Compiled by 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
Air Date: August 6, 2025
Summary of key points
In this episode, we interview Tom Lee, Director of Bitmine, about the rapid growth of his Ethereum asset management company and its goal of holding 5% of the total ETH supply.
Tom expressed confidence in the future of Ethereum, believing it could surpass Bitcoin in value and predicting a price range of $4,000 to $15,000. He also shared his analysis of market dynamics, warnings about leverage risks, and insights into the valuation of Ethereum and NFTs (such as Pudgy Penguins).
Summary of highlights
Ethereum represents one of the most significant macro investment opportunities of the next decade. Therefore, we wanted to act quickly and acquire as much Ethereum as possible at around $3,500 before the price saw a significant jump similar to the recent Bitcoin price increase.
Ethereum's upside potential is even greater than Bitcoin's. Its current price is clearly undervalued.
Ethereum's short-term market performance isn't entirely determined by its fair value. Looking back at 2017, Bitcoin was priced at $1,000 at the beginning of the year, but didn't begin to soar until August. I believe Ethereum is experiencing a similar moment to Bitcoin in 2017, with Wall Street finally starting to support Ethereum.
I believe the core story of Bitmine is scarcity. We have a clear strategic goal to acquire 5% of all Ethereum, and we have a very strong balance sheet. This is a major advantage. Furthermore, our stock is highly liquid, with $1.6 billion in daily trading volume, comparable to Uber.
Ethereum represents one of the most significant macro investment opportunities of the next decade. It's not only part of Wall Street's financialization of blockchain, but also a crucial component of the US strategy for artificial intelligence (AI) dominance. As the largest blockchain, Ethereum is also compliant with US law, making it a legitimate and recognized blockchain.
Compared to ETFs, reserve strategies also allow you to earn returns on your Ethereum staking. Ethereum reserve companies aren't just an alternative to an Ethereum ETF; they're actually critical infrastructure within the ecosystem. Beyond earning staking returns, these companies can generate revenue in other ways.
Microstrategy's stock trading volume reached $3 billion. In contrast, Ether Machine, the third-largest ETH holder, only traded $7 million today. Our trading volume is 100 times that of Ether Machine. Bit BTBT, the fourth-largest holder, traded $49 million today. This shows a significant disparity in liquidity, which directly impacts growth rate. High growth requires extremely liquid assets.
We recommend that clients allocate 1% to 2% of their portfolios to Bitcoin, and this investment has yielded a 120x return for some clients. I believe Ethereum's situation today is similar to Bitcoin's. While Ethereum is considered a dormant chain in some quarters, its stability is remarkable—no downtime in a decade. This is so crucial to Wall Street that they have already decided that Ethereum is the foundational chain on which they will build.
In the short term, I think the price of Ethereum should return to at least $4,000. Before the end of this year, it is reasonable for the price of Ethereum to reach $7,000, or even $12,000 or $15,000.
People always start declaring bubbles in the middle and late stages of the market, but the real top usually appears when no one is bearish.
I do have quite a bit of Pudgy Penguins merchandise, and it’s arguably my favorite Ethereum NFT.
introduction
Ryan :
Thanks for tuning in. On this episode, we're joined by legendary Wall Street investor Tom Lee, who serves on the board of directors of the newly formed Ethereum reserve company, Bitmine. It's great to meet you. I must say, I never would have predicted you'd be creating an Ethereum reserve company in 2025, but here you are.
As of this recording, Bitmine holds 833,000 ETH, representing approximately 1% of the total ETH supply . I believe you now hold the largest ETH reserve globally, at least among publicly traded companies. How do you feel about this?
Tom Lee :
I think we progressed very quickly. We announced the plan on June 30th and completed the acquisition on July 8th. From announcement to completion, it took only 27 days, which was incredibly fast. I think this is very important because MicroStrategy's success demonstrates the effectiveness of its reserve strategy, which has delivered a 30x return. Looking back to August 2020, MicroStrategy's stock price was $13, while the price of Bitcoin rose from $11,000 to $120,000.
