08 Aug Tom Lee: “Bitcoin is the best house in a tough neighborhood”
In the past week, the cryptocurrency market has dropped precipitously by 20%. That hasn’t seemed to rattle Fundstrat co-founder and chief analyst Tom Lee.
“While many attribute this to “proof crypto is in a bear market,” rather, we believe this highlights the difference in market positioning perception between US and Asia crypto. Simplistically, there are 3 primary cohorts impacting the price of crypto and digital assets: (i) US crypto investors; (ii) Asia crypto and (iii) crossover (from traditional markets), with the latter naturally representing the primary engine of fiat inflows (which raises overall market prices).”
He believes many of the sellers are Asian who interpret the US SEC decision deferral on the VanEck ETF as negative and are “selling the news.”
ICE’s new venture, Bakkt overlooked
The Intercontinental Exchange (ICE) last week announced the launch of Bakkt, the global platform and ecosystem for digital assets. The new company is working with organizations including BCG, Microsoft, Starbucks, and others, to create an integrated platform that enables consumers and institutions to buy, sell, store and spend digital assets on a seamless global network.
Lee says this positive news has not been noticed by the cryptocurrency market yet mostly because this ICE is not as familiar as the other highly visible US Immigration and Customs Enforcement in the news regarding immigrant children.
Bitcoin – “best house in a tough neighborhood”
He says bitcoin’s dominance rose to 49% of the market and “Bitcoin remains the best house in a tough neighborhood.”
Earlier this week, the DEA noted that the speculators now outnumber the drug dealers using bitcoin. According to a Bloomberg interview with Lilita Infante at the US Drug Enforcement Administration, criminal activity was behind about 90% of transactions in the cryptocurrency. Now, illegal activity has shrunk to about 10% and speculation has become the dominant driver, she said.
Bitcoin is much less speculative than the USD and oil
Lee compares the stats for speculative trading in bitcoin with US dollars and oil.
“For every USD spent in the economy, it has traded 96X across an FX desk at a bank, moved via derivatives or futures, or been speculated on by traders. For every drop of oil extracted from the ground, before it is turned into gasoline (or end markets), it has been speculated on 31X. For Bitcoin, this ratio is 2.5X.”
Positive risk/reward in the coming months
It’s not for the faint of heart investors, but Lee sees a positive risk/reward ahead. He looks for four catalysts to fiat to cryptocurrency investment in the coming months:
- ETFs: will enable easier access to cryptocurrency markets for retail and institutional investors.
- Institutional investor infrastructure: Creation of regulated and surveilled trading markets, along with custody solutions and adequate insurance, will make crypto a more stable and credible asset allocation.
- Fiat to crypto on-ramps: new on-ramps will open up access.
- Governments open to crypto: Japan, Taiwan, Switzerland, Singapore, and other countries have been friendly, but the US has not revealed its true hand yet.
“Purgatory” until mid-September
Numerous factors are pointing in a positive direction for bitcoin though there is little to encourage investors on altcoins according to Fundstrat’s latest newsletter.
Lee expects it will be mid-September before the anticipated upward trend arrives for bitcoin market capitalization.
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Editor’s note: Information on Blockcoin Today is not intended as investment advice. Please consult your own investment advisors for appropriate guidance and counsel.