"People always start announcing bubbles in the mid to late stages of the market, and the real top usually appears when no one is bearish."

Compiled & Edited by: Deep Tide TechFlow

Guest: Tom Lee, Chairman of Bitmine

Hosts: Ryan Sean Adams; David Hoffman

Podcast Source: Bankless

Original Title: The World’s Largest ETH Holder - Tom Lee on Treasuries, Ethereum Dominance, and Wall Street

Broadcast Date: August 6, 2025

Key Takeaways

In this episode, we interviewed Tom Lee, a director at Bitmine, to discuss how his Ethereum asset management company is rapidly growing and its goal of holding 5% of the total supply of ETH.

Tom is very confident about the future of Ethereum, believing its value could surpass Bitcoin, and predicts its price could range between $4,000 and $15,000. He also shared his analysis of market dynamics, warnings about leverage risks, and unique insights into the valuation of Ethereum and NFTs (like Pudgy Penguins).

Highlights

• Ethereum is one of the most important macro investment opportunities of the next decade. Therefore, we want to act quickly to acquire as much Ethereum as possible at around $3,500 before a significant jump in price similar to Bitcoin's recent surge.

• The upside potential of Ethereum even exceeds that of Bitcoin. The current price is clearly undervalued.

• The short-term market performance of Ethereum is not entirely determined by its fair value. If we look back to 2017, Bitcoin's price was $1,000 at the beginning of the year, but it didn't start to soar until August. I believe Ethereum is experiencing a moment similar to Bitcoin in 2017, as Wall Street finally begins to support Ethereum.

• I believe the core story of Bitmine lies in scarcity. We have a clear strategic goal of acquiring 5% of Ethereum while maintaining a very strong balance sheet. This is a significant advantage for us. Additionally, our stock liquidity is very high, with daily trading volumes reaching $1.6 billion, comparable to Uber.

• Ethereum is one of the most important macro investment opportunities of the next decade. It is not only part of Wall Street's financialization of blockchain but also a crucial component of the U.S. strategy for dominance in artificial intelligence (AI). As the largest blockchain that complies with U.S. law, Ethereum is a legitimate and recognized blockchain.

• Compared to ETFs, reserve strategies allow you to earn staking rewards from Ethereum. Ethereum reserve companies are not just alternatives to Ethereum ETFs; they are actually key infrastructure within the ecosystem. In addition to earning staking rewards, these companies can generate income in other ways.

• Microstrategy's stock trading volume reached $3 billion. In contrast, Ether Machine, as the third-largest ETH holder, has a trading volume of only $7 million today. Our trading volume is 100 times that of Ether Machine. Bit BTBT, as the fourth-largest holder, has a trading volume of $49 million today. There is a significant difference in liquidity, which directly affects the growth rate. To achieve high growth rates, assets must have extremely high liquidity.

• We recommend clients allocate 1% to 2% of their portfolios to Bitcoin, which has already brought some clients returns of 120 times. I believe Ethereum's situation today is similar to Bitcoin's back then. While Ethereum is considered a quiet chain in some respects, its stability is remarkable—there has been no downtime for a decade. This is crucial for Wall Street, which has decided that Ethereum will be the foundational chain for their future builds.

• In the short term, I believe Ethereum's price should at least return to $4,000, and it is reasonable for Ethereum to reach $7,000, or even $12,000 or $15,000, by the end of this year.

• People always start announcing bubbles in the mid to late stages of the market, and the real top usually appears when no one is bearish.

• I do have quite a few Pudgy Penguins merchandise; I can say it is my favorite Ethereum NFT.

Introduction

Ryan:

Thank you all for tuning in. In this episode, we have the legendary Wall Street investor Tom Lee, who is a director of the newly established Ethereum reserve company Bitmine. It's great to see you. I must say, I never predicted you would start an Ethereum reserve company in 2025, but here you are.

As of the time of our recording, Bitmine has already acquired 833,000 ETH, which accounts for about 1% of the total ETH supply. I believe you are now the largest Ethereum reserve company in the world, at least among publicly traded companies. What are your thoughts on this?

Tom Lee:

I think our progress has been very rapid. We announced this plan on June 30 and completed the acquisition on July 8. It took only 27 days from announcement to completion, and we acquired Ethereum at a very fast pace. I think this is very important because MicroStrategy's success has proven the effectiveness of its reserve strategy, yielding a 30-fold return. Looking back to August 2020, MicroStrategy's stock price was $13, while Bitcoin's price rose from $11,000 to $120,000.

I believe Ethereum is one of the most important macro investment opportunities of the next decade. Therefore, we want to act quickly to acquire as much Ethereum as possible at around $3,500 before a significant jump in price similar to Bitcoin's recent surge.

Rapid Development of ETH Reserve Companies

David:

Unlike MicroStrategy, Tom, when you launched Bitmine and announced the strategy for an Ethereum reserve company, other companies quickly followed suit. Joe Lubin's ConsenSys even launched Sharp Link just five days after your announcement, and now there is a wave of Ethereum reserve companies emerging. Do you know which companies are closely following you? Why do you think these events seem to have concentrated in the same two-week period?

