Bitcoin Fundamentals Have Never Looked Better: Bernstein

Bitcoin (BTC) is expected to emerge as a global macropolitical asset with a more-than $3 trillion market cap, quadrupling by mid-2025, broker Bernstein said in a research report Monday.

Bernstein says the cryptocurrency’s fundamentals have never looked better, noting that 70% of the outstanding supply hasn’t been traded in the past year.

“This is an all-time high in bitcoin’s history – these churn rates are extraordinary for a financial asset, particularly one known for its exponential moves driven by a supply squeeze,” analysts led by Gautam Chhugani wrote.

Another potential positive catalyst is the bitcoin halving, likely in April or May next year. According to Bernstein, the halving is expected to reduce monthly selling pressure from miners to less than $500 million from around $1 billion at today’s prices of $37,000 per BTC.

More favorable accounting treatment based on new Financial Accounting Standards Board (FASB) guidelines, which will allow companies to book mark-to-market gains on bitcoin inventory “will favorably impact corporate preference for holding bitcoin as a treasury asset, thus creating new demand sources from corporates,” the report said.

Another tailwind is the approval of a U.S.-listed spot bitcoin exchange-traded-fund (ETF), which will make it easier for companies and retail to gain access to the cryptocurrency. “U.S. bitcoin ETF is on track for an early 2024 approval, as the Securities and Exchange Commission (SEC) continues to engage on the applications from leading asset managers,” the authors wrote.

Bitcoin’s role as a “debasement hedge” may grow in prominence given the scenario of “debt monetization and/or a more gruesome slowdown in early 2024, with the lagging effect of rates over-correcting for inflation,” the report added.