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Bernstein, a renowned research and brokerage firm, has predicted that spot Bitcoin ETFs are nearing approval at major brokerages. The firm maintains its target of $200,000 for Bitcoin by the end of 2025.
While some argue that spot Bitcoin ETF trading is “over”, Bernstein analysts believe they are ignoring two important factors. Arguments against Bitcoin ETF trading generally revolve around early allocations driven by individual investors, with institutional participation limited to underlying “cash and carry” trading rather than net long positions.
This means ETF flows are not “real,” according to a note to clients Tuesday by Gautam Chhugani and Mahika Sapra.
But Bernstein analysts argue that institutional basis trading is a “Trojan horse” for adoption. These investors are now considering “net long” positions as they take comfort in increased ETF liquidity:
“We believe the 'basis trade' is driven mostly by hedge funds, which make up 36% of institutional allocation. However, based on our conversations with investors involved in Bitcoin ETFs, we can say that the next step after the basis trade is to consider 'long' positions.”
Additionally, distributions on financial advisors represent real demand. Disclosures reveal mostly small-to-midcap advisors with 0.1-0.3% of their portfolios allocated to Bitcoin ETFs. Analysts believe growth will be driven by larger advisors endorsing ETFs and significant allocation headroom in existing portfolios.
Another factor contributing to this prediction is the increasing adoption of Bitcoin as a treasury reserve asset. New FASB guidelines have made it easier for companies to keep this asset on their balance sheets by taking into account market gains rather than just impairment losses. Analysts said the following on the subject:
“We expect a new surge in demand from corporate treasuries in 2024, with MicroStrategy and BTC miners leading the demand today. Recently, Block announced that it will purchase monthly BTC from Bitcoin-related gross profits for the next 12 months.”
Although U.S. spot Bitcoin ETFs are currently experiencing a four-day streak of net outflows totaling $714.4 million, with another $154.4 million leaving the funds on Tuesday, Bernstein analysts expect net inflows to start accelerating again. “We expect Bitcoin ETF inflows to accelerate again in Q3/Q4, with current volatile markets providing new inflow levels before the next leg of institutional demand begins.” they said.
Last week, Chhugani and Sapra raised their price targets for Bitcoin from $150,000 to $200,000 by the end of 2025. Ultimately, analysts aim for Bitcoin to reach $500,000 by the end of 2029 and $1 million in 2033.
Reiterating these targets to clients today, Bernstein analysts said BTC in the current $60,000 range is equivalent to prices below $10,000 in June 2020, when BTC was in the same range after the halving.
*This is not investment advice.