Tom Lee:

Perhaps it's because talented people think alike. I'm not sure. You're right; previously, the market mainly had Bitcoin reserve companies, along with a few Solana reserve companies and some speculative enterprises. SharpLink was the first to announce the establishment of an Ethereum reserve company back in May. So we are actually latecomers, following Sharp Link. But I believe that using Ethereum as a reserve strategy is very reasonable.

First, if you are optimistic about the long-term development of Ethereum, it provides a basis for the reserve strategy, especially since reserve strategies allow you to earn staking rewards from Ethereum.

Secondly, due to the proof-of-stake mechanism, these reserve companies are essentially blockchain infrastructure companies. In return, they can earn staking rewards from Ethereum, which is essentially net income. For example, we currently hold over $3 billion worth of Ethereum, which can yield over 3% in staking rewards annually, essentially pure profit.

Another key reason is scarcity. I believe the core story of Bitmine lies in scarcity. We have a clear strategic goal of acquiring 5% of Ethereum while maintaining a very strong balance sheet. This is a significant advantage for us. Additionally, our stock liquidity is very high, with daily trading volumes reaching $1.6 billion. This makes us the 42nd largest liquid stock in the U.S. market today. In fact, our trading volume is comparable to Uber. Although Bitmine's market cap is only $4 billion, while Uber's market cap is $184 billion, our trading volume can rival that of Uber.

Ryan:

Tom, let's talk about that 5% target. I've heard you mention this number. 5% refers to 5% of the total Ethereum supply, which is about 6 million ETH. If you currently hold 833,000 ETH and reached that number in just four weeks, that's indeed very fast.

So do you really plan to acquire 5% of all Ethereum? At current market prices, acquiring 5% of Ethereum would require about $20 billion. I imagine achieving this goal is no easy task, especially at current price levels. How do you specifically plan to achieve this goal? Is this 5% a serious target, or just a symbolic number? If it's serious, what is your execution plan?

Tom Lee:

MicroStrategy currently holds 3.2% of the circulating supply of Bitcoin. But in reality, their goal is to hold at least 1 million Bitcoins, which is about 5% of the total Bitcoin supply. Keep in mind that once MicroStrategy holds 1 million Bitcoins, they will play a crucial role in the Bitcoin ecosystem. For instance, if the U.S. government wants to establish a strategic Bitcoin reserve, directly purchasing 1 million Bitcoins on the open market could be very difficult. Because once the plan is announced, sellers in the market will decrease, and the price of Bitcoin could quickly soar to $1 million.

Therefore, holding Bitcoin indirectly through MicroStrategy may be a simpler way. I call it "sovereign protection." MicroStrategy took five years to achieve its 3% target, purchasing an average of $0.16 worth of Bitcoin daily over five years. In contrast, Bitmine has been purchasing an average of $0.80 to $1 worth of Ethereum daily since its inception, at a speed 12 times that of MicroStrategy. Thus, we expect to reach the 5% target at a faster pace. This is reasonable because we want to be a responsible entity.

We fully comply with Ethereum's legal and regulatory philosophy, and all operations are conducted in the U.S., adhering to Wall Street and U.S. government regulatory standards, especially in the current environment of heightened regulatory pressure. Equally important is that Ethereum itself will become the core of Wall Street's blockchain financialization.

Ultimately, I believe that staking Ethereum is as important to Wall Street as players buying Nvidia graphics cards. Purchasing Nvidia graphics cards may be more cost-effective than actually playing games. Similarly, if Wall Street wants to tokenize real assets like money markets, dollars, or stocks, they would want to hold Ethereum itself while staking it through entities dedicated to advancing Ethereum. Therefore, I believe we play an important role in this process by staking Ethereum.

Goal: Hold 5% of Total ETH Supply

Ryan:

Tom, if your acquisition speed is 12 times that of MicroStrategy, then at this rate, reaching the 5% target would only take about one to two years. This is undoubtedly a very rapid progress.

Do you think Ethereum will see a sovereign protection strategy similar to Bitcoin? For example, I’ve heard you mention that many commercial banks, including JP Morgan, are gradually moving their businesses onto the blockchain. Additionally, the Genius Act-driven stablecoin legislation essentially means that the U.S. Treasury and central bank will peg the dollar to Ethereum, and Ethereum is clearly in a leading position in this regard.

Do you think there are similar sovereign protection options? For instance, could the U.S. government or other sovereign nations proactively contact you, saying, “We’ve noticed you hold a large amount of Ethereum. We want to purchase Ethereum for the U.S. Treasury to include it on our balance sheet. We know you hold a lot; can we achieve this through over-the-counter trading?” Do you think this possibility exists?

Tom Lee:

I think every point you just made is very reasonable, and it is indeed a very logical hypothesis. Assuming our goal is not to protect sovereign assets but to focus on advancing Wall Street. For example, the Genius Act and the SEC want to migrate the entire financial system to the blockchain, and Ethereum, as the largest blockchain that complies with U.S. law, is a legitimate and recognized blockchain. This is very important. Of course, this blockchain can also be used by other countries and regions, but the U.S. clearly wants to strengthen its position and dominance over Ethereum.

