Wall
Street's best-known cryptocurrency bull just cut his bitcoin price target
nearly in half.
Tom Lee,
co-founder of Fundstrat Global Advisors, lowered his year-end target to $15,000
from $25,000 — still well above where the cryptocurrency was trading on Friday.
A key driver
was bitcoin's "break-even" point, the level at which mining costs
match the trading price. That level is down to $7,000 from an earlier estimate
of $8,000 for the S9 mining machine by Bitmain, according to Fundstrat's data
science team. Based on that, Lee estimates that fair value for bitcoin would be
roughly 2.2 times the new $7,000 break-even price.
Bitcoin is
trading well below that, near $5,539 on Friday, according to data from
CoinDesk. This week, the majority of major cryptocurrencies saw double-digit
downward swings, and bitcoin hit its lowest level of the year.
But Lee is
betting on a recovery. He told clients in a note Friday that even in the depths
of a previous bitcoin bear market between 2013 and 2015, it "never sustained
a move below breakeven."
"While
bitcoin broke below that psychologically important $6,000, this has lead to a
renewed wave of pessimism," said Lee, J. P. Morgan's former chief equity
strategist. "But we believe the negative swing in sentiment is much worse
than the fundamental implications."
Much of that
price movement was driven by "crypto-specific" events including the
contentious argument over bitcoin cash, Lee said. This week, the cryptocurrency
community sparred on Twitter over what's known as a "hard fork" of
bitcoin cash. The digital currency split into two versions -- "Bitcoin
ABC," or core Bitcoin Cash, and "Bitcoin SV," short for
"Satoshi's Vision." Bitcoin Cash itself is a result of a fork from
bitcoin, after a disagreement on the best way to scale a digital currency.
For much of
October, bitcoin seemed immune to a sell-off in global financial markets. The
cryptocurrency traded comfortably in the $6,400 range before falling off a
cliff on Wednesday.
Still, Lee
is bullish on more institutional involvement bolstering prices into the end of
this year. The launch of ICE, Starbucks and Microsoft-backed Bakkt and Fidelity
entering the market is "part of a broader creation of infrastructure
necessary for institutional involvement," he said.
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