Bernstein on Digital Assets: 'Bitcoin Resilience is Impressive'

Bernstein analyst Gautam Chhugani discusses Bitcoin’s resilience and tariff impact on Bitcoin miners.

The analyst commented: "We have been on-road meeting clients through the tariffs chaos. Meanwhile. Bitcoin’s resilience has been nothing but impressive. In historical context, where we have seen Bitcoin fall off the cliff (~50-70% drawdowns) in crises periods (Covid, rate shocks etc), the current price action (down 26%) suggests demand for Bitcoin from more resilient capital. The China tariffs impact the miners, due to dominant China suppliers, but U.S based alternatives exist. Further, AI offers upside and business model diversification to miners.

Bitcoin price action during a global crisis, has always been a subject of controversy. It almost never decouples and acts as hedge (similar to Gold) and most often, demonstrates higher correlation with tech stocks (Mag 7 in current context). We believe, Bitcoin acts as the most accessible and liquid risk-market, when equity markets are shut down. When newsflow strikes over weekends, Bitcoin price has acted as a leading indicator on where risk is leaning. This still does not take away from its longer term outperformance as a digital ‘store of value’ asset. In our view, Bitcoin on a time-scale is probabilistic ‘gold’. Just under $2Tn Bitcoin market value vs. over $20Tn for gold, it trades as a highervolatility and more liquid version of gold. Refer Exhibit 1 for Bitcoin’s volatility vs. Gold (~2.5x gold’s volatility).

Tariff impact on Bitcoin miners: The China tariffs impact the mining supply chain, and negatively impacts the growth of U.S Bitcoin mining hash rate. However, the large miners (RIOT, IREN, MARA, CLSK) could potentially gain share, given they have already built scale and AI provides a strong alternative to mining power capacity.

What is the current Bitcoin mining supply chain landscape? Historically, the mining supply chain has been dominated by Asia/China. Bitmain, MicroBT (both private), and Canaan (not covered) are the three largest bitcoin mining chip design and miner manufacturing companies in the world, all based out of China, with manufacturing facilities located largely in Asia. Leading US based Bitcoin miners like CLSK, MARA, RIOT and IREN have all been sourcing their mining rigs from Bitmain, Canaan and MircoBT (Exhibit 7 ).

Large miners have aggressively grown hash rate: Throughout CY24, Bitcoin miners rapidly scaled up their hash capacity, to outpace the growth in Bitcoin network hashrate for market share gains. Over CY24-25 YTD, leading miners have grown their hashrate by 100-500% (Exhibit 8 ) - like MARA (~115% growth), CLSK (~304% growth), IREN (~525% growth) and RIOT (~171% growth). Bitcoin network hashrate is up ~35% since halving in April’24, as new hash capacity came online to capture the post halving price action in BTC led by election catalyst and regulatory tailwinds (Exhibit 9 ).

COIN: Coinbase is benefiting from a shift in regulatory landscape in the U.S. Lawsuit against its staking offerings were dropped in 3 U.S. states. Further, it is expanding its derivatives offerings, planning to launch futures on May 18. HOOD: HOOD released its equity and crypto trading volumes for March’25 MTD (as of March 26, 2025). Equity trading volumes were ~ $109Bn (vs ~$142.9Bn for Feb’25), option contracts traded were 145Mn (vs 165.6Mn for Feb’25), and crypto trading volumes were ~ $10Bn (vs ~$14.4Bn for Feb’25). MSTR: In Q1’25, MSTR has acquired ~80,715 BTC for ~$7.66Bn (raised ~$4.37Bn from common equity, ~$1.99Bn 2030 convertible debt, ~$0.6Bn STRK and ~$0.7Bn STRF). Currently, MSTR holds 528,185 Bitcoin, acquired for ~$35.63Bn (at ~$67,458/BTC). For Q1’25, MSTR has ~$5.91Bn in unrealized losses on digital assets holdings."

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