Bernstein stays bullish, downplays Bitcoin selloff

Analyst Gautam Chhugani wrote that, unlike prior crypto downturns, the market is not digesting a major failure or hidden balance-sheet damage. “Nothing blew up, no skeletons will unravel,” he wrote, describing the current episode as a “self-imposed crisis of confidence” even as institutional participation has expanded via spot Bitcoin ETFs.

The note landed after a sharp bout of volatility that spilled across markets. On Thursday, Feb. 5, Bitcoin sank to its weakest level since October 2024, sliding to about $63,295 and heading for its largest one-day fall since November 2022 as selling in tech shares and a jump in precious-metals volatility weakened risk sentiment. The selloff was accompanied by roughly $1 billion in Bitcoin liquidations over 24 hours, according to CoinGlass data cited in the same market update.

Macro positioning and rate expectations have been central to the move. One catalyst cited by market participants was President Donald Trump’s selection of Kevin Warsh as his pick for the next Federal Reserve chair, a choice that some investors interpreted as raising the odds of a more hawkish tilt and a smaller Fed balance sheet. In that framing, reduced liquidity is a headwind for speculative assets that have historically benefited when money markets are flush.

ETF flows have been another pressure point – and a key part of Bernstein’s argument. In the Feb. 9 note, Chhugani highlighted that Bitcoin ETFs had seen only about a 7% outflow even as Bitcoin’s spot price had corrected by roughly 50%, using the divergence to argue that the market drawdown has been more violent than the actual ETF redemption footprint would suggest.

The broader market picture in early February has been dominated by de-risking rather than single-asset idiosyncrasies. In the Feb. 5 slide, the S&P 500 fell to a seven-week low and the Nasdaq sank to its weakest in more than two months as pressure returned to the AI-driven tech trade, while gold and silver swings drew attention to leveraged positioning across asset classes. In that environment, Bitcoin traded as a high-beta risk asset rather than as a defensive store-of-value proxy.

Chhugani leaned into that interpretation directly, arguing that the gold-versus-Bitcoin divergence reflects liquidity conditions rather than a fundamental reassessment of Bitcoin’s role. He described Bitcoin as “a liquidity trade” that tends to be treated as a risk asset when financial conditions are tight, and said he expects improving liquidity to change that dynamic.

Bernstein also addressed several bear arguments that have gained traction during the drawdown. On quantum computing, the note acknowledged the long-term security challenge but argued it is neither unique to Bitcoin nor an imminent, Bitcoin-specific break, pointing to a timeline and an upgrade path shared across the digital economy. “Framing quantum computing as a Bitcoin-killer ignores the timeline, the upgrade path and the fact that the entire digital world shares the same vulnerability,” Chhugani wrote.

The note also pushed back on fears around leveraged corporate buyers and miner capitulation. Chhugani said only an extreme and prolonged price collapse would force balance-sheet restructuring among major holders, while arguing miners have diversified revenue streams through AI data center contracts and are less dependent on a single, end-stage capitulation event to meet obligations. He added that miners’ evolution has changed how supply can come to market, characterizing them as steadier sellers whose flow the market can absorb more easily.

Those arguments sit against a backdrop of sizeable wealth destruction across crypto markets since the late-2025 peak. One market snapshot put total crypto market value down by about $2 trillion from an early-October peak near $4.379 trillion, with roughly $800 billion erased in the last month alone, based on CoinGecko data cited in the Feb. 5 selloff report.

Сonclusion, despite the volatility, is that the bull thesis remains intact into 2026. Chhugani reiterated a roughly $150,000 Bitcoin estimate for 2026 and framed the current downturn as a confidence-driven drawdown occurring in a market where institutional rails – particularly ETFs – remain in place.