Tom Lee: "Bitcoin Will Be The Best Performing Asset Through Year End"

Tyler Durden's picture

Fundstrat Global Advisors analyst and former permabull - who recently became into one of Wall Street's biggest bears - Tom Lee, is a fan of bitcoin. The strategist, who recently turned "cautious on stocks", explained his bullish view on the digital currency during an appearance Wednesday on CNBC’s “Fast Money,” claiming that a single coin could someday be worth as much as $50,000.

Starting with the fundamentals, Lee said that Bitcoin’s decentralized nature makes it a “good store of value.”

This is why bitcoin could be the new gold, Tom Lee explained to CNBC.

“We did a study and published it in early July…[bitcoin] has a lot of characteristics that are similar to gold and will ultimately make it attractive as an alternative currency. It’s a good store of value. The encryption and the distributed ledger not only act as a means of protection, but it actually has an industrial use that could be replacing a traditional payment platform.”

Then there’s the scarcity argument. Approximately every four years, the number of coins awarded to the miners who process transactions on the bitcoin network decreases by half, making bitcoin an inherently deflationary asset.

“The supply of bitcoin is starting to slow. Within the next 2-3 years the number of coins discovered or mined or rewarded will be slower than the amount of gold discovered, so bitcoin will be a rarer unit than gold.”

 

“There’s $7.5 trillion worth of gold out there, so gold dwarfs the currency in circulation, and if bitcoin captures just five percent of that alternative currency, it could fetch as much as $25,000 to $50,000 a share.”  

Even with bitcoin trading near all-time highs, Lee says it's still “an under owned asset” with “potential for huge institutional sponsorship coming.” Lee added that he expects it not only to outperform stocks, but to become the best-performing asset of 2017.

“Yes, because there’re catalysts. Institutions have to directly buy the coin today through a broker but both the CBOE and CFTC have opened options and futures trading, so I think it’s going to grow in holdings.”

In July, the CFTC announced that it would allow a the Google-owned, Goldman-run LedgerX to create the first swap execution facility for bitcoin derivatives, opening the door to centrally cleared options and swaps, assuring the already vollatile asset becomes, well, even more volatile. Bitcoin is already up more than 300% year-to-date, recently trading around $3,300, or nearly three times the price of an ounce of gold. As long as the digital currency avoids a calamitous crash, it’s on track to beat even the best-performing stock markets (the S&P 500 is up about 12%, by comparison) - which, incidentally, is that of Venezuela so not much to boast there -  just like it did last year.

Finally, Lee is not alone in his bullishness. While Dana Lyons is not actively trading the cryptocurrency, the chart of Bitcoin intrigue him. 

Here's why in his own words:

One glance at the chart — which I never really intended to do — had me at least considering taking a deeper look at the price structure. What immediately caught my eye was a potential buy setup in the near-term. In fact, ironically, I doubt there are many charts among those “literally thousands of securities” that offer a better potential setup at the present time.

Before I get into the partial change of heart, let me reiterate one thing regarding Bitcoin. We have ZERO edge regarding our understanding of the phenomenon and its future potential. As such, we have no intention of trading it within our client accounts in the foreseeable future. Finally, given the (relatively) tenuous structure and regulation surrounding cryptocurrencies in general, any trade in the space must be considered pure speculation and nothing more.

Alright, with that said…here are the reasons we really like the potential of the chart at the moment.

1) Reliable conformity to charting analysis

When considering any price plot, especially one as immature and enigmatic as bitcoin, it is imperative to first study the chart history to determine whether prices actually appear to adhere to traditional technical analysis or charting techniques. If that is not the case, then it is utterly pointless to attempt to chart the issue as the lack of traditional guideposts will have you driving blindly.

In this case, though BTC is still relatively young, its price movement (especially in the most recent few cycles) does seem to conform to much of the charting analysis that we like to employ, e.g., Fibonacci especially. Check out the “long-term” chart:

 

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We left the y-axis elongated as it is in order to show potentially relevant levels above Bitcoin’s highs to date. But before we get ahead of ourselves, take a look at how closely BTC has conformed to key Fibonacci lines, including:

  1. The 161.8% Fibonacci Extension (in red) of the 2013-2015 decline lies near the 1860 level. This was in the vicinity of both the initial interim high this spring following a breakout above the 2013 and early 2017 highs, as well as the low set in the recent mid-July pullback.
  2. The 261.8% Fibonacci Extension (red) of the 2013-2015 decline lies near the 2892 level, or right near the all-time highs set in June.
  3. The 61.8% Fibonacci Retracement (blue) of the 2015-2017 rally lies near the 1250 level, i.e., the level of the breakout above the 2013 and early 2017 highs.
  4. The 38.2% Fibonacci Retracement (blue) of the 2015-2017 rally lies near the 1928 level, in the vicinity of low set the recent mid-July pullback.
  5. The 61.8% Fibonacci Retracement (green) of the rally from the 2013-2017 breakout level to the June highs lies near the 1900 level, in the vicinity of low set the recent mid-July pullback.