Moreover, we also need to consider not just the financialization of blockchain but also the development of artificial intelligence. For instance, if you want to tokenize robots or other intelligent systems, you would choose a highly secure blockchain. Therefore, the tech sector and Wall Street are gradually aligning with Ethereum.

Do companies like Goldman Sachs and JP Morgan want Ethereum to be decentralized and stored in millions of different wallets? Their goal is not centralization, but they want to ensure that the staking process is fully compliant, rather than allowing each holder to operate freely. This is also what we at Bitmine have emphasized from the beginning: we have a very clean balance sheet with no complex capital structure.

We are making steady progress. Although we have not officially announced our staking solution, we are cautiously planning the next steps. After all, handling $3 billion worth of Ethereum is a very important decision. We want to ensure that this process fully complies with U.S. regulatory requirements.

I completely agree with everything you just mentioned. These points indicate that Ethereum reserve companies are not just alternatives to Ethereum ETFs; they are actually key infrastructure within the ecosystem. In addition to earning staking rewards, these companies can generate income in other ways. Therefore, I believe the Ethereum reserve companies you emphasize play a very important role in the entire ecosystem.

The Role of Ethereum on Wall Street

Ryan:

Tom, there’s a question that confuses me, and I think many people have similar doubts. Why hasn’t Ethereum’s price broken through $4,000 yet? You just mentioned that Bitmine holds $3 billion worth of Ethereum within a month. If so much Ethereum has really been purchased, why hasn’t it pushed the price above $4,000? How have you been able to continue buying at $3,500? Where did this Ethereum come from?

Tom Lee:

We have learned a lot through this process, but since we may be one of the largest buyers of Ethereum, I cannot disclose too many details. What I can say is that Ethereum’s short-term market performance is not entirely determined by its fair value. For example, last week Ethereum’s price dropped to $3,300 because some traders triggered liquidation levels or engaged in hedging trades.

There are also some who believe Ethereum is a “dead chain,” thus betting on other blockchain projects in an attempt to force the market to trigger liquidations. These dynamic factors affect short-term price performance. But isn’t that exactly what happened with Bitcoin in 2017? If we look back to 2017, Bitcoin’s price was $1,000 at the beginning of the year, but it didn’t start to soar until August. I believe Ethereum is experiencing a moment similar to Bitcoin in 2017, as Wall Street finally begins to support Ethereum.

David:

We haven’t seen Wall Street show such strong interest in Ethereum assets and the Ethereum network for four or five years. Now, we see funds pouring in from various sectors of the Ethereum ecosystem. When people ask you why you chose Ethereum instead of Bitcoin reserve companies, like MicroStrategy and other similar companies like Hype and Ethena, what is the appeal of Ethereum reserve companies compared to these Bitcoin reserve companies?

Tom Lee:

First of all, I am a staunch supporter of Bitcoin. I believe Bitcoin is the right choice. Moreover, based on our fund strategy research, Bitcoin’s price could potentially reach $1.5 million per coin. So the Bitcoin story remains very appealing.

However, Bitcoin and Ethereum play different roles in the financialization world. This is their main distinction. Because Ethereum symbolizes the transition of the financial world to blockchain technology and is also related to artificial intelligence and digital securities. Ethereum essentially provides a digital-native way to connect real-world assets with digital securities. This is also why some would choose Ethereum reserve companies. If I were an investor, I would choose MicroStrategy because it is a safe choice, especially in the fund strategy ETF. But the appeal of MicroStrategy lies in its daily increase in Bitcoin holdings.

On the other hand, Ethereum reserve companies are essentially the only way for U.S. stock investors to access Ethereum assets unless they directly purchase Ethereum or an Ethereum ETF. This is an important theme for institutional investors. They are not likely to simply say, “Well, Ethereum is the largest trade in my $50 billion fund.” They are more likely to ask, “How do I directly access Ethereum assets?” Currently, they cannot purchase Ethereum ETFs because it does not fit the investment parameters of their funds. Therefore, for professional investors in the U.S. stock market, Ethereum reserve companies are the only way to gain exposure to Ethereum assets.

This is also why investors like Cathie Wood have made significant investments in Bitmine. Bill Miller also announced last week that he made a significant investment in Bitmine. These institutional investors are veterans in the cryptocurrency space, and they realize this is the best way to gain macro exposure to Ethereum.

Accumulating More ETH

David:

So what is your strategy for accumulating ETH? Besides leveraging the MNAV premium to increase assets on the balance sheet, what other methods can be used to accumulate Ethereum? Assuming we do not consider the MNAV premium, how do you increase Ethereum on the balance sheet?

Tom Lee:

That’s a great question, and I have many answers, but since some strategies are proprietary, I cannot share all the details. However, I believe investors should not oversimplify their understanding of reserve companies. We have become the third-largest crypto reserve company in the world, second only to Mara Blockchain and MicroStrategy. Our crypto asset scale even surpasses that of Meta Planet. The significant difference in scale and liquidity allows us to adopt diversified strategies rather than being limited to a single method, which may be a key distinction between us and other companies.

