Bitcoin ETF inflows, crypto equity markets and retail trading sentiment are 'screaming risk-on,' Bernstein says

As bitcoin again attempts to break out of the $70,000 resistance level toward all-time highs, analysts at research and brokerage firm Bernstein said Bitcoin exchange-traded fund inflows, crypto equity markets and retail trading sentiment are “screaming risk-on.”

With bitcoin, alongside other risk-on assets, interpreting rising odds for the overtly pro-crypto Donald Trump to win the U.S. presidential election alongside bullish and clearer crypto policy statements from rival Kamala Harris, the market is seemingly less worried about downside risk and finding it attractive to bid, Bernstein analysts led by Gautam Chhugani wrote in a note to clients on Monday.

Republican candidate Donald Trump currently leads Democrat Kamala Harris by odds of 61.1% to 38.6% to win the presidential election on Nov. 5, according to the decentralized predictions platform Polymarket. Last week, Vice President Harris vowed to support a crypto regulatory framework in her plan to help build wealth for Black men.

The next leg of the bitcoin bull market?

U.S. spot Bitcoin ETFs are back to strong net inflows, registering $2.1 billion last week, the analysts noted — the largest since the $2.6 billion generated in the second week of March as bitcoin was approaching its all-time high of nearly $74,000.

Cumulative net inflows since the funds began trading in January now stand at nearly $21 billion, while assets under management are at a record of more than $66 billion.

“We believe the incremental ETF inflows are now increasingly leading to bitcoin spot demand given asset managers have focused on distribution to wealth advisors and wirehouses, unlike initial ETF demand which came from the spot-CME derivatives carry trade (mostly from hedge funds and arb funds),” Chhugani said.

Bitcoin is currently trading for $68,334, according to The Block's Bitcoin Price Page — up 5.4% over the past week.

Crypto-related equities have outshone bitcoin so far this month, with pure-play bitcoin miners largely outperforming the AI diversifiers they have lagged behind all year.

AI diversifiers have benefitted from increasing demand for high-performance computing and AI data center hosting services, given their valuable power contracts pipeline. However, pure-play firms have argued the return on bitcoin mining’s cheaper infrastructure and faster energization is far quicker than AI gestation periods, especially amid a potential bull run for the foremost cryptocurrency.

The current pure-play outperformance reflects underlying bullish sentiment for bitcoin compared to the compute thesis, the analysts said.

Chhugani also argued that Robinhood’s crypto trading revenues, up 160% year-over-year, was another indicator of bullish retail sentiment. Meanwhile, MicroStrategy continues to outperform almost everything with a 49% return so far this month and is a leading indicator for bitcoin, according to the analyst.

30-day returns - bitcoin vs. crypto equities. Image: Bernstein.

Memecoins and their intersection with AI

Memecoins are also attracting new retail investors again, according to the analysts, with its collective market cap tripling to around $66 billion over the past six months. 

The debate surrounding Murad Mahmudov’s "memecoin supercycle" talk at Token2049 last month helped to spark renewed enthusiasm for the crypto niche, propelling him to the “main character” status of the moment.

“This is the fastest growing coin category within crypto and, whether we like it or not, retail ‘normies’ find memes funny, relatable and socially engaging, leading to natural memetic growth of these tokens,” Chhugani said.

The topic has since crashed into the intersection of crypto and AI, with bots trained on social media data to perpetuate ideas among themselves. The development recently occurred when a supposed AI agent with the X handle @truth_terminal endorsed the Solana-based memecoin Goatseus Maximus (GOAT). This was picked up by other AI agents, subsequently seeing its market cap surge to $300 million, the analysts noted. The AI agent was given a crypto wallet by its New Zealand-based researcher Andy Ayrey and continues posting about the GOAT token.

“This example may be entertaining, offering a semi-baked version of the future, but it also gives us a glimpse of the interaction potential between AI and crypto, as crypto offers permission-less ‘financial API’ and ‘payment rails’ to AI agents, as the traditional financial system may struggle to adapt to the AI economy,” Chhugani wrote.

The Marc Andreesen-backed crypto-trading AI chatbot appeared to become a crypto millionaire after its holdings in a memecoin called Fartcoin surged in value on Friday. However, the @truth_terminal account came under scrutiny over the weekend, with community members flagging spelling errors in its posts as indicating a human was actually behind the account rather than an AI agent, which led to significant volatility in the price of the GOAT token.

“The truth terminal makes typoes because language models are fundamentally 'simulators' — they're trying to predict 'what comes next' in a long string of text. A base, untuned model will output much more chaos than this, Ayrey responded.

Gautam Chhugani maintains long positions in various cryptocurrencies. Bernstein and its affiliates may receive compensation for investment banking services from MicroStrategy. Certain affiliates of Bernstein act as market makers or liquidity providers in the debt or equity securities of Riot and Robinhood.