Bitcoin’s Unique Cooperative Value and Price Prediction Model

Tom Lee, Fundstrat’s renowned market strategist, recently shared his views on Bitcoin (BTC), stocks, and technology in an interview.

Known for his bullish comments on Bitcoin and correctly predicting the last bull market, Lee explained how he formulates price targets for Bitcoin.

Lee emphasized that Bitcoin is different from other asset classes due to its cooperative value. Contributors to the network benefit from BTC, setting it apart from other assets. In 2017, when Bitcoin was around $1,000, Fundstrat published a white paper highlighting that just two variables explained over 80% of Bitcoin’s price movement: the number of active wallets and activity per wallet.

Based on these variables, Fundstrat made a simple prediction. They foresaw that if the number of wallets increased by 70% and activity per wallet by 40% over five years (by 2022), Bitcoin would reach $25,000. Lee stated that even if one doesn’t fully understand Bitcoin, its price movements can be mathematically predicted.

The Impact of Institutional Adoption on Bitcoin’s Legitimacy

Lee praised Bitcoin’s technology, describing BTC as a secure, decentralized database. In its 14-year existence, not a single entry in the Bitcoin ledger has been fraudulent. In contrast, 6% of all bank ledger activities during the same period were deemed suspicious by the FDIC.

Lee believes that Bitcoin’s future price will depend on increased adoption and network activity growth. He is confident that both will occur, leading to exponential price increases. If the number of wallets continues to grow at a linear rate over a sufficiently long time period (e.g., five years), he indicated that Bitcoin could reach millions.

Lee likened Bitcoin’s adoption to the adoption of the dollar. Initially, not everyone accepted the dollar, but as more people adopted it, its usage grew. He suggested that the history of currencies could explain Bitcoin’s potential growth. As Bitcoin becomes more widespread, innovations such as pricing in BTC, lending in BTC, micropayments in BTC, or blockchain-based payments could emerge.

While Lee couldn’t pinpoint a single use case to explain the growth in wallets, he noted that institutional adoption is increasing. Highlighting BlackRock’s entry into Bitcoin as a significant development, Lee argued that this move invalidates the notion that Bitcoin is merely a hobby for ordinary people. According to Lee, BlackRock’s involvement lends credibility to Bitcoin as a legitimate form of digital currency.

Note: This is not investment advice