Ryan:

Why does the MNAV premium exist? Can you elaborate on that? I’ve heard some investors say that the MNAV premium should typically stay around 1, possibly slightly above 1. In a bear market, it might drop below 1. So why do crypto reserve companies have an MNAV premium?

Tom Lee:

I can explain from both a numerical and non-numerical perspective. Bitmine’s cost structure is very strict; let’s assume we hold $3 billion worth of Ethereum. You might say this is just an ETF (Exchange-Traded Fund). Let’s assume we invest at 1 times the net asset value (NAV), and Ethereum itself has a 3% yield. If we pay this yield as net income to investors, we can give it a multiple of a money market, say 5%. In this way, the yield is amplified to 20 times. This means that a 3% yield can add 0.6 of value to the net asset value.

In addition, there are two key factors that affect value. The first is the growth rate. When we launched the Ethereum strategy on July 8, the value per share of Ethereum was only $4. By July 27, the value per share of Ethereum had grown to $23, and it is even higher now. Although we have not disclosed the latest data, it has indeed increased. In about 20 days, the value per share of Ethereum increased by $19.

This is the impact of growth rate. When we calculate the net asset value, we must consider this because the net asset value is continuously growing. We need to assign a multiple to this growth rate. For example, MicroStrategy received a 1.7 times premium for increasing its Bitcoin holdings by $0.16 daily, while our growth rate is 12 times faster than that. Theoretically, our premium should be higher. Based on MicroStrategy’s premium of 0.6, our speed is 12 times faster, theoretically reaching 7.2 times. Of course, this is just a theoretical estimate, but it is worth considering.

This is just the impact of growth rate. The other factor is liquidity. For example, MicroStrategy has a daily trading volume of about $3 billion. We are the second-largest crypto asset repository, with a daily trading volume of $1.6 billion. In contrast, Meta Planet has a daily trading volume of only $50 million. We have a significant advantage in liquidity, which should also be assigned a certain premium.

Therefore, Bitmine's valuation can start from 1 times the net asset value, plus a yield premium of 0.6, totaling 1.6. Next is the growth rate premium. We know that MicroStrategy received a 0.6 times premium for increasing Bitcoin by 13 cents daily, while our speed is 12 times faster. Finally, there is the liquidity premium, as liquidity determines our ability to issue other financial instruments at a lower cost.

Ryan:

Yes, the liquidity premium comes from being the largest, strongest, and deepest in the market. The growth rate premium is also very interesting. We can delve into this because in the first month, your growth rate was 12 times that of MicroStrategy. The question is, can this speed be sustained over the next 11 months, or throughout the year? Let’s talk about this. So how did you achieve this growth rate in Ethereum? Can this level really be maintained?

Tom Lee:

This is actually a reflection of the liquidity function. Liquidity and growth rate are two aspects of the same characteristic. We are able to achieve a high growth rate because of our liquidity advantage. Let me give you an example. As of 2 PM today, our trading volume has reached $800 million.

In contrast, MicroStrategy's trading volume is $3 billion. Meanwhile, Ether Machine, as the third-largest holder of Ethereum, has a trading volume of only $7 million today. Our trading volume is 100 times that of Ether Machine. Bit BTBT, as the fourth-largest holder, has a trading volume of $49 million today. It is clear that there is a huge difference in liquidity, which directly affects the growth rate. To achieve a high growth rate, assets must have extremely high liquidity.

Ryan:

I have another question about the growth rate. Since you said the growth rate depends on liquidity, where does that liquidity come from? How do you gain more liquidity?

Tom Lee:

That’s a great question. I believe liquidity mainly comes from team collaboration and resource integration.

First, I lead this project as a director, and among Bitmine's private investors, Mosaics is a very well-known and experienced macro hedge fund. Their involvement has helped us attract some heavyweight investors, such as Founders Fund and Stan Druckenmiller. It’s worth mentioning that Stan Druckenmiller is disclosed as a holder in our registration statement. Additionally, there are Arcs and Bill Miller, who are some of the most influential names in traditional finance and venture capital. Their support reflects trust and recognition of our vision.

The second reason is that I have always been a staunch supporter of cryptocurrency and its integration with traditional finance. As early as 2017, we clearly stated that Wall Street would gradually focus on Bitcoin. From that year onward, Bitcoin truly became an asset of interest for institutional investors, and its market ownership gradually expanded. Now, Ethereum is experiencing a similar "2017 moment," gradually gaining favor among institutions and investors. I believe this trend is logical and helps drive the achievement of the Ethereum asset library's goals.

Of course, I also strongly support projects like Sharp Link and Andrew Keys, as we are all working towards a common goal. We enhance Ethereum's security through staking, making it a reliable American blockchain. It can be said that we are all collaborating for the same vision, jointly promoting the development of the cryptocurrency ecosystem.

The Explosive Moment for Ethereum

Ryan:

Tom, many listeners started engaging with cryptocurrency after 2017. I am not one of them. I remember seeing you on CNBC in 2017; you were the only one in a suit discussing Bitcoin in traditional financial media.

