Despite short-term bearish sentiment, the structural adoption cycle* remains intact, according to analysts at research and brokerage firm Bernstein. They argue that if voter sentiment in the upcoming US Presidential election leans more towards the Republican Party, “Trump trade” will be the dominant trend in the cryptocurrency market, implying a change in Political dynamics, especially pro-cryptocurrency stances, can significantly influence the direction of the market.
The market has turned bearish due to recent outflows from spot Bitcoin ETFs and concerns that the launch of spot Ethereum ETFs may fall short of expectations.
Despite seeing recent outflows, Bitcoin ETFs have enjoyed remarkable success with over $14 billion in net inflows since launch. Bernstein analysts suggest that the current outflow may be temporary before private banks whitelist these ETFs, which could significantly increase Bitcoin allocations in portfolios.
The launch of spot Ethereum ETFs may not generate as much excitement or inflows as spot Bitcoin ETFs due to the lack of staking features and a clear story, unlike the “digital gold” of Bitcoin, with its descriptions of “decentralized computing or web3 app store” is quite outdated. However, Ethereum’s use case as a tokenization platform remains strong, especially for stablecoin payments and real-world assets.
Improved regulatory clarity, possibly under a more crypto-friendly Republican administration, is likely to increase adoption and usage stories for cryptocurrencies, especially Ethereum.
Despite the short-term weakness, analysts see this as an opportunity to find attractive entries for a new multi-year crypto bull cycle. They maintain a long-term price target for Bitcoin of $200,000 by the end of 2025.
Overall, although the current sentiment is bearish, the cryptocurrency’s structural adoption cycle remains intact, and future regulatory developments could significantly influence market dynamics.
*The structural adoption cycle refers to the long-term process of adoption and use of a cryptocurrency technology in society and markets, i.e. its increasingly widespread and stable acceptance and use in investment and trading activities.
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