I believe Ethereum is one of the most significant macro investment opportunities of the next decade, so we wanted to act quickly and acquire as much Ethereum as possible at around $3,500 before the price saw a significant jump similar to the recent Bitcoin price increase.
The rapid development of ETH Reserve Company
David:
Unlike MicroStrategy, Tom, when you launched Bitmine and announced your strategy for an Ethereum reserve company, other companies quickly followed suit. Joe Lubin's ConsenSys even launched Sharp Link within five days of your announcement, and now there's a whole slew of Ethereum reserve companies. Do you know which other companies are following your lead? Why did all of this seem to happen within the same two-week period?
Tom Lee:
Perhaps it's because talented individuals think alike. I'm not sure. You're right. Previously, the market was dominated by Bitcoin reserve companies, with a few Solana reserve companies and some hype-driven ventures. SharpLink was the first Ethereum reserve company to announce its establishment, back in May. So we were actually a latecomer, following SharpLink. But I think Ethereum as a reserve strategy makes perfect sense.
First, if you are optimistic about the long-term development of Ethereum, this provides a basis for a reserve strategy, especially compared to ETFs , as a reserve strategy can also allow you to obtain the income of Ethereum staking .
Second, due to the proof-of-stake mechanism, these reserve companies are essentially blockchain infrastructure companies. In return, they receive a return on the staking of Ethereum, which effectively represents net income. For example, we currently hold over $3 billion in Ethereum, earning over 3% in staking returns annually, which is essentially pure profit.
Another key reason is scarcity. I believe the core story of Bitmine lies in scarcity. We have a clear strategic goal to acquire 5% of Ethereum, and we have a very strong balance sheet. This is a major advantage. Furthermore, our stock is highly liquid, with $1.6 billion in daily trading volume. This makes us the 42nd most liquid stock in the US stock market today. In fact, our trading volume is comparable to that of Uber. This is despite Bitmine's market capitalization being only $4 billion, while Uber's market capitalization is $184 billion.
Ryan:
Tom, let's talk about that 5% target. I heard you mention that number. 5% is 5% of all Ethereum supply, which is about 6 million ETH. If you're currently holding 833,000, and you've reached that number in just four weeks, that's pretty fast indeed.
So, do you really plan to acquire 5% of all Ethereum? At current market prices, acquiring 5% of all Ethereum would require approximately $20 billion. I imagine this is no easy feat, especially at current prices. How exactly do you plan to achieve this goal? Is 5% a serious goal, or just a symbolic figure? If so, what is your execution plan?
Tom Lee:
MicroStrategy currently holds 3.2% of the circulating supply of Bitcoin. However, their goal is to hold at least 1 million Bitcoins, which represents approximately 5% of the total Bitcoin supply. Remember, once MicroStrategy holds 1 million Bitcoins, they will play a vital role in the Bitcoin ecosystem. For example, if the US government wanted to establish a strategic Bitcoin reserve, it would likely be difficult to purchase 1 million Bitcoins directly on the open market. Once the plan was announced, there would be fewer sellers in the market, and the Bitcoin price could quickly soar to $1 million.
Therefore, indirectly holding Bitcoin through MicroStrategy may be a simpler approach. I call this "sovereign protection." MicroStrategy took five years to reach its 3% target, purchasing an average of 16 cents worth of Bitcoin per day for five years. Bitmine, on the other hand, has purchased an average of 80 cents to $1 worth of Ethereum per day since its inception, a rate 12 times greater than MicroStrategy's. Therefore, we expect to reach our 5% target more quickly. This makes sense, as we aim to be a responsible entity.
We fully adhere to Ethereum's legal and compliance philosophy, and all operations are conducted in the United States, meeting the regulatory standards of Wall Street and the US government, especially under the current regulatory pressure. Equally important, Ethereum itself will become the core of Wall Street's blockchain financialization .
