Bitcoin to be Worth at Least $25,000 According to Thomas Lee’s Prediction Model
Thomas Lee, Co-founder of Fundstrat Global Advisors and a data scientist, recently gave his bullish predictions on Bitcoin’s price in an interview with Business Insider.
The strategist first presented his short-term model, according to which Bitcoin would be around $6,000 by mid-2018. Given how Bitcoin rose meteorically this year, from $1,000 in January to almost $6,000 this month, this prediction seems very conservative.
“...in the short-term we think bitcoin has really followed very closely the idea of acting like a social network. Meaning the more engagement there is, the greater the value rises. And in the short-term, we think bitcoin will reach at least $6,000 by mid-2018.”
However, Lee backed it up with a model based on Metcalfe’s Law, which takes the number of users into account in order to ascertain the value of a network. This means, as Lee clarified, that the stronger the Bitcoin network gets (in terms of users), the higher its value will go.
He gave the example of Facebook, Alibaba and Google, all of which grew exponentially as their user base increased.
Moving on to his long-term model, Lee pegged Bitcoin to be worth $25,000 at least, as investors start seeing it as a store of value comparable to gold.
Lee backed up this prediction with the fact that future businesses are going to be digital in nature and information is going to be extremely valuable. Since Bitcoin is essentially a secure, encrypted store of information, its value going up should be part of the natural progression.
Additionally, the top strategist pointed towards the gold market, worth around $9 trillion at the moment, and said that even if the new wave of investors moves 5% of gold’s market cap to Bitcoin, it would appreciate in value to about $25,000.
“I think this next generation of young people view bitcoin as their store of value. And if it captures 5% of the gold market, it's worth at least $25,000 per unit.”
Even this figure, he added, is a conservative estimate, since most portfolios today have 10% to 15% invested in cryptocurrencies – even $100,000 is reachable in the long-term, he said.
The Fundstrat co-founder also addressed concerns about Bitcoin’s volatility, by comparing it to the early days of gold.
“You know, when people talk about bitcoin’s volatility today, they're forgetting that when we went off the dollar — the gold standard on the dollar, gold’s volatility for 4 years was about the same as bitcoin’s volatility today.”
Thomas Lee isn’t the first to predict Bitcoin prices, more recently we had Michael Novogratz, a former hedge fund manager, state that Bitcoin would reach $10,000 within the next 6 to 10 months. At the time of writing, Bitcoin is trading at $5,650.