Listening to the crypto bulls of yesteryear continue to defend their case for new new all-time highs, despite a growing mountain of evidence to suggest that last year's rally was spurred by the blind greed of gullible marginal buyers (not to mention outright manipulation), one can't help but feel a twinge of pity for Mike Novogratz and Wall Street's original crypto uber-bull, Fundstrat's Tom Lee.
Lee achieved rock star status thanks to his prescient calls for a stunning rally in bitcoin months before crypto went parabolic. But as prices plunged this year, he has carried on with his appearances on CNBC and in the financial press, making the structural bull case for bitcoin to anybody who is still willing to listen. We imagine most of Lee's audience is in the same boat as he is: Refusing to let go in the face of heavy losses, according to Bloomberg.
Apparently ignoring the fact that bitcoin has crashed through every support level so far with little regard for financial models projecting fair value at $6,000 (or $5,000 or $4,000), Lee has published another categorically bullish research note explaining why his model suggests that bitcoin's true "fair value" is somewhere between $13,800 and $14,800.
Bitcoin's present value "doesn't make sense", Lee argues, because, working backwards, one would expect the number of "active" crypto wallets to fall to 17 million from 50 million. Ergo, since the number of crypto wallets hasn't declined, the "fair value" level of crypto must be much higher than it is currently (though how Lee justifies the wallet metric as anything other than an arbitrary benchmark remains a mystery).
"Fair value is significantly higher than the current price of Bitcoin," he wrote.
"In fact, working backwards, to solve for the current price of Bitcoin, this implies crypto wallets should fall to 17 million from 50 million currently."
This latest call comes after Lee lowered his year-end projection for bitcoin from $25,000 to $15,000.
According to Lee's calculations, bitcoin wallets climb to around 7% of the total number of VISA account holders (some 4.5 billion) BTC could be worth $150,000.
“Hence, the risk/reward is still strong,” Lee said.
“Given the steep discounts of [bitcoin] to our fair value models, the excessive bearish sentiment about fundamentals does not seem warranted.”
But we don't have to tell you that bitcoin at $150,000 - with the fundamentals being what they are - seems ridiculous on its face. Which makes us wonder: What is it about the number of active wallets that justifies using it as a basis for this valuation model?
However, in an interview with CNBC this week, the best-known bitcoin bull exhibited some frustration in his forecasts for crypto prices:
“Given we are so close to year-end, we are not providing any updates to near-term price objectives - read this as, we are tired of people asking us about target prices,”
Finally, we note that this year's utter collapse is not that unusual; throughout its ten-year history, bitcoin has bounced from boom to bust to boom to bust. If this latest boom and bust has taught us anything, it's that conventional financial modeling doesn't work for crypto.