Your way of expressing resonated with many in the crypto space. Can you reflect on the "2017 moment" for Ethereum that you mentioned? Can you compare it to Bitcoin in 2017 and discuss the change in perception on Wall Street? Help us establish that connection. What was Bitcoin like in 2017? And what similarities does Ethereum have now?

Tom Lee:

In 2017, Fundstrat was a company focused on macro trends and thematic research. We began conducting some research that ultimately led us to focus on Bitcoin. At that time, we conducted two important studies.

One of them was a study on millennials. The oldest group of millennials was about 25 years old at the time. We realized that they would become a significant force driving the U.S. economy. While this point is widely accepted today, it was a fresh perspective a few years ago. Our research was so in-depth that we eventually collaborated with Snapchat to write several white papers exploring how millennials became a group that needed to be monetized. At that time, Snapchat was trying to persuade advertisers to target Gen Z and millennials, while many traditional brands like Pepsi still believed advertising should primarily target Gen X. This may sound strange, but that was the situation back then.

The second study drew our attention to Bitcoin's price movements. When I worked at JPMorgan, Bitcoin's price was $100. After leaving JPMorgan, I saw it rise to $1,000, with a market cap of $100 billion. I had never seen any asset reach such a scale without any support. Therefore, we spent months deeply researching Bitcoin. Although I did not fully understand all its details, we found that the main drivers of its price increase were twofold: the growth in the number of wallets and the transaction activity per wallet. This is essentially the network value effect—more users lead to exponential growth in network value. We predicted that by 2022, Bitcoin's price could reach $25,000, and if it captured 5% to 10% of gold's market cap, it could even reach $100,000. So we began telling this story to the market.

We believed Wall Street needed to understand Bitcoin because it is "digital gold." We were indeed the first company to push Bitcoin into the institutional market. At that time, 0% of institutional investors owned Bitcoin, and 100% were retail investors. Over the past eight years, the main narrative around Bitcoin has been its value storage function as digital gold. Of course, it is also a payment system, but the truly appealing aspect is its function as a store of value. Our research showed that gold is primarily held by the baby boomer generation, while millennials would choose Bitcoin as their gold. This is a cross-generational story and also a story of digital replacement.

That’s the background. At that time, I conducted many webinars at Fundstrat, but we lost some institutional clients because they thought our views were too radical. They questioned why we would recommend an asset considered only for drug transactions and the dark web, calling it a legitimate asset class. Our reputation suffered as a result. But as you know, Bitcoin's price later reached $120,000. We advised clients to allocate 1% to 2% of their portfolios to Bitcoin, and this investment has brought some clients 120 times returns.

This made many clients very aggressive. I believe Ethereum's situation today is similar to Bitcoin's back then. While Ethereum is considered a quiet chain in some respects, its stability is remarkable—there has been no downtime for ten years. This is crucial for Wall Street, and they have decided that Ethereum is the foundational chain for their future builds.

David:

A lot has happened in the past six months. Circle's IPO performed well, Coinbase's stock has done well, and Robinhood announced it will soon launch Ethereum's Layer 2. Additionally, the term "tokenization" is spreading rapidly. A lot is happening, all supported by Ethereum. Circle's USDC was born and grew on Ethereum, Coinbase, as the world's largest crypto-listed company, is building Ethereum's Layer 2, and Robinhood, as a traditional financial company, is also building Layer 2. Although Robinhood is not a crypto company, it has entered the crypto space by legitimizing these technologies.

Does Wall Street understand that Ethereum is a pillar of many current movements? Do you think that’s why there is such strong momentum behind these reserve companies? Or am I just fabricating this narrative?

Tom Lee:

David, your description makes a lot of sense. But Wall Street typically only connects these dots when they can make money. For example, many listeners may hold stocks in Apple, Amazon, or Nvidia. Nvidia is a prime example of exponential growth, but it also went through a year where it performed almost nothing and was even considered "dead money." Years later, the market suddenly realized its value and repriced it.

Ethereum is currently experiencing a similar situation. On-chain activity has reached historical highs, and the community has been revitalized by the price rebound. More and more people are starting to use Ethereum, and the functionality of the smart contract blockchain gives it an advantage over Bitcoin, as Bitcoin cannot support stablecoins.

I believe that Ethereum's current price not reaching $15,000 is not a bad sign. We have recommended Tesla and Nvidia, and their growth is not directly tied to revenue but shows significant leaps in stages. I hope Ethereum's price remains low in the coming years so we can acquire it at a more attractive price. If its price reaches $17,000, that might be too expensive for Ethereum reserve companies. Of course, this would boost their stock prices, but for me, that would actually be a good thing.

The Potential for Ethereum to Achieve 100x Growth

Ryan:

Just like in 2017, Wall Street did not understand Bitcoin at that time. You mentioned that by 2025, Wall Street may still not fully understand Ethereum as an asset. Perhaps they are starting to recognize it, but I feel this is very similar to Bitcoin's early development model. Remember in 2017, when you discussed Bitcoin on traditional financial shows, its price was around $2,000 to $3,000. At that time, you made some bold predictions on shows like Squawk Box, suggesting Bitcoin would reach $20,000 or even $40,000. While many thought those predictions were too aggressive, it turned out your judgment was correct.

