Long-time bitcoin bull Thomas Lee has found a unique way to make his case in favor of the cryptocurrency even as wild price swings have investors on edge. He believes that despite the 70% selloff in the cryptocurrency since its 2017 highs, it is still in a bull market, and should reach $25,000 per bitcoin by the end of the year.
That case centers heavily on the psychological state of millennials as it relates to trust in government and financial institutions, the growing size of the generation’s buying and investing power and the remarkable adoption of cryptocurrencies by younger generations across the world, especially in Asia.
Lee cut his teeth as an equity analyst covering the wireless industry in the late 1990s when not many people believed it would take over our lives the way it has. He went on to serve as JP Morgan’s Chief Equity Strategist from 2007 to 2014 and became a fixture on business news television, well known for his bullish calls on tech and the markets overall. He founded Fundstrat Global Advisors in 2016, and serves as its head of research.
Addressing the CMT Symposium, a gathering of market technicians and technical analysts, in New York City, on April 12, Lee laid out his thesis, combining a mix of fundamental and technical analysis, demographical studies and futuristic projections to make his case.
Here are a few pillars on which his thesis rests:
Digital Economy Boom
We are living in an increasingly digital world, where technology is responsible for the lion’s share of economic growth over the past two decades. That will only increase going forward. Lee points out that the global economy was $60 trillion a decade ago. Now it is $80 trillion. 50% of that growth came from the digital economy. Some 70% of Gen X’ers and millennials use digital banking.
Trust is Declining
The digital boom has brought along security problems. Customer records for 2 billion people have been hacked between breaches at companies like Equifax, Target and Visa. Not only is it a question of trusting whether your data is safe with a company, Pew Research studies show that trust in government itself is at a 60-year low.
Cryptocurrencies address that problem of lack of trust. In fact, an interesting correlation that Lee points out is that other countries where trust in governments is low, is where bitcoin essentially is thriving.
The Millennial Market
It's not about just following the trend but there’s a wide range of factors that show that millennials as a demographic are primed for investing in crytpocurrencies:
- Millennials are history's largest generation in terms of overall births: 95.8 million births. They are well educated, as 72% of millennials enrolled in college, and higher education leads to more income. It’s a fact.
- Millennials and Gen X’rs are going to have a lot of money. Disposable income will grow at a 9.1% compound annual growth rate in the next decade, more than doubling from $3 trillion to $7.1 trillion. These generations, especially millennials, will be the biggest purchasers of big ticket items like houses, cars and computers.
- They will need banking! Millennials will represent 72% of all financial services purchases over the next decade.
- Millennials are eager to own cryptocurrencies, and Lee hypothesizes that they want to own it at the expense of bonds. According to a Harris survey, only 4% of millennials own crypto, but 30% say they prefer it to bonds.
- And they have the tools to invest in crypto handy. Investing apps like Robinhood are gaining huge traction with their crypto offerings. The app has 4 million users, and 25% of them are investing in bitcoin and other cryptocurrency on it. Keep in mind, Robinhood launched its crypto investing platform just a year ago.
Old is Gold but New is Crypto
The Silent Generation bought gold, and it proved to be a reliable investment in turbulent times during the 20th century. It has not proved to be so, since. They are transferring those gold assets and investments down to their offspring, but it is not clear whether we will value gold like our parents and grandparents did. Bitcoin’s survivability since 2008 has been remarkable, and the pickup by younger generations shows early signs that they prefer it, despite the fact that it is not a store of value. ( see also: Bitcoin or Gold? Depends on the State)
Look to Asia. A lot of technological revolutions come from the East. Look at video games, mobile and animation. In Japan, 14% of males own some form of crypto. In South Korea, 23% of its citizens are involved in crypto, in some form. In other geographies too, cryptocurrencies are gaining popularity.
Now, it hasn’t been easy investing in bitcoin, especially if you bought the hype in 2017. But, its important to know that bitcoin has seen bigger crashes than the one that has taken place over the past four months. At around $8,000 per bitcoin as of this writing, its right back where it was before its parabolic rise in the back half of 2017. Millions of accounts or digital wallets were opened, but most of them with less than $1,000 in them. The big investors and the HODL’rs, who have been in the game for years, have done very nicely, by the way.
Still, Lee believes the price will triple by the end of 2018. In addition to the fundamental and sociological factors listed above, he points out that at around $8,000 per bitcoin, it is trading at 1x the cost to mine the token, or its book value, put another way. Given the way the world population will age and the massive transfer of wealth and spending power that will accompany it, Lee sees an undervalued asset that will recover from the bursting of the hype bubble this year, and beyond.
Caleb Silver, Editor-in-chief
Investing in cryptocurrencies and other Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns bitcoin.