• Bernstein says the current crypto market decline could be temporary, as Bitcoin could begin a recovery in the first half of the year.
• Analysts at the firm highlighted that growing institutional flows and evolving US policy dynamics could lay the foundation for Bitcoin's "most consequential cycle."
• Other experts predict a rotation from "overcrowded" precious metals toward Bitcoin.

Bitcoin could bottom around its last cycle high in the $60,000 range before seeing a recovery potentially in the first half of the year, according to Bernstein analysts.

The analysts, led by Gautam Chhugani, highlighted that the recent downturn in crypto prices follows the strong outperformance of gold over Bitcoin in the past year. The top crypto's market capitalization relative to that of the precious metal is approaching a two-year low, as central banks have stepped up their gold accumulation over the past year.

However, Bernstein noted that the current market weakness could be a short-term correction rather than an extended bearish cycle, driven by several factors.

New factors helping Bitcoin stay firm amid weakening prices

The firm argued that strong institutional flows across Bitcoin ETFs — which have amassed $165 billion in assets — and corporate treasuries have helped the market break out of the traditional boom-and-bust cycle.

Bernstein noted the absence of miner-driven capitulation, which typically characterized previous downturns. Instead, miners have diversified revenue streams toward AI-related data center activity, reducing dependence on Bitcoin price movements.

US policy dynamics present another potential catalyst for recovery. Bernstein highlighted the establishment of a Strategic Bitcoin Reserve using seized government BTC holdings, while shifts in Federal Reserve leadership under nominee Kevin Warsh could elevate Bitcoin's status. The analysts suggested broader political alignment with the crypto industry might create scenarios where Bitcoin gains recognition as a sovereign or reserve-style asset.

"We just don't see a passive U.S. government if the digital asset markets keep sliding," the analysts wrote.

The latest estimate comes after the analysts predicted last month that Bitcoin had found a bottom around $80,000. The top crypto is trading near $78,000, up 1.8% in the past hours at the time of publication.