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Amid the battering the crypto market has received on Monday, Bernstein said Q3 for Bitcoin will be heavily influenced by macroeconomic factors and political developments.
"Overall, the Bitcoin and crypto market will likely trade off macro and election cues for most of Q3, 2024," the Bernstein analysts wrote in a note Monday morning, highlighting the interconnectedness of digital assets with broader economic and political trends.
The report notes that BTC experienced a significant correction over the weekend, continuing the bloodbath on Monday, attributing it to "fears in equity markets" and wider economic concerns, rather than crypto-specific issues.
Despite the recent volatility, Bernstein remains optimistic about Bitcoin's long-term prospects.
"We don't see any incremental negatives for crypto here. Bitcoin's institutional adoption trends - ETF inflows and wirehouse/bank approvals remain on track," the report asserts.
The analysts flagged the U.S. presidential election as a major short-term catalyst for crypto markets.
The analysts note that "Bitcoin remains a 'Trump trade'" with crypto markets generally favoring Trump as a crypto-friendly candidate.
The report suggests that narrowing odds between Trump and Harris in prediction markets have contributed to recent weakness in Bitcoin and crypto prices. Vice President Kamala Harris and former President Trump are virtually tied, 50 to 49 percent respectively, in new CBS News/YouGov polling data that was released yesterday.
Bernstein Institutional involvement in the crypto space continues to grow, with Bitcoin ETFs seeing steady inflows exceeding $17 billion year-to-date.
The report mentions recent approvals from major financial institutions, stating, "We expect more wirehouse approvals into Q3 and Q4, thus providing further on-ramps for asset allocation to Bitcoin."
Looking ahead, Bernstein anticipates that BTC and crypto markets will likely remain range-bound until the U.S. elections, "trading off catalysts such as the Presidential debate and the final election outcome."
The analysts suggest that investors seeking exposure to a potential "Trump trade" could consider adding Bitcoin or Bitcoin-related equities to their portfolios.
However, they also note that if broader equity markets recover due to a Federal Reserve response, "we would expect Bitcoin and crypto markets to follow."
Edited by Stacy Elliott.