Ultimately, I think staking Ethereum is as important to Wall Street as buying an Nvidia graphics card is to gamers. Buying an Nvidia graphics card might be more cost-effective than actually playing the game . Similarly, if Wall Street wants to tokenize real-world assets like money markets, dollars, or stocks, they'll want to hold Ethereum itself, while also having it staked by entities dedicated to advancing Ethereum's development. Therefore, I believe we play a crucial role in this process by staking Ethereum.
Goal: Hold 5% of the total ETH supply
Ryan:
Tom, if you increase your stake 12 times faster than MicroStrategy, then at that rate, it would only take about one to two years to reach the 5% target. This is undoubtedly very rapid progress.
Do you think Ethereum will develop a sovereignty protection strategy similar to Bitcoin? For example, I heard you mention that many commercial banks, including JPMorgan, are gradually migrating their operations to blockchain. Furthermore, the stablecoin legislation promoted by the Genius Act effectively means that the US Treasury and central bank will peg the US dollar to Ethereum, and Ethereum is clearly a leader in this area.
Do you think there are similar sovereign protection options? For example, the US government or another sovereign could reach out to you and say, "We've noticed you hold a lot of Ethereum. We'd like to buy Ethereum for the US Treasury and add it to our balance sheet. We know you hold a lot, can we do this in an over-the-counter transaction?" Do you think that's a possibility?
Tom Lee:
I think every point you just made is valid, and it's a very reasonable assumption. Let's assume our goal isn't to protect sovereign assets, but rather to promote the development of Wall Street. For example, the Genius Act and the SCC aim to migrate the entire financial system to the blockchain. Ethereum, as the largest blockchain, is also compliant with US law and is a legal and recognized blockchain. This is crucial. While this blockchain can certainly be used by other countries and regions, the US clearly wants to strengthen its position and dominance in Ethereum.
Furthermore, we need to consider not only the financialization of blockchain but also the development of artificial intelligence. For example, if you want to tokenize robots or other intelligent systems, you will choose a highly secure blockchain. Therefore, the tech sector and Wall Street are gradually moving towards Ethereum.
Do firms like Goldman Sachs and JPMorgan want Ethereum to be stored in millions of different wallets? Their goal isn't centralization, but they want to ensure that the staking process is fully compliant, not arbitrary by each holder. This is something we at Bitmine have emphasized from the beginning: we have a very clean balance sheet and no complex capital structure.
We're making steady progress. While we haven't officially announced our staking solution yet, we're carefully planning our next steps. After all, handling $3 billion worth of Ethereum is a significant decision. We want to ensure that this process fully complies with US regulatory requirements.
I completely agree with everything you just mentioned. These points demonstrate that Ethereum reserve companies aren't just an alternative to an Ethereum ETF ; they're actually critical infrastructure within the ecosystem. Besides generating staking returns, these companies can generate revenue in other ways. Therefore, I believe these Ethereum reserve companies you highlighted play a very important role within the ecosystem as a whole.
Ethereum’s role on Wall Street
Ryan:
Tom, I have a question that's puzzling me, and I think many people share it. Why hasn't the price of Ethereum broken through $4,000? You mentioned earlier that Bitmine held $3 billion worth of Ethereum within a month. If that much Ethereum was purchased, why didn't it push the price above $4,000? How did you manage to consistently buy at $3,500? Where did all that Ethereum come from?
Tom Lee:
We've learned a lot along the way, but since we're probably one of the largest buyers of Ethereum, I can't go into too much detail. I can say that Ethereum's short-term market performance isn't entirely determined by its fair value. For example, last week, the price of Ethereum dropped to $3,300 because some traders triggered liquidations or hedged.
Some also believe Ethereum is a "dead chain" and are betting on other blockchain projects in an attempt to force a market liquidation. These dynamics influence short-term price performance. But isn't this exactly what happened to Bitcoin in 2017? If we look back at 2017, Bitcoin's price was $1,000 at the beginning of the year, but it wasn't until August that it began to soar. I believe Ethereum is experiencing a similar moment to Bitcoin in 2017 this year, with Wall Street finally starting to support Ethereum.
