Bitcoin is coming off a year in which it shed approximately two-thirds of its value, taking a variety of digital currencies and other crypto-correlated assets, including select crypto stocks, along for that ominous ride.
Exchange traded funds, such as the Invesco Alerian Galaxy Blockchain Users and Decentralized Commerce ETF (BLKC) and the Invesco Alerian Galaxy Crypto Economy ETF (SATO), were caught up in the calamity. Pinpointing exactly when these ETFs and bitcoin will rebound is a fool’s errand, but crypto-enthused investors can take heart in knowing that some market observers remain constructive on the long-term outlook for crypto as an asset class.
In a Monday note to clients, Bernstein analyst Gautam Chhugani waxed bullish on bitcoin, noting that in the largest digital currency’s 13-year history, there had been two previous instances comparable to the current crypto winter and those later gave way to upside.
“Prior to 2022, crypto has gone through two winters in its 13-year history and the track record of buying into crypto stress has been spectacular,” Chhugani opined. “Crypto as an industry has a great track record of fighting back from its lows and taking punches when down.”
While both BLKC and SATO have exposure to bitcoin via an index fund, the Invesco ETFs are primarily equity-based funds, meaning that Chhugani’s industry-level comments are relevant because many holdings in both ETFs offer investors a story with many more chapters beyond bitcoin prices. Plus, the crypto industry remains in its infancy from a growth standpoint.
“We believe crypto is probably amongst the few industries that can clock frontier-tech-like growth, in a broadly maturing tech landscape,” noted Chhugani. “Today, crypto touches less than 5% of total internet users with significant headroom for application led adoption.”
Late last year, some crypto market observers theorized that the crypto winter of 2022 was comparable to the tech bubble bursting in 2000. Chhugani took it a step further, noting that consumer crypto adoption could follow a similar path to that of the internet two decades ago. If accurate, that could be positive for BLKC and SATO.
“Crypto today has 200 million holders, but around 10 million monthly active wallets using apps,” Chhugani concluded. “As blockchains scale and applications mature, we expect the monthly user base to grow 10-100x over the long term. We expect gaming, social and NFT-based digital commerce & brands to lead adoption.”
vettafi.com is owned by VettaFi, which also owns the index provider for BLKC and SATO. VettaFi is not the sponsor of BLKC and SATO, but VettaFi’s affiliate receives an index licensing fee from the ETF sponsor.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.