Bernstein: Returns From Buying Crypto During Downturns Have Been Spectacular

Before the turmoil of 2022, the digital-assets market had witnessed two crypto winters, and the returns from buying into such periods of market stress have been spectacular, brokerage firm Bernstein said in a research report Monday.

Bernstein notes that despite bitcoin’s (BTC) slump last year, the largest cryptocurrency is up about 60 times from its 2014 low and roughly five times from its 2018 bottom. Ether (ETH) is up 14 times from its 2018 lows, despite a 68% slide last year.

The crypto industry has a strong track record of fighting back from its lows and “taking punches when down,” the report said. Still, some may argue that the macro backdrop is different this time, the report added.

“Crypto is probably among the few industries that can clock frontier-tech-like growth, in a broadly maturing tech landscape,” analysts Gautam Chhugani and Manas Agrawal wrote. Crypto touches less than 5% of total internet users with “significant headroom for application led adoption.”

Investors should continue to focus on the long-term consumer adoption of crypto, the note said, and that adoption should mirror the growth of the internet, as blockchain applications become more mainstream.

As blockchains scale up and applications mature, Bernstein expects the monthly user base to increase by as much as 100-fold long term, with gaming, social and non-fungible-token (NFT)-based digital commerce and brands leading adoption.

NFTs are digital assets on a blockchain that represent ownership of virtual or physical items and that can be sold or traded.

The crypto industry should focus on growing by “accepting a few regulatory trade-offs, that would incite more capital and mainstream participation,” the note added.

Read more: Citi Says Crypto Market Leverage, Open Interest Are Historically Low