David:
We haven't seen this much interest in Ethereum assets and the Ethereum network on Wall Street in four or five years. We're seeing an influx of capital from all sectors of the Ethereum ecosystem. When people ask you why you chose Ethereum over a Bitcoin reserve company, like MicroStrategy, and other similar companies like Hype and Ethena, what's the appeal of an Ethereum reserve company compared to these Bitcoin reserve companies?
Tom Lee:
First, I'm a big supporter of Bitcoin. I believe Bitcoin is the right choice. Furthermore, according to our fund strategy research, Bitcoin's price could potentially reach $1.5 million per coin. So the Bitcoin story remains compelling.
But Bitcoin and Ethereum play different roles in the financialized world. This is their primary difference. Ethereum symbolizes the financial world's transition to blockchain technology , and is also relevant to artificial intelligence and digital securities. Ethereum fundamentally provides a digitally native way to connect real-world assets with digital securities. This is why some choose Ethereum Reserve. If I were an investor, I would choose MicroStrategy, as it's a safe bet, especially within fund-of-funds ETFs. But MicroStrategy's appeal lies in its daily growth in Bitcoin holdings.
The Ethereum Reserve is effectively the only way for US stock investors to gain exposure to Ethereum, unless they buy it directly or through an Ethereum ETF. This is an important topic for institutional investors. They won't simply ask, "Okay, Ethereum is the largest trade in my $50 billion fund." They're more likely to ask, "How can I get direct exposure to Ethereum?" Currently, they can't buy an Ethereum ETF because it doesn't fit the fund's investment parameters. Therefore, for professional investors in the US stock market, the Ethereum Reserve is the only way to gain exposure to Ethereum.
This is why investors like Katherine Woods have made significant investments in Bitmine. Bill Miller also announced a significant investment in Bitmine last week. These institutional investors are veterans of the cryptocurrency space who recognize this as the best way to gain macro exposure to Ethereum.
Accumulate more ETH
David:
So what is your strategy for accumulating ETH? Besides leveraging the MNAV premium to add assets to your balance sheet, what other methods are there to accumulate ETH? Assuming the MNAV premium is not a consideration, how do you add ETH to your balance sheet?
Tom Lee:
This is a great question, and I have many answers, but because some strategies are proprietary, I can't share all the details. However, I believe investors shouldn't oversimplify their understanding of Reserve. We have become the third-largest crypto reserve company in the world, behind only Mara Blockchain and MicroStrategy. Our crypto holdings even exceed those of Meta Planet. This significant difference in scale and liquidity allows us to employ a diverse range of strategies, rather than being limited to a single approach, which may be a key differentiator between us and other companies.
Ryan:
Why does the MNAV premium exist? Can you elaborate on this? I've heard some investors say that the MNAV premium should typically remain around 1, perhaps slightly above 1. In a bear market , it might dip below 1. So why does Crypto Reserve have an MNAV premium?
Tom Lee:
I can explain this 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 argue this is just an ETF (Exchange Traded Fund). Let's assume we invest at 1x net asset value (NAV), and Ethereum itself has a 3% yield. If we pay this profit to investors as net income, we can give it a money market multiple, say 5%. This way, the yield is magnified 20x. This means that a 3% yield can add 0.6% to the NAV.
Beyond that, there are two key factors that influence value. The first is the rate of growth. When we launched our Ethereum strategy on July 8th, the value of each Ethereum share was only $4. By July 27th, the value had grown to $23, and it's now even higher. While we haven't disclosed the latest figures, it's certainly increased. In approximately 20 days, the value of each Ethereum share has increased by $19.
