Fundstrat’s Thomas Lee on Bitcoin (BTC), EOS, Stellar Lumen (XLM), Dogecoin (DOGE), and XRP

Siamak Masnavi

Thomas Lee, a Managing Partner and the Head of Research at Fundstrat Global Advisors, recently had an interview with crypto influencer Heidi Chakos, the owner of the popular YouTube Channel "Crypto Tips", during which he presented his latest thoughts on Bitcoin (BTC) and altcoins (in particular, Stellar Lumen, EOS, and Dogecoin). 

Here, we look at some of the key highlights from this interview.

Interesting Correlations Within the Crypto Markets

"Yeah, there are some things that surprise us.In general, doing research for 25 years, I've learned that the crowd is mostly right. So, I do think, for the most part, what people believe is generally usually going to be correct... But there are a lot of times when divergences or extremes are where interesting correlations can be found...

For instance, Bitcoin mining break-evens... the way we define it in our data science team is the cost of mining plus the cost of electricity plus the transmission cost of electricity plus the overhead, and that gets to around $6,000 Bitcoin right now... I don't think it's a coincidence that Bitcoin is holding $6,000. I think it actually acts like mining [cost] is the floor for Bitcoin. In 2014, just to give you perspective, $180 was the break-even cost for Bitcoin... and in 2013-2015... Bitcoin bottomed around $180...

Miners are in the business of Bitcoin mining because they actually believe in the project. So, what they know is that at $6,000, they are pretty much only going to sell the bitcoins they need to pay their staff, but they are actually more likely to want to retain it, especially because they know Bitcoin can violently move upwards... So, I think miners here are trying not to dump their bitcoin."  

What Lee Thinks About Metcalfe's Law Determing Bitcoin's Price

"The idea is that something like Bitcoin or Facebook or anything that relies on other users, if you keep doubling the number of users, the value of the community doesn't actually double, it grows up by an exponent factor. If you double the size of the community, you actually get a 4X increase in the utility of it...

So, to Nic's [i.e. Nic Carter, co-founder of Coinmetrics] point, wallets is the same metric. Bitcoin only has 50 million wallets... We've shown that one variable, [number of] wallets, close to 72% explains Bitcoin's price change since 2009."

The Correlation Between the Price of Bitcoin and Altcoins

"Correlations between cryptocurrencies is very high. So, like if Bitcoin is rising, everything goes up, and when Bitcoin falls, everything goes down. There is some differentiation, a little bit more than we realized. For instance, year to date, only three tokens have had an increase in daily active users, or what we call Daily Active Addresses, which is Stellar Lumen, EOS, and Dogecoin, and they are the three best performing tokens this year. 

So, there is a fundamental variable for some of these projects that have quite a lot of activity, but then some of the 1500 tokens on CoinMarketCap barely have any users. So, I think they are going to be trading relative to Bitcoin, because if they don't go down when Bitcoin goes down, it means that they are outperforming, and if they don't have an active community, they should be falling. So, I think... if you can find projects where the community is not only active but growing... those are going to be the best performing projects...

An example is DOGE... Another one that I think... deserves some credit is XRP because there is a very active community there."

Security Tokens

"We communicate with the traditional markets... the bulk of our clients are traditional investors. They have a lot of interest in security tokens, and maybe not because those things can go to the moon... security tokens can't really have the same upside as a Bitcoin, but it allows them to either invest in things that are traditional equities, [like] single buildings or intellectual property... It's probably going to be a big area. I don't have a strong view because I think there's still some uncertainty on the regulatory side of that."

Price Prediction for Bitcoin

"I think people are too bearish. What happens is that people get bearish because it makes sense... I mean, markets have been terrible, and we are below our 200-day [moving average], and we published a report this week showing that when Bitcoin is below its 200-day, it only goes up 50% of the time in the next six months, and when it is above its 200-day, it's up 80% of the time...

But Bitcoin's break-even by the end of this year is going to be close to $8,000 or $9,000, and historically, it's traded at 2.5 times that, and so that's how we get the $22,000 [price]...

We believe Bitcoin has bottomed because we think that $6,000 is the floor... The one thing that everyone's psychology going to do is immediately give a 100% probability to the negatives, and they give the lowest probabilities to the positives... 

I know a lot of people think that Bitcoin could collapse to $3,000... I think what's more probable is that we have a very explosive increase in price."

 

Featured Image Courtesy of Fundstrat Global Advisors