the upcoming spot Ethereum ETH/USD ETF launch.

Bitcoin ETFs, launched in January, have seen substantial success, generating over $14 billion in net inflows and driving Bitcoin's 75% rise in the first quarter.

Recently, the ETFs have experienced a six-day streak of net daily outflows exceeding $100 million each, totaling nearly $1 billion.

The analysts noted that some inflows were driven by the basis trade between CME futures and spot Bitcoin ETFs, indicating that real demand-led inflows might be smaller.

Yet, they emphasized, “adoption is adoption,” and the inflows have contributed to increased liquidity for the ETFs.

They added, “There may be a temporary pause, before the large private bank platforms whitelist the Bitcoin ETFs.

This is the real game-changer for portfolio allocations towards Bitcoin, beyond simply the basis trade.”

The analysts expect these approvals by the latter half of the year predicting that until then, markets might drag.

Currently, Bitcoin ETFs represent just 0.1-0.2% of wealth advisors’ portfolios, with potential to grow to 2-3%.

Also Read: Bitcoin Miner Heats Finnish Town Using Waste Heat From Mining BTC

Ethereum ETFs: Initial Impact May Be Limited

Chhugani and Sapra also addressed the anticipated launch of spot Ethereum ETFs, predicting it could be a “non-event” with lower flows compared to Bitcoin ETFs.

They attributed this to the absence of a staking feature but still foresee demand similar to that for Bitcoin ETFs, albeit on a smaller scale.

The U.S. Securities and Exchange Commission recently approved 19b-4 forms for eight spot Ethereum ETFs from firms like BlackRock and Fidelity.

However, these issuers must have their S-1 registration statements become effective before trading can begin.

The analysts argued that Ethereum lacks a clear narrative akin to Bitcoin’s “digital gold,” noting descriptions such as "decentralized computing" or "web3 app store" are outdated.

However, they see Ethereum's potential as a tokenization platform for stablecoin payments and real-world assets, which could be bolstered by improved regulatory clarity under a potential Republican presidency.

"Thus, ETH ETFs may be weak initially, but if the election sentiment shifts more Republican, crypto would end up as the primary ‘Trump trade' and hopes of a favourable regulatory regime would change the ‘use-case' narrative around blockchains such as ETH," they said.

Chhugani and Sapra concluded by emphasizing the long-term potential of the new crypto bull cycle, viewing the current market weakness as a potential opportunity for attractive entry levels.

In their previous week’s analysis, the Bernstein team predicted that spot Bitcoin ETFs were nearing approval at major wirehouses, maintaining a bullish $200,000 Bitcoin price target by the end of 2025.

Future Insights At Benzinga’s Event

These evolving trends and insights into the digital assets market will be explored further at Benzinga’s Future of Digital Assets event on Nov. 19.

Industry leaders and investors will gather to discuss the dynamic landscape of digital assets, offering valuable perspectives on the future direction of the market.

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