Bernstein’s Bitcoin Investing Guide

Bernstein's research analysts released a detailed Bitcoin investing guide that highlights the rise in institutional involvement in Bitcoin, along with its growing role as a corporate treasury asset.

The report titled From Coin to Computing: The Bitcoin Investing Guide also makes predictions for Bitcoin’s future price trajectory and explores the increasing market for Bitcoin ETFs, while highlighting the convergence of Bitcoin with AI infrastructure.

Key Insights

Institutional Surge in Bitcoin ETFs

According to Bernstein, global asset managers have ramped up their holdings of Bitcoin and Ethereum ETFs to nearly $60 billion in 2024, a significant increase from just $12 billion in September 2022. The report describes the launch of Bitcoin ETFs as historic, with $18.5 billion in inflows year-to-date since their introduction in January.

"With institutional players flocking to Bitcoin, ETFs are proving to be the entry point for large-scale investment in digital assets," stated Bernstein, noting that ten prominent asset managers have set up regulated Bitcoin and Ethereum ETFs.

Bitcoin’s Path to $200,000 by 2025

Bernstein is notably bullish, predicting that Bitcoin could reach $200,000 by the end of 2025 due to increased institutional interest via ETFs. The cryptocurrency has already risen 120% over the last 12 months, raising its market cap to $1.3 trillion.

“With institutional adoption accelerating, we expect Bitcoin to triple from its current levels,” Bernstein asserts, adding that Bitcoin miners are scaling their capacities to meet the growing demand. Larger financial institutions are expected to play a dominant role as the market matures, potentially surpassing Bitcoin's pseudonymous creator Satoshi Nakamoto as the top wallet holder by 2024.

The Rise of Bitcoin as a Corporate Treasury Asset

The report highlights Bitcoin’s increasing role as a corporate treasury asset, led by firms like MicroStrategy, which holds over 99% of its cash in Bitcoin. MicroStrategy is now one of the largest corporate holders, owning 1.3% of total supply. Bernstein views MicroStrategy as an active leveraged Bitcoin equity strategy and points out their superior returns compared to directly holding Bitcoin or utilizing ETFs.

Consolidation in the Bitcoin Mining Industry

The mining industry is undergoing significant consolidation, with major players like Riot Platforms, CleanSpark, and Marathon acquiring smaller miners. Bernstein notes that industrial-scale mining operations are dominating the sector and acquiring less organized outfits to manage a global power supply of at least 20 gigawatts.

This trend toward large mining operations is set to continue, with anticipated expansions into AI data centers. Bernstein predicts that leading miners will amass 30% of Bitcoin’s total hashrate by 2025.

Bitcoin Mining’s Role in the AI Revolution

The synergy between Bitcoin mining and AI infrastructure is highlighted as miners present a unique advantage to data centers due to access to large-scale power. "Miners present an energy arbitrage opportunity, trading at $2-4 million per megawatt, compared to $30-50 million per megawatt for legacy data centers," Bernstein explained. Core Scientific is cited as an example, entering a multi-billion-dollar deal to develop AI data centers alongside Bitcoin mining operations.

The Future of Bitcoin ETFs and Mainstream Adoption

Bernstein predicts that ETF adoption for Bitcoin will outstrip traditional assets as retail investors seek regulated investment vehicles, overcoming self-custody challenges. The report forecasts Bitcoin’s market cap could soar from $1.3 trillion to over $3 trillion by the end of 2025 as wealth management platforms, pension funds, and registered investment advisors increasingly allocate funds to Bitcoin.