I think that is enough evidence to confidently proceed with an earnest analysis of the Bitcoin chart.

2) Substantially optimistic prospects for higher prices (if looking to buy)

This box gets checked as well as the chart-based outlook for BTC in the near, and longer-term, appears bright. The main point is that the recent June-July consolidation looks to us like a continuation pattern, i.e., prices should eventually resolve higher in continuation of the rally initiated by April’s breakout above the 2013-2017 highs.

Following the most recent selloff in July, BTC importantly rallied back up to near the June highs. This suggests that the post-June decline was perhaps a counter-trend ABC down wave that has been completed via the recent bounce to higher interim highs. Thus, based upon that analysis, new highs should be in the cards for BTC.

 

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3) An identifiable and nearby trigger (e.g., price point)

This last requirement is satisfied as well as, in our opinion, the pullback over the past few days has put BTC into position here it can commence a new up-leg at any moment. Any of the purple Fibonacci Retracement levels would suffice in containing the recent decline and in serving as a springboard to a new rally. Thus, anywhere between the 38.2% Retracement ~2498 and the 61.8% Retracement ~2222 should be a solid entry point on the long side in Bitcoin. A decisive close below 2222 would undermine our bullish analysis and suggest stopping out one’s position.

If our scenario is valid, how high can Bitcoin go? While we don’t like to apply targets to our trading, using Fibonacci Extensions of this recent June-July consolidation may be reasonable to set expectations for a post-breakout move. BTC’s conformity to the 2013-2015 Extensions provide cover for our use of these new Extensions. Here are some possibilities based on said Extensions:

  • 127.2% Fibonacci Extension of June-July decline = ~3340 (+33% from current levels)
  • 161.8% Fibonacci Extension of June-July decline = ~3772 (+50% from current levels) *Best Bet?*
  • 423.6% Fibonacci Extension of June-July decline = ~4592 (+84% from current levels)
  • 261.8% Fibonacci Extension of June-July decline = ~5012 (+100% from current levels)

Obviously, there are a lot of big IF’s that we are dealing with here for the above gains to materialize. However, based upon our read of the BTC chart, as we would apply to all other charts, the possibility of hitting at least the 1st 2 “target” levels is good enough from a risk/reward standpoint to warrant an entry here.

Again, we are not telling anyone to buy Bitcoin. It is doubtless more risky and unstable than most securities that we cover every day. That said, if one is so inclined to partake in the speculation, our read of BTC’s current chart setup is about as favorable as it gets.

**August 7, 2017 UPDATED CHARTS:

See Bitcoin’s strong reaction (a/o 8/7/2017) off of the levels we highlighted in our July 27 post.

Short-Term:

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Long-Term:

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Raffie's picture

Good stuff...

Waiting for that Litecoin to pop then back into BTC

crazytechnician's picture

Cue the haters and 'tards....

RightEdge's picture

When the haters stop ranting here, I'll start thinking about getting out of cryptos. They provide an invaluable contrary indicator service.

crazytechnician's picture

The bitcoin haters and 'tards on here are the 1920's Wall St. shoe shine boys. When they finally say buy bitcoin - and they will - you will know it's time to fucking sell hard.

SeuMadruga's picture

Know how to id them under their new alias ?

crazytechnician's picture

Loads clearly post alt- alias since they realise bitcoin is not a Ponzi any longer - it's now double gold. Most just stay away because ther strawman arguments are so pathetic and easy to destroy. Maybe when there is no 'tards left on here will be the biggest sell signal . When silvergeddon stops posting that may be a strong sell signal because shoeshineboy may then actually be buying ... but he may be bluffing and already be a large hodler.

