Wall Street investment bank Bernstein recently released a report predicting that Bitcoin will rise to $70,000 by the end of this year, breaking its historical high. The report identified four major factors that could drive up the price of Bitcoin: net inflows into ETFs, Federal Reserve interest rate cuts, a Republican victory in the US election leading to a change in SEC leadership, and the continued growth of the Bitcoin ecosystem.
According to DL News, after Bitcoin spot ETFs were approved for listing, Bitcoin briefly surged to $49,000 before falling back to around $43,000. However, Bernstein analysts Gautam Chhugani and Mahika Sapra stated in their report that they are optimistic about Bitcoin’s performance this year. They believe that the price of Bitcoin will increase by 65% to about $70,000 by the end of this year. The analysts provided four reasons for their bullish outlook.
The first reason is the net inflows into Bitcoin spot ETFs. Last week alone, there were approximately 19,000 additional Bitcoins flowing into ETFs. The dominant power of ETFs will continue to have a profound impact on the price trend of the currency. In a commodity with a known limited supply, such a scale of incremental demand will have a significant impact on the price.
In addition, ETF issuers are receiving “unprecedented and rapid” responses from investment advisors on how to allocate Bitcoin in client portfolios. This indicates that ETFs may indeed unlock long-term demand for Bitcoin. The latest report from CoinShares shows that institutional cryptocurrency investment products had a net inflow of $708 million last week, totaling $1.6 billion since January 1, with Bitcoin accounting for 99% of these net inflows.
The macroeconomic environment is also favorable. Bernstein pointed out that the Federal Reserve has signaled possible interest rate cuts. With current interest rates at 5.25% to 5.5%, savings returns will be less attractive, and investors will turn to other assets for returns. In a lower interest rate environment, risk assets like Bitcoin typically perform better.
During the Democratic Party’s tenure, Gary Gensler, Chairman of the US Securities and Exchange Commission (SEC), has been criticized by the cryptocurrency community and Congress for his enforcement actions in cryptocurrency regulation. However, if the Republican Party wins in the upcoming US presidential election in November, the cryptocurrency market is expected to rally as this would mean a change in SEC leadership.
The fourth catalyst for Bitcoin’s historical high is the growth of the Bitcoin ecosystem. Bernstein predicts that as the Bitcoin developer ecosystem continues to develop, Layer2 will continue to drive transaction income for miners, and economic activities such as token minting and ordinals will continue to thrive.
Ed Goh, Head of Trading at cryptocurrency market maker B2C2, strongly agrees with Bernstein’s view. He points out that Bitcoin shows a clear preference for buyers, and the investment pattern in cryptocurrencies remains strong, with native cryptocurrency funds, retail brokers, and proprietary trading firms all evenly investing. This trend has continued throughout this year.