15th June 2024 > > Bernstein Research.

tl;dr

Bernstein Research provides a timely reminder that diamond hands are the only way to play crypto markets.

Market Snap

Market Wrap

A disappointing week of outflow from the spot BTC ETFs leaves prices languishing in no-man’s land. There are a lot of techies posting on social media supposedly key support prices, and predicting either Armageddon if they are breached to the downside, or unlimited wealth for everyone if they hold.

I firmly believe that if the price goes up, it goes up. If it goes down, it goes down. Unless you know how to manage liquidation risk on a minute-by-minute basis, focus only on the long-term, never use leverage, and you will be just fine.

Curious Cryptos’ Commentary – US election

Joe Biden is doubling down on his personal anti-crypto stance with the renomination of SEC Commissioner Caroline Crenshaw. Crenshaw is so enamoured with authoritarianism she laughably voted against the approval of spot BTC ETFs. Her rage when the S-1s for spot ETH ETFs was approved must have been a sight to behold.

The schism on this topic between the two most important people within the Democratic Party – Joe Biden and Senate Majority Leader Chuck Schumer – does not bode well.

Curious Cryptos’ Commentary – Bernstein Research

Bernstein Research (a joint venture between Société Générale and AllianceBernstein) has raised its price target for BTC to $200,000 by the end of 2025, a 33% increase on its previous prediction. The 2033 target of $1mm is not far from the CCC’s estimate, though the timescale is longer.

The reason for the price upgrade should surprise no-one at all:

“We believe that the U.S regulated ETFs were the watershed moment for crypto that brought in structural demand from traditional pools of capital. Around $15 billion of net new flows have been brought in by the ETFs combined. We expect Bitcoin ETFs to be equivalent to ~7% of bitcoin in circulation by 2025 and ~15% of bitcoin supply by 2033.”

And there is a lovely (log-scale) graph to reinforce the point:

With less than $1 TRILLION of assets under management, AllianceBernstein cannot be described as one of the big boys. But you can be sure that naysayer firms like Vanguard will be nervously eyeing the performance of both AllianceBernstein’s and SocGen’s funds to see just how much advantage early adopters gain by including BTC in their clients’ portfolios.

A lot, I suspect.

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Bernstein has also initiated coverage of MSTR (MicroStrategy), a long-favoured leveraged play of ours (with no risk of liquidation) on the price of BTC. Bernstein is full of the joys of MicroStrategy, in stark contrast to Kerrisdale Capital who are rather negative on one of my choice picks:

https://www.curiouscryptos.com/post/29th-march-2024-mstr-btc-kucoin

The CCC has long maintained that the terms embedded in MSTR’s convertible bond programme effectively put the downside BTC risk onto the bond buyers, and give all the upside risk to normal shareholders. The Bernstein analysts agree:

“We believe MSTR’s long term convertible debt strategy allows it enough time to gain from bitcoin upside, with limited liquidation risk to its bitcoin on balance sheet.”

Financially speaking, they haven’t quite got that right, as by definition these bonds can be settled in shares not cash. The CCC research team has read several of the previous prospectus (*). There is no reason to think that this new bond differs in any material sense.

This means that the analysts at Bernstein mistakenly wrote “liquidation risk to” when they meant to write “dilution risk for current shareholders of”. No-one at Bernstein has yet responded to my request for clarity on this point.

However, the sentiment is sound.

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(*) The word prospectus looks like a 2nd but is actually a 4th declension noun (or so I am told), rare though they may be. In the 4th there is no change for the masculine in the plural accusative ending, whilst using the English plural of prospectus is just too awkward, in my opinion.

I am sure that the wordsmiths will correct me on this point.