Now Ethereum's price is at a similar level, around $3,000. You have also made high price predictions for Ethereum's future, which have similarly caused a stir in traditional finance. Do you think Ethereum can achieve similar growth as Bitcoin? What are your price expectations for Ethereum?

Tom Lee:

I believe Ethereum's upside potential even exceeds that of Bitcoin because it faces more skepticism. While Bitcoin was not widely accepted in its early days, people did not short it; they simply chose not to believe in it.

We predicted in 2017 that Bitcoin would reach $100,000, and although it seemed crazy at the time, this growth has actually not taken long from 2017 to now. Bitcoin has achieved a 100-fold increase in our lifetime. Ethereum's current situation is very similar to Bitcoin in 2017. Wall Street remains skeptical about whether Ethereum can survive in the long term, partly due to its transition to Proof of Stake and its previously high circulation. However, these issues are gradually being resolved. Wall Street's skepticism about Ethereum mainly revolves around whether it can truly benefit from Layer 1 rather than merely serving as a support platform for Layer 2. I believe this viewpoint will be broken in the future, and once it happens, it will lead to exponential growth. Therefore, I think Ethereum's potential could even surpass Bitcoin's 100-fold increase.

If Bitcoin's price reaches $1 million, then Ethereum's potential will be even more astonishing. Ethereum is not only part of Wall Street's financialization of blockchain; it is also a crucial component of the U.S. strategy for dominance in artificial intelligence (AI).

If MicroStrategy's Bitcoin price triples, then Ethereum reserve companies could also potentially achieve a threefold increase. Therefore, I believe Ethereum reserve companies are a great investment category. Bitmine's unique strategy places it at the forefront in this field, while Ethereum itself is severely undervalued.

Ryan:

Your prediction may shock some people; a 100-fold increase for Ethereum would mean a total market cap of about $40 trillion. Additionally, you mentioned that Ethereum could potentially surpass Bitcoin in network value, which is not a widely accepted view in the crypto community, although many Ethereum supporters have believed this for a long time. In the shorter term, how do you think Ethereum's price will change? For example, what level might it reach by the end of this year or at the end of the next cycle?

Tom Lee:

In the short term, I believe Ethereum's price should at least return to $4,000 because today's Ethereum story is stronger than it was last December when its price was $4,000.

In fact, Ethereum's performance today is better than it was a year ago. A year ago, the price ratio of Ethereum to Bitcoin was 0.05, corresponding to about $6,000. Therefore, from a narrative perspective, Ethereum should at least reach that level.

Moreover, by the end of this year, as other Ethereum reserve companies begin to purchase Ethereum and with the rise in Bitcoin prices, I think it is reasonable for Ethereum's price to reach $7,000, or even $12,000 or $15,000.

By 2026, the Federal Reserve will begin to implement a dual transition, and central bank liquidity will rise, further driving the growth of Ethereum's price. I am not sure if there is a clear cycle in cryptocurrency, but if there is, it would be beneficial for Ethereum. Personally, I believe Ethereum reserve companies would prefer Ethereum to remain stable over the next five years before achieving significant growth. However, this could happen suddenly in a leapfrogging manner.

For example, when I predicted the S&P 500's earnings in 2009, the market had nearly dropped 80%, but by 2010, the S&P 500's earnings had recovered to $60. Today, the S&P 500's earnings have reached $300, indicating that traditional market earnings can grow exponentially. Similarly, the network value of cryptocurrency could reach $20 trillion.

We are witnessing growth similar to that of the stock market. Additionally, the valuation of cryptocurrency reserve companies is primarily based on their balance sheets rather than profitability. Similar to Exxon Mobil, these companies have always been valued based on reserves rather than profitability over the past few decades. Cryptocurrency reserve companies are becoming the new Exxon.

Estimating the Value of ETH

David:

Tom, you have mentioned attempts to model the valuation of cryptocurrencies, but we also realize that the valuation of these assets is inherently difficult to predict accurately through traditional models. Nowadays, many companies like Coinbase, Robinhood, and Circle are building applications on Ethereum, Layer 2 solutions are also based on Ethereum, and tokenization technology is similarly based on Ethereum. I believe these narratives significantly impact Ethereum's value and price.

So, when you try to analyze these prices, how do you deconstruct them? Do you view Ethereum's price as a reflection of transaction fee demand? Or do you consider its role as a store of value in DeFi applications, or the impact of staking demand? How do you specifically analyze Ethereum's value and price?

Tom Lee:

I might ask this: David, have you ever seen someone accurately predict Bitcoin's price using a spreadsheet model? But in reality, it has never been successful. I believe no one can do that.

