Bernstein says the FTX collapse has had a positive impact on the crypto market

The FTX collapse has become the catalyst for a new bullish rally in the cryptocurrency market, according to Bernstein Asset Management analysts, CoinDesk reports.

The bankruptcy of Sam Bankman-Fried’s cryptocurrency exchange “eliminated the last tranche of toxic leverage” and motivated investors to focus on the importance of decentralization and non-custodial storage of digital assets, according to Gautam Chhugani and Manas Agrawal.

They believe macro catalysts—weakness among regional U.S. banks and outflows from them into money-market funds and large financial institutions—are working in favour of the leading cryptocurrency.

“Any potential misalignment, whether on the credit side of banks or on the sovereign assets side, … perfectly positions Bitcoin as a safe haven alongside gold,” the analysts said.

They note that since the start of 2023 the leading cryptocurrency has risen by around 80%. Ethereum prices have added about 76%. Only after activation of the Shapella hard fork in April did the ETH price rise by 13%, pulling the rest of the market along.

Gas fees on the Ethereum blockchain have tripled, reflecting ‘rising user activity and token prices in the post-FTX era,’ the analysts noted.

In their view, the new crypto cycle is not yet fully understood, but a number of positives have emerged. They point to another era of mining, ongoing Ethereum upgrades, and scaling solutions such as Arbitrum.

“The prospect of building a new institutional financial stack on the blockchain remains a worthy goal, and serious participants remain focused on the long-term prospects,” the analysts emphasised.

In their view, the upcoming cycle will be the first in which institutional investors play the leading role.

As Bank of America analysts suggested in April, the continuation of the Bitcoin rally could continue.