Bernstein says market has not priced in positive shift in crypto regulations under potential Trump victory

Analysts at research and brokerage firm Bernstein said the market has not priced in a potential positive shift in crypto regulations if Donald Trump wins the U.S. presidential election.

Bitcoins’s price positively reacts to perceived improvements in odds for a Republican win, placing faith in Trump’s pro-crypto stance ahead of his speech at Bitcoin 2024 in Nashville on July 27, Gautam Chhugani and Mahika Sapra wrote in a note to clients on Monday. “We see significant headroom from institutional investors allocating to crypto and crypto stocks,” they added.

Bitcoin is up around 8% over the past week, according to The Block’s bitcoin price page, currently trading for $67,548. “Bitcoin ETF momentum is back,” the analysts said, with net inflows of more than $2 billion in the last two weeks taking total inflows to over $17 billion since their launch in January and total assets under management to $60 billion.

BTC/USD price chart. Image: The Block/TradingView.

Crypto stocks outperform as high-beta bitcoin proxies

Crypto stocks performed even better, up 22% last week, with Chhugani and Sapra outlining the implications for several crypto stocks within Bernstein’s coverage, which its analysts see as high-beta bitcoin proxies.

The analysts expect large bitcoin mining consolidators like Marathon, Riot and CleanSpark to outperform, with price action driven by the underlying bitcoin price and potential cash flows from their aggressive operational expansion plans. These companies are not hesitant to raise capital to grow their bitcoin mining market share, Chhugani and Sapra said.

Alternatively, other bitcoin miners, such as IREN and Core Scientific, are pursuing a hybrid bitcoin mining and AI data center strategy, leveraging significant power access to maximize yields through AI data center retrofits and new builds. The analysts said the market undervalues the power access of these bitcoin miners, expecting a significant portion of their future enterprise value to come from AI initiatives.

The analysts also view stock and crypto trading app Robinhood as well-positioned in the market due to its competitive rates and a captive base of 11 million active, young traders. Chhugani and Sapra expect the firm's crypto transaction revenues to grow significantly following the acquisition of Bitstamp, contributing to 40% of total revenues by 2025, compared to 7% today.

Finally, the analysts view MicroStrategy as an active leveraged bitcoin equity strategy, holding 1.1% of the world’s total bitcoin supply using a mix of equity and long-term convertible debt. The company trades at a premium due to its active strategy, Chhugani and Sapra said, with a projected bitcoin holding value of $41 billion by 2025, supporting a target price of $2,890 for MicroStrategy stock.

President Biden drops out

Joe Biden dropped out of the U.S. presidential race on Sunday, offering his "full support and endorsement" for Vice President Kamala Harris to replace him as the Democratic Party's nominee, seemingly increasing Trump’s chances of victory.

On the decentralized prediction platform Polymarket, Biden’s odds to win the election unsurprisingly fell below 1%, while Kamala Harris now stands at 28% and Trump gained slightly to 65%.

In June, Chhugani and Sapra raised their bitcoin price target to $200,000 by the end of 2025, $500,000 by the end of 2029 and $1 million by the end of 2033.

Gautam Chhugani maintains long positions in various cryptocurrencies.