Wall Street broker Bernstein says crypto-linked equities may be nearing a cyclical bottom after a steep roughly 60% drawdown from their 2025 highs. Rather than treating the decline as evidence that the long-term crypto equity story is broken, the firm frames the current selloff as a valuation reset and a possible “big discount” entry point ahead of first-quarter earnings. In other words, the market may still feel fragile in the near term, but Bernstein believes much of the damage is already reflected in prices.
The Monday note, led by analyst Gautam Chhugani, argues that three forces have weighed heavily on the sector: macroeconomic uncertainty, geopolitical tension, and weak sentiment across the broader crypto market. According to Investing.com’s summary of the report, Bernstein’s key point is that these headwinds have compressed valuations, yet they have not destroyed the structural fundamentals supporting long-duration growth across crypto finance and tokenized capital markets.
Even with that constructive longer-term view, Bernstein reduced price targets on several major names. It cut Coinbase to $330 from $440, Robinhood to $130 from $160, and Figure to $67 from $72. Importantly, all three companies remain rated Outperform. That combination matters: Bernstein is not turning bearish on the sector, but it is acknowledging that valuation assumptions need to be adjusted lower in response to a tougher market backdrop and softer near-term revenue expectations.
The broker estimates that crypto equities as a group have retraced about 60% from their 2025 peak, mirroring a broad crypto market correction that wiped out trillions of dollars in value. Bitcoin’s sharp retreat from record highs has been a major contributor to weaker trading activity and softer sentiment. That matters because public companies tied to trading, brokerage, market infrastructure, and digital-asset finance are highly sensitive to volumes, retail engagement, and the willingness of investors to take risk.
Why Bernstein still sees value in battered crypto stocks
Bernstein’s thesis is not based on ignoring weak earnings or short-term pain. Instead, it separates cyclical weakness from secular growth. The report says that several structural drivers remain intact, including stablecoins, tokenization, prediction markets, and derivatives. These themes point to a broader transformation in payments, capital markets, financial infrastructure, and on-chain trading. From that perspective, falling share prices do not automatically mean the underlying industry thesis has collapsed.
The note also differentiates among individual companies. Bernstein argues that crypto represents a smaller portion of Robinhood’s overall revenue base, which may make it more resilient than pure-play names during periods of weaker digital-asset activity. Figure, by contrast, is presented as a more direct tokenization play, meaning its strategic appeal is more tightly linked to the long-term expansion of real-world asset and financial product issuance on blockchain rails. Coinbase, while still heavily exposed to market sentiment and trading volume, remains one of the clearest public market proxies for a recovery in U.S. crypto activity.
Bernstein also provides a timing framework. It expects first-quarter weakness to act as a sentiment floor and then sees a recovery building into the second half of 2026. That is a subtle but important distinction. The firm is not claiming the bottom is already fully in. Instead, it suggests that the market may need to absorb disappointing near-term earnings first, reset expectations, and only then begin to price in the next leg of structural growth.
For investors, that implies a different way to interpret the selloff. The key question is not simply whether prices are lower than before. The more important issue is whether the decline reflects temporary cyclical stress or a lasting impairment of the business model. Bernstein’s answer is clearly tilted toward the former. It acknowledges the weakness in sentiment, valuation, and liquidity, but argues that the long-range expansion story still has room to play out.
Bitcoin remains under pressure as geopolitics drives short-term sentiment
The note arrives at a time when Bitcoin has continued to trade lower. One catalyst was a set of comments from Donald Trump, who suggested that the United States was engaged in discussions involving a new leadership structure in Iran and that progress toward a potential agreement was underway. Instead of calming markets, those remarks added another layer of uncertainty by forcing traders to reassess whether the Middle East situation was moving toward diplomacy, escalation, or both at once.
In market terms, Bitcoin dipped toward $64,000 over the weekend and reinforced a broader rangebound pattern between roughly $65,000 and $70,000. That trading behavior is important because it signals indecision rather than trend conviction. Bulls have not been able to reclaim clear upside momentum, while bears have also struggled to force a full breakdown below key support. The result is a frustrating, headline-sensitive market that keeps reacting without committing.
Sentiment has been heavily shaped by rising tension in the Middle East. The conflict between Iran and Israel has intensified, with strikes on Iranian targets and spillover risks affecting Kuwait and other Gulf states. Reports of missile and drone activity, threats to energy infrastructure, and risks to shipping routes through the Strait of Hormuz have kept global markets on edge. In such an environment, Bitcoin has not behaved like a clean safe-haven asset. Instead, it has often traded more like a high-beta macro-sensitive instrument.
Political messaging from the United States has added to the uncertainty. Donald Trump has alternated between diplomatic language and severe threats toward Iran’s energy infrastructure. At the same time, U.S. Secretary of State Marco Rubio has been cited in discussions suggesting that regime-change dynamics may be starting to emerge. The report also mentions Pakistan as attempting to facilitate indirect talks. For markets, this kind of mixed signaling is destabilizing because it allows both optimistic and pessimistic interpretations to coexist at the same time.
How derivatives positioning is suppressing Bitcoin volatility
Geopolitics is only part of the story. The article also highlights an important market-structure factor: derivatives positioning. According to the report, institutional investors selling covered call options have contributed to a muted volatility environment. Covered call strategies are often used when investors already hold the underlying asset and want to generate premium income while accepting limited upside. That positioning tends to be associated with a restrained near-term directional outlook rather than an expectation of explosive gains.
When institutions sell large amounts of covered calls, gamma exposure shifts toward market makers. Those market makers then hedge dynamically to stay risk-neutral. In practical terms, that means they are often pushed to buy when the market dips and sell when it rallies. This flow acts as a stabilizer, reducing the size of price swings and reinforcing the impression that Bitcoin is trapped inside a controlled range. It also helps explain why dramatic headlines have not always translated into equally dramatic moves.
This options-driven hedging structure can offset some of the momentum generated by retail traders. Even when headline shocks trigger emotional reactions, institutional positioning and dealer hedging can absorb or blunt the impact. That is why Bitcoin has remained stuck despite the combination of geopolitical anxiety, macro uncertainty, and changing policy narratives. Price action may look quiet on the surface, but the restraint comes from a complex interaction between investor positioning and market-making mechanics.
Overall, the article describes a market still searching for direction. On the equity side, crypto-linked stocks have fallen around 60% from 2025 highs, and Bernstein sees that drawdown as creating a more attractive valuation setup. On the asset side, Bitcoin remains confined mostly between $65,000 and $70,000, with downside tests toward $64,000 reflecting risk aversion but not yet producing a decisive trend break. Traders are weighing geopolitical risk, policy signals, liquidity conditions, and derivatives structure all at once.
The bigger lesson is that bottoms rarely form because bad news disappears. More often, they form because bad news has already been heavily discounted while the long-term growth narrative survives. That is essentially Bernstein’s message: short-term earnings may stay weak, sentiment may remain fragile, and Bitcoin may continue to drift in a constrained range, but the deeper structural themes behind crypto finance still appear intact heading into the later stages of the 2026 cycle.