Ever-the-optimist when it comes to crypto, Tom Lee has stated that he thinks a fair price for Bitcoin is $14,000. He bases this opinion on the cost to mine a Bitcoin and what he considers a traditional markup on commodities.
The managing partner and head of research at Fundstrat Global Advisors also stated that the ongoing bear market of 2018/19 was over. He believes that infrastructure developments and the accumulation of Bitcoin by so-called whales is behind the change in price trends seen thus far in 2019.
Tom Lee: Infrastructure, Turmoil, and Whales Driving Bitcoin Rally
Tom Lee has appeared once again on CNBC’s “Squawk Box” segment. This time, the Fundstrat manager and researcher provided insight into the latest price rise that took Bitcoin from around $4,119 at the beginning of April to a high of $5,300 yesterday according to Coinmarketcap.
After a “rough 2018”, he stated that the Bitcoin price had been heading up for most of 2019. He attributed this to original investors one again accumulating Bitcoin. Many of these, according to Lee, managed to sell at the top of the 2017 price run up in late December.
Lee believes that several factors are influencing these original Bitcoiners to reload. Amongst them is the growing interest from parts of the suffering from poor government money management or political instability and greater infrastructure development from the likes of Fidelity Investments and the much-anticipated Bakkt platform.
Although not entirely sure what caused the sudden move at the start of April, Lee stated that there was:
“… real evidence that there’s a lot of dry powder.”
He went on to say that the crypto community kept a lot of cash and was waiting for Bitcoin to break below $3,000. When it failed to do so and instead made the recent upwards move, much of this cash poured back in.
— Thomas Lee (@fundstrat) April 4, 2019
Perhaps the most interesting part of the short interview was when Lee gave his opinion that the fair price of Bitcoin is around $14,000. When prompted for explanation, he opined that the price of a commodity is often two to three times its cost of production when in a bull market.
Since Lee estimates that the cost to mine a single Bitcoin is now around $5,000 to $6,000 and therefore a fair valuation is between two and three times that figure. He briefly stated that since Bitcoin has crossed over the 200 day moving average, the market is indeed bullish. He therefore joins a sizeable and growing group of crypto commentators that believes the bear market of 2018 is now over and the bottom is in.
Finally, Lee was asked whether he was buying Bitcoin right now. He largely skirted the question, stating that Fundstrat recommended that individuals invest one to two percent of their net worth in Bitcoin. This according to the presenter was crazy and akin to gambling. Lee largely agreed but sees no problem with a high risk, high reward investment with a small percentage of a portfolio.
The interview concluded with Lee arguing that Bitcoin makes most of its gains in a 10 day window. Therefore, his advice for those wanting to cash in on those gains is simple:
“You’ve got to essentially hold [Bitcoin], or hodl it, as they say, to really capture the gains.”