Bernstein Forecasts Bitcoin Recovery by 2026: Navigating the Institutional Shift

Following a sharp 40% decline from its all-time highs, which saw Bitcoin briefly struggle around the $75,000 mark, Wall Street investment bank Bernstein offers a compelling perspective. Analysts at Bernstein believe the current downturn in the cryptocurrency market is a temporary phase, projecting a significant recovery by 2026.

Short-Term Correction, Long-Term Resilience

In their latest research report to clients, the analytical team led by Gautam Chhugani suggests that while the crypto market is indeed experiencing a “short-term bear cycle,” a reversal is anticipated within the current year. They forecast that “Bitcoin is likely to bottom out around the previous bull market high, approximately $60,000,” with this crucial turning point expected in the first half of the year. This bottoming phase is then predicted to pave the way for the establishment of higher lows, setting the stage for a powerful resurgence.

Bitcoin vs. Gold: A Shifting Narrative

Bernstein contextualizes this recent pullback against Bitcoin’s relative underperformance compared to gold over the past year. Analysts highlight that this period coincided with substantial gold purchases by global central banks, providing robust support for gold prices.

The report notes that as central banks, particularly those in China and India, continue to bolster their gold reserves, Bitcoin’s market capitalization has slipped to approximately 4% of gold’s, nearing a two-year low. In contrast, gold’s share of global foreign exchange reserves is projected to rise to about 29% by the end of 2025.

The Dawn of the Institutional Cycle

Despite Bitcoin’s comparative weakness, Bernstein argues that the past two years represent the most pivotal “institutional cycle” in Bitcoin’s history. Unlike previous cycles, which were largely retail-driven and characterized by speculative “boom-bust” volatility, the current phase is anchored by two critical developments: the dramatic growth in assets under management (AUM) for spot Bitcoin ETFs, now reaching approximately $165 billion, and the emergence of dedicated “hodling companies” accumulating significant Bitcoin reserves.

Potential US Policy Tailwinds

Analysts further point to potential US policy developments as a bullish catalyst. They specifically mention the possibility of establishing strategic Bitcoin reserves using government-seized assets. Furthermore, they hint that under a new Federal Reserve Chair, such as Kevin Warsh, the Fed might forge broader political alliances with the cryptocurrency industry. This scenario could elevate Bitcoin’s status, making its consideration as a sovereign or reserve asset a less remote possibility.

The analysts state unequivocally: “If the digital asset market continues to fall, we believe the U.S. government will not stand idly by.”

Resilience Amidst Volatility: Who’s Holding Strong?

From a market structure and capital flow perspective, Bernstein concludes that institutional investors have not fully exited the market. While Bitcoin ETFs have experienced recent outflows, these are relatively minor compared to overall holdings. Moreover, there is no evidence of “capitulation selling” from miners driven by financial distress, largely because miners have successfully diversified their revenue streams by pivoting towards AI data center operations. Additionally, major corporate holders, exemplified by entities like MicroStrategy, have continued to accumulate Bitcoin during the correction, adding $3.8 billion worth year-to-date, undeterred even when prices dipped below their cost basis.

Beyond the Downturn: A Transformative Cycle

Considering these factors, Bernstein interprets the current market softness as a “late-stage bull market correction,” rather than the onset of a prolonged crypto winter. While short-term volatility is inevitable, the anticipated rebound in 2026 is poised to lay the groundwork for Bitcoin’s “most influential cycle” yet, with long-term implications that transcend traditional four-year market cycles.