Here’s How Bitcoin Could See a 4,826% Increase in Value
- Bitcoin is second-largest transaction network after Visa and with five million BTC users, it's almost a 100X increase in price, – Tom Lee of Fundstrat
- A 4,826% increase in price is possible because “the more people who hold it and find it useful the greater its price gain”
- There are a lot of ways to kill Bitcoin, but like young people adopted the internet, they are adopting cryptos
Could Bitcoin Reach $40,000 Before The Dow?
“Absolutely” is what Thomas Lee, co-founder and Head of Research at Fundstrat Global Advisors feels about his target that he gave last week on CNBC.
In his latest interview on “MarketBrief,” a weekly digital show launched by Dow Jones’ Barron’s Group, Lee talked about why this figure, and even higher, is possible in the future.
Currently, Dow is at 29,232, inches away from 30,000 mark that Lee previously predicted to hit before Bitcoin. But for Dow to reach 40,000 it needs a jump of nearly 37%. In contrast, Bitcoin is currently trading at $10,150 and needs a spike of 195% to reach $30,000 level and 294% of a jump to reach $40,000 level and still, Lee expects the digital asset to make it before the Dow.
“Today Bitcoin's transaction activity is twice that of PayPal, seven times Discover Network. It's the second-largest transaction network after Visa. And there's four billion Visa cardholders; so if you get to… five million Bitcoin users, it's almost a 100X increase in price.”
But why so bullish on Bitcoin?
The reasons behind expecting even a 4,826% increase in the digital asset’s price is in the fundamentals, as per the analyst. Lee said on Tuesday,
“Bitcoin is a network value asset, so the more people who hold it and find it useful the greater its price gain. It's really a log function. Today, about 500,000 people use Bitcoin. So, for it to quadruple, you just need to double the number of users.”
But bitcoin is not only a leader in the crypto market, but it also works better than the traditional financial system. Lee said, in the financial systems,
“too much money is paid to intermediaries. Today, roughly 6% of all GDP globally is paid to the financial system to manage trust. Bitcoin has been around for 11 years, and has never had a single fraudulent activity on its blockchain with $5 trillion of activity.”
“So, it works better than the traditional financial system, and the cost is vastly lower. Today, you can transmit a million dollars of Bitcoin between countries for $15. That same transaction using remittance would cost you 5 to 10% of that – $50,000 to $100,000,” he added.
But there’s a lot of ways to kill Bitcoin
But of course, the future is “uncertain,” and if there were some sort of Proof-of-Work (PoW) attack on the blockchain, bitcoin would be “destroyed” and it would lose all of its value. Lee added,
“Governments could try to ban the off-ramping of Bitcoin. So to convert it back into fiat, they could tax it, or make it illegal. That would make it very difficult.”
So, there are a lot of ways to kill Bitcoin but Lee says “it’s a generational thing. Look at Schwab’s latest holdings for stocks. A top-five holding is the Grayscale Bitcoin Trust. Just like young people adopted the internet, young people are adopting cryptocurrencies.”
Geopolitical tensions making Bitcoin more useful
Currently, Bitcoin is trading at $10,150, up 4.13% in the past 24 hours. In 2020, we are up 38% so far amidst the deadly coronavirus outbreak which according to Lee is “good” for the leading cryptocurrency. Lee explained,
“it's creating an asynchronous or, you know, idiosyncratic event that makes Bitcoin more useful. You know, China's trying to contain its market. People want to move money freely, there's geopolitical tensions, making Bitcoin more useful, but… the coronavirus, I think, is ultimately a non-issue globally.”
Already, Bitcoin has broken above 200-day moving average and this week, we also formed the “extremely bullish” golden cross pattern. With reward halving coming in May, “that's a good supply-demand change.”