Or even if they succeed, a year later, these models cannot explain all the changes. Therefore, I think those who try to predict Ethereum using spreadsheet models are making a similar mistake to those who use earnings models or ISM indices to predict the S&P index. This is also why no one can accurately predict the S&P index. Because I learned a saying when I first started working on Wall Street: "Valuation models focus too much on earnings (E) and overlook the importance of the price-to-earnings ratio (PE)." Many people spend too much time trying to model earnings data, but what often influences price is the price-to-earnings ratio. Ethereum's price is not determined by a week's trading data but by the market's recognition of its value five years from now. Therefore, I believe we should not overly rely on models and claim to accurately predict a certain price. My view on the stock market is the same, such as the valuations of Palantir and Tesla. Fundstrat has always been able to correctly assess these trades because we are not constrained by traditional models.

Ryan:

So, how do you estimate the market size? Do you compare Ethereum to other assets? For example, you compared Bitcoin to digital gold in 2017, and gold's total value is about $20 trillion. Would you compare Ethereum to digital oil and use that to discuss its value ceiling?

Tom Lee:

That's just part of the valuation. I have indeed seen some reports comparing Ethereum to digital oil, and those analyses are quite good. I believe you have also seen similar studies. For example, the Mosaic team has built two models for Ethereum, one based on a banking system proxy model and the other based on a payment system proxy model. But ultimately, if I learned one thing from the stock market, it is not to be constrained by rigid frameworks. Many people try to limit predictions to standardized models, such as SOP (Standard Operating Procedure). For instance, when the S&P dropped in April, many believed that reduced earnings would lead to further declines in the S&P index, while my team was the only one that did not downgrade its annual forecast. It turned out that the market subsequently experienced a V-shaped rebound. This phenomenon cannot be predicted by spreadsheet models, but it reflects the resilience of the market and how it operates.

I do not oppose establishing frameworks, but I believe Ethereum's current price of $3,600 is clearly undervalued. Perhaps that is the most important conclusion, rather than trying to predict the price five years from now using a spreadsheet. I know this sounds like I am not providing a specific answer, but I believe this is actually the best answer.

Strategies for Managing Market Risks

Ryan:

Tom, do you think cryptocurrency reserve companies, such as those for Bitcoin, Ethereum, and other assets, could experience overheating at some point? Perhaps this relates to the post-traumatic stress response in the cryptocurrency space, as many of us have experienced the trading of GBDC and the collapse of O Capital, which impacted other markets as well.

We see these reserve companies and new entrants entering the market at a premium to market net asset value (MNAV), with some even comparing it to the investment trusts of the 1920s. Of course, we all know how the stock market bubble of the 1920s burst. Do you think these reserve companies could enter a bubble phase? For example, prices could rise excessively, premiums could reflexively increase, and then suddenly drop like an elevator, losing all value and even triggering systemic risks in cryptocurrency and the broader market? Are you concerned about this?

Tom Lee:

There are indeed many points worth discussing. First, let's look at the situation in the liquid stock market.

The current stock market rebound is referred to as "the most hated V-shaped recovery." In our video conferences with institutional clients, we often hear their views on why the stock market should not rise and why current valuations are too high. However, after each meeting, I become more convinced that the stock market has reasons to continue rising because this viewpoint is not the mainstream consensus in the market. In the market, skepticism is often the key driver of price increases. If the audience is optimistic about the market but it does not rise, while everyone is bullish, that could be a sign of a bubble.

The only situation where cryptocurrency reserve companies might run into trouble is if they use leverage. I believe that any company using complex tools or debt structures, if their resources are not scarce, may face risks. But companies like MicroStrategy and Meta Planet can succeed because they have changed the industry landscape. Those that fail to innovate may struggle. However, from my observations, most cryptocurrency reserve companies adopt relatively simple structures.

If these companies encounter problems, the result may simply be a price drop. I do not think this is likely to trigger a stock market crash; stock market crashes are usually caused by debt issues or external shocks. I believe we are still far from a bubble. In fact, the market is betting on an oversupply of these assets, so their value will only rise when Bitcoin prices increase.

Of course, at some point, the market may enter a bubble phase. But I find that people often start declaring bubbles in the mid to late stages of the market, and the real top usually occurs when no one is bearish. Currently, everyone is bearish on Bitcoin and the stock market due to recent market performance.

If we are truly at the market top, then a few days of bearish sentiment should not trigger so much concern. But the fact is, everyone is saying this is the market top.

When market confidence is very fragile, it is often far from the real top; keep that in mind.

Ryan:

**Tom, what is your view on the current macroeconomic situation? Macro events, such as tariffs or economic recessions, could impact the cryptocurrency market. I remember we interviewed you last August when the *yen* arbitrage trading suddenly disappeared. You predicted that this situation would end, and it turned out you were right. So what is your outlook on the macro economy now? Is there anything that concerns you, or do you think we are currently in a good position?**

Tom Lee:

I am very concerned about the politicization of institutions. For example, the Federal Reserve and the Bureau of Labor Statistics (BLS) should be independent, but some data revisions from the BLS seem very strange. However, I do not believe these revisions are the result of politicization.

