Crypto Market is Bent, Not Broken: Fundstrat’s Tom Lee
Dubbing the recent crypto market crash “healthy”, Lee claimed crypto is only undergoing temporary disruptions, and still has plenty of staying power and room to grow.
While the crypto market may currently be in the throes of a serious collapse, prominent Bitcoin bull Tom Lee has doubled down on his optimism for the future of digital currencies – according to the Fundstrat Global Advisors’ co-founder and chief analyst, now is, in fact, the “golden time” to get into crypto and stay there.
Speaking at BlockShow Asia 2018 in Singapore this Wednesday (November 28), Lee claimed that there are two reasons behind the crypto market crash of 2018.
Firstly, 2017 saw “parabolic gains” (Bitcoin skyrocketed up to $20,000), and 2018 is merely a “reversion to mean in terms of total performance”, given the fact that BTC (which is currently trading at around $4,000) was worth around $4,000 per token only last August. Therefore, the bear market has only just brought prices back to where they were before.
Secondly, the crypto market currently suffers from a flawed market structure. There are currently only two types of investors in the crypto market – the whales, and regular retail investors – and there is very little institutional investment in the market. In more traditional markets, institutional investment is anywhere from 40% to 80%, but in crypto this is only around 4%. Institutional investors tend to be anti-cyclical (e.g. they buy when people are selling) and also long-term – therefore, their lack happens to be a current weakness in the market.
Lee identified three main “temporary disruptions” that has shaken up the market – the crackdown on initial coin offerings by the U.S. Securities and Exchange Commission, the Bitcoin Cash “fork war”, and the greater “meltdown” in the macro traditional equities market (the S&P 500, e.g., has fallen by 9% only in two months) which is indirectly impacting the crypto market.
However, he added that this didn’t mean that the crypto market was done for good – rather, crypto is currently caught in a “healthy bear market” which is helping “reset investor expectations” in terms of price, and also helping people in the industry build “really high return value capture products”.
In addition, while crypto prices might be down, there is still a lot of money being made in crypto – e.g. exchanges have been exceedingly profitable.
Crypto’s staying power can also be gauged by the fact that digital currencies are seeing increased adoption and acceptance in terms of wallet numbers, as a payment system, and adoption by big companies such as Microsoft and Starbucks. Bitcoin’s $1.3 trillion on-chain transaction value is also 2.5 times Paypal’s value throughput and within a few years distance from that of Visa.
According to Lee, 2019 is also likely to bring some major catalysts which will propel the crypto market upwards and bring in more institutional investors, such as Bakkt and ICE, as well as BTC possibly recovering to its 200-day.
Based on these arguments, Lee asserted that the crypto market is “bent”, but “not broken”, and still has plenty of “staying power” and room to grow. The current price correction “has caused the price to fall even below its 200-day” but Lee expects it to rise slowly, with time. Stating that the present was a “golden time to be in crypto”, he added:
“As soon as Bitcoin crosses its 200-day, we know there will be a flood of money coming.”