In brief

  • Tom Lee compared Bitcoin's price to the Tesla bubble.
  • He gave three reasons why he's optimistic about Bitcoin.
  • He said that millenials in the US will drive Bitcoin's growth.

Tom Lee, co-founder of investment fund Fundstrat, said today that, when Bitcoin gets big enough, investors will plough into it like they did with Tesla stocks—driving up Bitcoin's price.

Speaking at Coingeek Conference 2020, he started by recognizing that the crypto market is still tiny. “Crypto as a percentage of traditional liquid assets is 0.1%. It’s a lot smaller than people realise,” he said, adding, “Until crypto gets larger, it’s largely a retail market. What happens when institutions start buying crypto? Well FOMO is going to kick in.”

To back this up, he referred to Tesla stocks, which recently shot up from $450 to $991 in a matter of months—briefly overtaking Bitcoin’s market cap. He noted that most institutions considered the stock dead money, until it started rising. “We’ve shown that most of the buying for Tesla has been Russell 1,000 fund managers who ignored the stock and suddenly needed exposure,” Lee said.

Tesla stock rises in a bubble
The price of Tesla stocks have doubled in recent months. Image: Shutterstock.

“In four months, institutions went from an underweighted Tesla to a market exposure which is 0.7% exposure to Tesla, added a $140 billion market cap. The day institutions decide they want to be market weight crypto, you’re going to see the same kind of parabolic move, almost in an instant,” he added.

Bitcoin’s key market is the US

Crypto is a global phenomenon, with Bitcoin mining largely centered in China, a lot of development happening in the US and funding—notably ICOs—typically happening outside of the US. But Lee argued that the US is the number one market where Bitcoin will take off.

“The US is $98 trillion, one third of all the money in the world is held in the US. $51 trillion is China and Japan is $24. Those are the three most important countries when you think about asset allocation. It’s over 60% of the money,” he explained.

And the key is millennials. He said that people aged 60 hold over 76% of the money in the US today, worth $76 trillion—but that in the next 20 years, millennials will inherit $68 trillion of this wealth.

Millenials are much more pro-crypto than traditional investors.

Tom Lee

“We’re done a lot of demographic work at Fundstrat to show that millennials are the only real drivers of the US economy over the next 20 years and they’re going to inherit the wealth equivalent of China and Japan combined,” he said, adding, “Millenials are much more pro-crypto than traditional investors. This process of inheritance is also going to drive crypto adoption.”


Betting on Bitcoin against banking

Lee’s final argument for Bitcoin is that it has the potential to disrupt the current financial systems. He points out that the current system is inordinately expensive, and that Bitcoin could offer a cheaper alternative.

“Using data from the OECD, banking today captures 6% of all the activity in the economy. Meaning every $1 of stuff that you guys do, $0.06 is paid to the banking industry to enable that transaction,” Lee said.

“That means the average person spends 3.5 weeks a year, almost a month of their salary, to pay for the right to use the financial system. And in the US, that works out to about $1,000 a year,” he added.

However, he did add one caveat. “The future is uncertain,” he said, stating that it’s important to be in the right space but that’s it’s not always easy to know which specific coins are the right ones to invest in. But he stressed that, regardless, it’s time to be optimistic.

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