This is the growth rate. When calculating net asset value, we must account for this, as it's constantly growing. We need to assign a multiple to this growth rate. For example, Microstrategy receives a 1.7x premium for adding 16 cents of Bitcoin per day, while our growth rate is 12x faster. Theoretically, our premium should be even higher. Using Microstrategy's 0.6x premium, ours is 12x faster, theoretically 7.2x faster. Of course, this is just a theoretical estimate, but it's worth considering.
This is simply a matter of growth rate . Another factor is liquidity. For example, Microstrategy's daily trading volume is approximately $3 billion. We are the second-largest cryptocurrency asset library, with a daily trading volume of $1.6 billion. In comparison, Meta Planet only has a daily trading volume of $50 million. We have a significant advantage in liquidity, which should also be given a certain premium.
Therefore, Bitmine's valuation can start with a 1x NAV, plus a 0.6x yield premium, for a total of 1.6x. Next is a growth rate premium. We know that Microstrategy receives a 0.6x premium for adding 13 cents of Bitcoin per day, while our rate is 12x faster. Finally, there's a liquidity premium, as liquidity allows us to issue other financial instruments at a lower cost.
Ryan:
Yes, the liquidity premium comes from being the biggest, strongest, and deepest in the market. The growth premium is really interesting. We can dig deeper into this, because in your first month, you grew 12 times faster than Microstrategy. The question is, can that growth be sustained over the next 11 months, a full year? Let's talk about that. So how did you achieve this kind of Ethereum growth? Is it truly sustainable?
Tom Lee:
This is actually a manifestation of liquidity. Liquidity and growth rate are two aspects of the same trait. We are able to achieve high growth rates because of our liquidity advantage. Let me give you an example. As of 2:00 PM today, our trading volume has reached $800 million.
Microstrategy's trading volume reached $3 billion. In contrast, Ether Machine, the third-largest Ethereum holder, only traded $7 million today. Our trading volume is 100 times that of Ether Machine. Bit BTBT, the fourth-largest holder, traded $49 million today. This shows a significant disparity in liquidity, which directly impacts growth rates. High growth requires extremely liquid assets.
Ryan:
I have another question about growth. Since you said growth depends on liquidity, where does liquidity come from? How do you acquire more liquidity?
Tom Lee:
This is a good question. I think liquidity mainly comes from team collaboration and resource integration.
First, I lead this project as a board member. Among Bitmine's private investors is Mosaics, a well-known and experienced macro hedge fund. Their participation helped us attract some significant investors, such as Founders Fund and Stan Drucker Miller. Notably, Stan Drucker Miller is disclosed as a shareholder in our registration statement. Also included are Arcs and Bill Miller, two of the most influential names in traditional finance and venture capital. Their support demonstrates their confidence in and commitment to our vision.
The second reason is that I've always been a strong supporter of cryptocurrency and its integration with traditional finance. As early as 2017, we clearly stated that Wall Street would gradually pay attention to Bitcoin. Since that year, Bitcoin has truly become an asset that institutional investors are paying attention to, and its market ownership has gradually expanded. Now, Ethereum is experiencing a similar "2017 moment," gradually gaining favor with institutions and investors. I believe this trend is logical and helps advance the goals of the Ethereum Asset Library.
Of course, I also strongly support projects like Sharp Link and Andrew Keys because we're all working towards a common goal. By staking Ethereum, we're strengthening its security and making it a reliable American blockchain. It's like we're all collaborating on a common vision to advance the cryptocurrency ecosystem.
Ethereum's breakout moment
Ryan:
Tom, there are a lot of listeners who only started to get into cryptocurrency after 2017. I'm not one of them. I remember seeing you on CNBC in 2017, and you were the only one in a suit appearing in traditional financial media to talk about Bitcoin.
Your expression resonates with many in the crypto space. Could you please recall the 2017 moment you mentioned for Ethereum? Are you comparing it to Bitcoin in 2017 and describing the shift in perception on Wall Street? Please help us make that connection. What was Bitcoin like in 2017? How are the parallels drawn with Ethereum today?