Antifaschistische's picture

I got nothing against bitcoin or crypto's.   heck, I've been a coin collector all my life.  If I could have bought bitcoins the first day I heard of them off of ebay I would have....because, thats what I do.   Maybe it'll go to 50k.   fine with me.

However, the fact that people are saying it could go to 2k it could go to 20k it could go to 50k means one thing is certain, and that is there is no true way to assess "fair value" of this item.  Maybe it's 100k...that's fine too.

so, can a company create their own crypto and put it on their balance sheet as an "asset"?   what if they jack up the marginal price?  What's the volume?  does anyone care?  I don't really.

I hope they stay around for the day when I need to smuggle a few hundred K out of the country.

Oracle of Kypseli's picture

Tulip like insanity. maddness of crowds, heard mentality, GREED

"I should have known better"

"but everyone was doing it."

"We are gonna get priced out of housing"

 

Golden Phoenix's picture

"The growth of the Internet will slow drastically, as the flaw in 'Metcalfe's law'–which states that the number of potential connections in a network is proportional to the square of the number of participants–becomes apparent: most people have nothing to say to each other! By 2005 or so, it will become clear that the Internet's impact on the economy has been no greater than the fax machine's." - Paul Krugman

Golden Phoenix's picture

It's the same as with stocks. If the public perceives it's undervalued they'll bid it up. If they think it's overvalued they'll sell it off. Some of the brokerage houses have already admitted if companies use coin issuance in place of stock there will be no need for their entire industry. 

JethroBodien's picture

You are all clueless.  How can something created out of thin air and backed by nothing have any value.  The answer is it can't.  Such a system is guaranteed to fail.  Just like all FIAT currenies have failed since time immemorial.

I'm sure everyone will get out just fine when the music stops.

$50,000 dollars for what pray tell.  It's laughable.

 

Oswald did it's picture

Marshal McLuhan wrote this in 1965.  From the chapter titled Money, from his book Understanding Media, The Extensions of Man

Automation, which is electronic, does not represent physical work so much as programmed knowledge. As work is replaced by the sheer movement of information, money as a store of work merges with the informational forms of credit and credit card. From coin to paper currency, and from currency to credit card there is a steady progression toward commercial exchange as the movement of information itself

TeamDepends's picture

"created out of thin air and backed by nothing".  You have no idea what you are talking about.

JethroBodien's picture

Pray tell explain.  I'm waiting.

And yes, generating some 0/1's though a software algorithm does qualify as creating a bitcoin out of thin air.   In what rational world do those 1/0's have value?   It's all so ludicrous as to be amusing.

crazytechnician's picture

There is no such thing as solid matter.

Solosides's picture

How about a global trustless accounting and transaction system that can be traded 24/7/365 and without the government being able to tax or freeze your funds? Or with ethereem you have essentially a massive worldwide supercomputer that incentivizes people to create the most efficient software possible.

Golden Phoenix's picture

The world doesn't owe you an explanation or give a shit whether you understand. It's moving on without you. 

crazytechnician's picture

Actually , everything is guaranteed to fail , in the end. Every atom and molecule will eventualy self-destruct. That is physics. But aside that , like gold , bitcoin is a measurement of energy , or proof of work. bitcoin is a Meta-energy measurement , it is nowhere near fiat. Fiat is far worse than thought than even you beleive it is - it is worse that being created out of thin air because fiat is loaned into existance - it is created from exponentially increasing the debt which is mathematically impossible to ever be repaid. But bitcoin - like physical gold , bitcoin is not a debt , it does not exist as debt and therefore it cannot be created as a debt based fiat currency. It is not fiat.  Like the rest of the ZH haters and 'tards - you need to do more research.

The central planners's picture

You forgot to say that bitcoin limitation is a man made promise. It could be changed anytime in the future plus it has no fundamental difference to the another 1000 cryptos in existence.

Raffie's picture

'$50,000 dollars for what pray tell.  It's laughable.'

So far all the ignorant people pretty much said the same thing when Bitcoin 1st launched that it would be over $10 and so on...

Peeps like you will QQ about cryptos. When BTC hits $50k you will be babbling about 'BTC hitting $100k is laughable.' will never end because you are just a troll and nothing more.

TROLL ON KIDDO....

JethroBodien's picture

You are side stepping the issue.  Where is the inherent value in a bitcoin?  The continued success of bitcoin is based purely on a perception and faith there will always be a greater fool. 

I'm not arguing that money can't be made.  I'm simply staiting cryptocurrencies are a speculative play and nothing more.  Good luck playing in that sand box.

