Bernstein Blames Market Factors, Not Bitcoin, for Crypto Bloodbath

A weekly report from the brokerage and research firm Bernstein says bitcoin (BTC) is not the cause of the recent crypto market crypto that caused over $1 billion in liquidations.

According to analysts at the brokerage firm, the leading cryptocurrency will trade range-bound in the coming months until the United States elections are over. This prediction comes as bitcoin falls to the $50,000 level for the first time since Febuary 2024. 

The experts expect the market to respond to macroeconomic and political catalysts like the presidential debate and the final election outcome in November, which will see the emergence of a new United States president. 

Bitcoin Not At Fault

According to Bernstein in its latest report, Bitcoin is a “Trump trade” because the market favors the former U.S. president and presidential candidate Donald Trump due to his pro-crypto stance. Analysts suggested that investors add Bitcoin or Bitcoin-related equities to their portfolios if they seek exposure to a potential Trump trade.

Since U.S. President Joe Biden dropped out of the presidential race, the odds between Trump and Vice President Kamala Harris, who replaced Biden, have narrowed on the leading prediction platform Polymarket. Bernstein analysts suggest that Harris’s closing in on Trump contributed to the weak trading of BTC and the crypto market. However, they expect the crypto market to rebound if the broader equity markets recover following a Federal Reserve response.

Although Bitcoin is reacting to election trends, analysts say the crypto market bloodbath is not the fault of the leading crypto asset or tied to crypto-specific issues. The broader decline was triggered by a dislocation in the yen market and fears of a U.S. recession, which is evident in billions of dollars being wiped from the U.S. stock market today.

Analysts Remain Optimistic on BTC

Regardless of the state of the crypto and traditional markets, Bernstein analysts said they do not see any “incremental negatives” for crypto because they expect risk assets like BTC to regain their value if U.S. recession fears respond to the usual template of rate cuts and monetary liquidity.

The increasing institutional adoption of crypto investment products like the spot Bitcoin exchange-traded funds (ETFs) signal investor belief in the long-term products of this cryptocurrency. Bernstein expects more “wirehouse approvals” into the third and fourth quarters of the year, providing further on-ramps for asset allocation to BTC.

Meanwhile, analysts asserted that flows into the spot Ethereum ETFs, which were off to a rough start, will stabilize in the coming weeks.