Tom Lee:
In 2017, Fundstrat, a firm focused on macro trends and thematic research, began conducting research that ultimately led us to Bitcoin. At the time, we conducted two key studies.
One of these studies was about millennials . At the time, the oldest millennial cohort was around 25 years old. We realized they would become a significant force driving the US economy. While this is widely accepted today, it was a novel concept just a few years ago. We delved so deeply into this that we ultimately partnered with Snapchat to write several white papers exploring how millennials could become a demographic to be monetized. At the time, Snapchat was trying to convince advertisers to target Gen Z and millennials, while many traditional brands, like PepsiCo, still believed their advertising should primarily target Gen X. This might sound strange, but that was the situation at the time.
Our second research led us to Bitcoin's price action. When I was at JPMorgan, Bitcoin was $100. After leaving JPMorgan, I watched it rise to $1,000 and reach a market capitalization of $100 billion. I'd never seen an asset reach such scale without any backing. So, we spent months deeply researching Bitcoin. While I didn't fully understand all its details, we discovered that its price growth was driven primarily by two factors: the growth in the number of wallets and the transaction activity within each wallet. This is essentially the network value effect—the more users there are, the exponentially greater the value of the network. We predicted that by 2022, Bitcoin could reach $25,000, and if it could capture 5% to 10% of the market capitalization of gold, it could even reach $100,000. So we began telling the market our story.
We believe Wall Street needs to understand Bitcoin because it's "digital gold." We were the first firm to bring Bitcoin to the institutional market. At the time, 0% of institutional investors owned Bitcoin, and 100% were retail investors. For the past eight years, the dominant narrative surrounding Bitcoin has been its function as a store of value, a digital gold. Of course, it's also a payment system, but the real appeal lies in its function as a store of value. Our research shows that gold is primarily held by baby boomers, while millennials are choosing Bitcoin as their gold. This is a cross-generational story, and also a story of digital substitution.
Here's the background. I was doing a lot of webinars at Fundstrat at the time, but we lost some institutional clients because they thought our views were too radical. They questioned why we would recommend an asset thought only used for drug trafficking and the Dark Web, calling it a legitimate asset class. Our reputation suffered. But as you know, Bitcoin later reached $120,000. We recommended that clients allocate 1% to 2% of their portfolios to Bitcoin, and this investment has generated 120x returns for some clients.
This has led many clients to become very aggressive. I see Ethereum's situation today as similar to Bitcoin's. While Ethereum is considered a dormant chain in some quarters, its stability is remarkable—no downtime in a decade. This is crucial to Wall Street, which has already decided that Ethereum is the foundational chain for their future builds.
David:
A lot has happened in the past six months. Circle's IPO was a stellar success, Coinbase's stock has performed well, and Robinhood announced its upcoming launch of Ethereum's Layer 2. Furthermore, the term "tokenization" is spreading rapidly. So much is happening, and it's all powered by Ethereum. Circle's USDC was born and grew on Ethereum, Coinbase, the world's largest publicly traded crypto company, is building Ethereum's Layer 2, and Robinhood, a traditional financial company, is also building on Layer 2. While Robinhood isn't a crypto company, it's entering the crypto space by legitimizing these technologies.
Does Wall Street understand that Ethereum is the backbone of many current movements? Do you think this is why there is such strong momentum behind these reserve companies? Or am I just making this up?
Tom Lee:
David, your description is very logical. But Wall Street typically connects the dots only when there's money to be made. For example, many listeners probably own shares of Apple, Amazon, or Nvidia. Nvidia is a poster child for exponential growth, but it's also experienced periods of near-zero performance, even being considered "dead money." A few years later, the market suddenly realizes its value and revalues it.
Ethereum is currently experiencing a similar situation. On-chain activity has reached all-time highs, and the community has been revitalized by the price recovery. More and more people are using Ethereum, and its smart contract blockchain capabilities give it an advantage over Bitcoin, which cannot support stablecoins.