 

Raffie's picture

I can convert my btc into any available fiat in to the world and PM. Japan is a best example, I can travel all over Japan and buy anything I want, even fly Japan airways all with bitcoin. So why would Japan and other countries adopt cryptos if they spec and not money/value/wealth?

I find it amusing that most of you haters gawk and bawk at cryptos without even doing any research at all.

So at what point of adoption globaly do you think cryptos are not spec but money? They are over $100 billion already and growing.

 

JethroBodien's picture

Good luck with that when the value of bitcoins in dollars can go up or down 50 percent in a matter of days.

Oracle of Kypseli's picture

The moment Japan airlines get your bitcoins they converted to Yen or Dollars. They never hold large amounts of bitcoins, Just enough to justify an acoount.

crazytechnician's picture

The moment Japan airlines get your Yen or Dollars they converted to Fuel , spare parts and salaries. They never hold large amounts of Yen or Dollars, Just enough to justify an acoount.

False_Profit's picture

BTC...the honeypot of all honeypots...

 

 

Full disclosure: long tulips...

 

 

 

 

Golden Phoenix's picture

The first bitcoin transaction was when someone accepted 10,000 bitcoin for a pizza. At a pizza price of $20, that's $.002 per coin. Today one coin trades at about $3400. 1,700,000 times as much. The coins received for that pizza are now worth $34,000,000. They now buy 1,700,000 pizzas or 26,425 ounces of gold.

You could have had 26,425 free ounces of gold but you don't ask out the pretty girls because they'd just end up leaving you anyway. It's more fun to watch the other guys marry them so if they end up getting a divorce you can say 'I told you so!' right? The guy who accepted bitcoin for pizza is an idiot right?

Oracle of Kypseli's picture

Always try to get married with a handsome dude or a pretty girl even if you know that he/she may cheat on you.

'Cause it's better to eat honey and share than eat shit all by yourself

silverer's picture

Yeah, OK. But it's NOT an asset. It's a speculative vehicle.

Blue Steel 309's picture

So are my fingernail clippings.

Raffie's picture

If cryptos are fake and such, then why can I buy PM with them?

Unlike your figernails.

Also why do so many countries have cryptos and widly accepted if they fake?

Because you are just a troll. Not a very good one either.

Oracle of Kypseli's picture

You have to first find a greater full to sell and get FRN's and then buy Gold. 

Cabreado's picture

One time, pets.com was a digital asset.

Now you're playing the same game with a "currency."

tmosley's picture

At the same time, Amazon.com shares sold for pennies.

Cabreado's picture

So you acknowledge that BTC is being treated as pure speculation, outside of any reasonable, rational definition of "currency."

Good for you.

Raffie's picture

So pets.com was global with over $100billion in value?

Hmm.................... it is like you are fumbling around trying to compare a straw to a inter dimensional traveling craft saying they are the same thing. 

jcaz's picture

LOL-  you  fail to see your own hypocracy....

If Bitcoin is such a "thing", why do you continue to value it in terms of dollars?  Why no talk about how difficult it is to convert into dollars?

What's the value of a dollar in terms of Bitcoin?  The value of anything?  Until it stands on its own merit as an unassailable means of conveyance, it's a tulip;

When you nerds can start to really think outside the box, you'll make real progress.   As it stands, you're still just a blip of a sideshow.

tmosley's picture

If you find yourself reduced to arguing from word-thinking, then you need to re-examine your position.

JethroBodien's picture

Yes.  That is exactly what it is.  All the power to anyone who wants to play the game assuming they understand its an actual game where the participants are called greater fools.

FreeShitter's picture

Has been since 09.

Cabreado's picture

Ah, a "currency" as "best performing asset"...

that'll Fix Things Up, fer sure...

Sizzurp's picture

8 billion people in the world, 20 million BTC. Get one.

0Theorem's picture

Simple math - 357,000 satoshi's per person (assuming 7.5 Billion peeps).

0.0036 BTC /person. IF it were equally distributed!

You would be in the 1% (assuming 'they' still own 90% of all assets) with about 350BTC income/yr (at current price).

The remaining 99% (7.425B) would fight over the remaining 2.1M BTC.... barely 28,000 satoshi/person.

IF equally distributed...LOL

 

 

Bunga Bunga's picture

Only for millionaires. 15 million millionaires in the world.