Throughout the cryptocurrency market downturn, the one thing that has remained steady is Fundstrat Co-Founder Thomas Lee’s bullish bitcoin forecast — until now. Lee has decided to lower his prediction for the bitcoin price, slashing it 20% from an expected $25,000 by year-end 2018 to $20,000. While he threw in that it could go higher than that, the lowered forecast is a sign that things have not gone according to plan for the market this year.
Lee shared his update with CNBC’s Squawk Box and views the market through the lens of bitcoin mining, the energy-intensive process by which volunteers use their computing power to solve complex equations and make more coins. There’s a finite supply of BTC, and the cap is 21 million, and the landscape is shifting in favor of bitcoin bulls. He told the business network that bitcoin is a buy:
“Bitcoin has historically traded at 2.5 times its mining costs. It’s not out of the question that it could be over $20,000 by the end of the year at fair value … The reason bitcoin looks really good here is the cost of mining around $7,000 fully loaded. And the difficulty is rising. So by the end of the year, it’s going to be $9,000,” said Lee on CNBC.
Lee’s decision to reassess comes on the heels of a bitcoin price that has been trading in the doldrums pretty much all year. For instance, BTC has shaved nearly one-third from its value since its May high of $9,800.
Lee is a Wall Street veteran who prior to launching Fundstrat was a top JPMorgan strategist who was ranked among the best of his peers. He still covers stocks but believes “digital money and blockchain is a multi-decade story [of which] we”re in the early stages,” likening to industry to the convergence of wireless and internet in the nineties.
Meanwhile, even in a worst-case scenario of Lee’s forecast, bitcoin $20,000 still reflects a 200% increase over the current levels of BTC $6,695. And on a year-over-year basis, the bitcoin price is up more than 100%.
Now that Lee has taken his forecast down a notch, it’s unclear if other market predictors will do the same. Billionaire venture capitalist Tim Draper, for instance, is calling for $250,000 bitcoin price by 2022, though his forecast gives the blockchain industry more time to mature. Arthur Hayes, who is at the helm of bitcoin exchange BitMEX, believes that BTC could hit $50,000 by the end of the year. The market is waiting on the wave of institutional capital everyone’s talking about, which in turn is waiting on regulatory clarity.