Despite Selloff, Bitcoin Remains a ‘Trump Trade’: Bernstein

Bitcoin experienced a notable 13% decline over the weekend as global equity markets reacted to concerns about a U.S. recession and turmoil in the Yen markets.

Analysts from Bernstein noted that Bitcoin’s immediate response as a ‘risk-off’ asset was expected. They pointed out that this trend has been previously observed, particularly during the March 2020 flash crash, as Bitcoin is the only market that operates through the weekend.

Despite the recent drop, Bernstein remains optimistic about Bitcoin’s future. The analysts believe that if rate cuts and increased monetary liquidity become common responses to recession fears, Bitcoin, often termed “Digital Gold,” is likely to see an upward revaluation.

They highlighted that unlike in earlier cycles when investing in Bitcoin was more cumbersome through cryptocurrency exchanges, Bitcoin ETFs are now available and are highly liquid, with daily trading volumes around $2 billion.

Bernstein also referenced Bitcoin’s connection to political factors, dubbing it a “Trump trade” due to the crypto market’s inclination toward Trump as a candidate favorable to cryptocurrencies. They observed that as the odds between Trump and Harris tightened, Bitcoin and the broader crypto market reflected weakness.

Looking ahead, they predict that Bitcoin and crypto markets will likely stay range-bound until the U.S. elections, influenced by events such as presidential debates and the election outcomes.

Additionally, Bernstein mentioned that ETFs have experienced significant inflows, totaling nearly $1.2 billion in just two weeks, although these gains have been partially negated by outflows from Grayscale’s ETHE.

Overall, Bernstein suggests that the Bitcoin and crypto markets are likely to be influenced by macroeconomic and political cues for much of the third quarter of 2024. They recommend that investors interested in the “Trump trade” consider adding Bitcoin or Bitcoin-related equities to their portfolios. If general equity markets recover due to a Federal Reserve response, Bernstein anticipates that Bitcoin and crypto markets will follow suit.