Lee made the corresponding statements on November 15 to the CNBC broadcast Street Signs Asia. Here he argues that crypto currencies are so-called “network value assets”, i.e. assets whose value depends on a network effect, similar to the large Internet companies Facebook, Amazon, Apple, Netflix and Google (FAANG).
Network Value Assets
Lee, known as Bitcoin’s advocate, referred to the context when asked whether his $25,000 price forecast for 2022 remains valid given Bitcoin’s recent weakness. The Chief Analyst of Fundstrat Global Advisors pointed out that his forecast was a long-term one, made as early as 2017, and reaffirmed that this target remains “very easy to achieve”. To this end, he explains:
“Crypto currencies are network value assets, which means that the more people they have, the higher their value. In principle, you can imagine this as a logarithmic function, if you double the number of users, then you quadruple the value. To reach $25,000, we currently need a little less than a quadruple, which means we need to double the number of Bitcoin users.”
According to Fundstrat estimates, about half a million people own Bitcoin, so you would “only” have to increase this number to one million to reach a market value of $25,000 in that period. Accordingly, Lee draws the above-mentioned comparison with the large tech companies Facebook, Amazon, Apple, Netflix and Google, whose initial price developments are clearly due to a network effect:
“70% of their price gains from the early days can be explained by the expansion of the Internet at that time. The prices correspond quasi to a logarithmic function of the growth of the Internet and it will be exactly the same with crypto currencies”.
Lee is generally of the opinion that crypto currencies are still “in an initial phase”, which is why he remains optimistic. He attaches particular importance to the entry of institutional investors, who could ensure that the asset class establishes itself. At the renewed request of the CNBC moderator, who could not quite follow Lee’s explanations, Lee illustrates the price trend he predicted by saying that it would form “like an ice hockey stick”.
At the beginning of October, Lee had still relativised Bitcoin’s profits this year and predicted that there would initially be a small return. In the same month he also pointed out that Bitcoin has a clear correlation with the stock markets and therefore does not serve as a hedge against economic crises, as many other experts claim.