From my perspective, the economy is currently performing very strongly. When I communicate with clients, many institutional investors believe we are experiencing an economic recession. Some might say, “Tom, if everyone thinks we are in a recession, then you are wrong because you cannot say the economy is strong.” But in my 30 years of experience, no one can accurately predict a recession. When everyone thinks we are in a recession, it usually is not a recession. A true economic recession often occurs when the business environment changes suddenly, catching everyone off guard.

For example, the real estate bubble bursts, but when everyone is very cautious, the bubble does not burst. The ISM index has been below 50 for 29 consecutive months, and the business community is very cautious. If this is indeed a recession, it would be the first time in history that a recession occurs without the ISM index breaking 50.

This may sound strange, but based on my observations, we are currently in the mid or even early stages of the economic cycle. Tariff issues were once a factor in the recession, and interest rate shocks have reset confidence in the business sector. This fear has actually helped us avoid a recession because it has led companies to reduce spending.

If you look at the data, corporate earnings are performing well, and no one sees a collapse in demand. This is because everyone is very cautious.

Misunderstandings About Cryptocurrency on Wall Street

David:

Tom, I guess Wall Street's phones must be blowing up for you. Every billionaire on Wall Street is calling you, asking about Ethereum, trying to understand more. What do you think are the misunderstandings Wall Street has about cryptocurrency, especially Ethereum?

Tom Lee:

That's a great question, thank you for asking me, David. Wall Street likes to analyze using spreadsheets, so every time I get a call, they start by asking me, “Tom, can you give me a model showing how the use of stablecoins changes Gas fees?” Then they will further ask, “What is the trading volume of stablecoins? How much of that is related to Ethereum? How much is Layer 2? What is the payment situation?” I think that is the problem.

When people rely too much on spreadsheets, they often fall into analysis paralysis and cannot see the bigger overall trends. In fact, Ethereum is a legally compliant blockchain, which is very important. But this situation is not limited to Ethereum; similar issues exist in the analysis of the S&P 500. For example, someone might say, “The long-term median P/E ratio of the S&P 500 is 16 times, and the current profit margin is at a historical high, so the margin will decline, and the index may fall back to 3,000 points.” But in reality, this kind of analysis has never really generated profits.

I suggest people look back at how these views have performed over the past 50 years, and you will find that this kind of analysis has never made money.

David:

My analysis is that those who come to you with spreadsheets are actually doing basic "cover work"; they need to prove to their boss and their boss's boss why they are buying large amounts of Ethereum or other assets. They need to accomplish this task by creating spreadsheets. So how can we provide them with a different way of "covering"?

Tom Lee:

That's a great question. At Fundstrat, we are evidence-based in our research, but we are not constrained by assumptions. For example, unemployment rate data is not a legal rule, the federal funds rate is not a legal rule, and the 10-year Treasury yield is not. They have never been a balance point.

For instance, Fundstrat launched an ETF last year called Granny Shots. Although it has only 8 months of history, Granny Shots has achieved a 17% return this year, while the S&P 500 has only risen by 7%. We are 1,000 basis points above the S&P 500. Morningstar ranks us in the top 30 out of 1,400 funds, which is the top 2% of large-cap stock funds. We adopt an evidence-based approach but are not constrained by traditional earnings forecasts. Our stock selection is very disciplined.

If someone asks me about Ethereum reserve companies, I would not specifically talk about Bitmine. You should start with the health of Ethereum per share and then combine the following four factors: Velocity, Liquidity, Scarcity, and their uniqueness. The largest companies should obviously receive a premium due to network effects, and then you should ask yourself, what is the price of Ethereum? What are its potential risks and returns?

If someone tries to precisely calculate the price of Ethereum down to every penny or even $100, their analysis will never be effective because Ethereum has never been a balance point. But you should ask yourself, if the price of Ethereum reaches $3,700, what are its risks? What is the lowest price? For example, this year's low was $1,700. And what is its potential return? You can refer to Bitcoin's price five years ago, which could lead Ethereum's price to reach $20,800. This way, you can see the asymmetry of risks and returns.

You can derive the price based on the health of Ethereum per share, combined with velocity, liquidity, and scarcity. This is not calculated through spreadsheets but is based on real-life situations. If the price of Ethereum reaches $20,000, how much would these companies be worth? If the price drops to $1,700, it would be halved. But if the health of Ethereum per share doubles during the same period, its stock price may remain unchanged. Therefore, those companies with better liquidity are the best choices because they can increase your share of Ethereum.

Summary and Outlook on Ethereum

David:

Tom, do you own any other Ethereum-related assets? For example, NFTs (non-fungible tokens), or what is your overall view on NFTs?

Tom Lee:

I do have quite a few Pudgy Penguins merchandise. These things are very interesting, and I shared their designs last week. However, it is hard to keep these items in my office because almost everyone wants a piece.

David:

So, are Pudgy Penguins your favorite Ethereum NFT?

Tom Lee:

You could say that. I find the uniqueness of Pudgy Penguins very appealing, and they are very popular in South Korea. South Korea not only has a very strong stock market culture but is also one of the most active stock markets in the world. I worked in South Korea for a while and found that the cryptocurrency culture here is also very developed. Therefore, the popularity of Pudgy Penguins in South Korea further proves its value.

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