I don't think the fact that Ethereum hasn't reached $15,000 is a bad sign. We've previously recommended Tesla and Nvidia, whose growth isn't directly tied to revenue, but rather shows periodic, large jumps. I hope Ethereum's price remains low over the next few years, allowing us to acquire it at a more attractive price. If it reaches $17,000, it might be too expensive for Ethereum Reserve. Of course, this would increase their stock price, but to me, that's actually a positive thing.
Ethereum has the potential to achieve 100x growth
Ryan:
Just like in 2017, Wall Street didn't understand Bitcoin. You mentioned that by 2025, Wall Street might still not fully understand Ethereum as an asset. Perhaps they're starting to understand it, but I think this is very similar to Bitcoin's early development pattern. Remember in 2017, when you discussed Bitcoin on traditional financial shows, its price was around $2,000 to $3,000. At the time, you made some bold predictions on shows like Squawk Box, saying Bitcoin would reach $20,000 or even $40,000. While many thought these predictions were too radical, they turned out to be correct.
Ethereum's price is currently trading at a similar level, around $3,000. You've also made high predictions about Ethereum's future price, which have also caused a stir in traditional finance circles. Do you think Ethereum can achieve similar growth as Bitcoin? What are your price expectations for Ethereum?
Tom Lee:
I think Ethereum has even more upside potential than Bitcoin because it faces more skepticism. While Bitcoin wasn't widely accepted in its early days, people didn't short it ; they simply chose not to believe in it.
In 2017, we predicted Bitcoin would reach $100,000. While it seemed crazy at the time, the growth from 2017 to now has actually not taken too long. Bitcoin has achieved a 100x growth in our lifetime. Ethereum's current situation is very similar to Bitcoin's in 2017. Wall Street remains skeptical about Ethereum's long-term survival, in part due to its shift to Proof of Stake and its once-high circulating supply. However, these issues are gradually being resolved. Wall Street's skepticism about Ethereum primarily focuses on whether it can truly benefit from Layer 1, rather than simply serving as a supporting platform for Layer 2. I believe this view will be shattered in the future, and once it does, it will lead to step-change growth. Therefore, I believe Ethereum's potential may even exceed Bitcoin's 100x growth.
If Bitcoin reaches $1 million, the potential for Ethereum will be even more staggering. Ethereum is not only part of Wall Street’s financialization of blockchain, it is also a key component of the United States’ strategy for dominance in artificial intelligence ( AI ).
If MicroStrategy's Bitcoin price triples, then Ethereum Reserve is likely to triple as well. Therefore, I believe Ethereum Reserve is a good investment category. Bitmine's unique strategy puts it at the forefront of this space, while Ethereum itself is significantly undervalued.
Ryan:
Your prediction may shock some people; a 100x increase in Ethereum's value would imply a total market capitalization of approximately $40 trillion. Furthermore, you mentioned the potential for Ethereum to surpass Bitcoin in network value, a view not universally accepted in the crypto community, despite the long-held belief among many Ethereum supporters. In the shorter term, what do you foresee for Ethereum's price? For example, what level might it reach by the end of this year or the end of the next cycle?
Tom Lee:
In the short term, I think the price of Ethereum should at least return to $4,000 because the Ethereum story is stronger today than it was in December last year when it was priced at $4,000.
In fact, Ethereum is performing better today than it did a year ago. A year ago, the Ethereum to Bitcoin price ratio was 0.05, corresponding to approximately $6,000. Therefore, from a narrative perspective, Ethereum should at least reach this level.
Furthermore, before the end of the year, as other Ethereum reserve companies begin to buy Ethereum and the price of Bitcoin rises, I think it is reasonable to see Ethereum reaching $7,000, or even $12,000 or $15,000.
By 2026, the Federal Reserve will begin implementing its dual shift, and central bank liquidity will rise, further driving Ethereum's price growth. I'm not sure if there are clear cycles in cryptocurrencies, but if there are, it would be positive for Ethereum. Personally, I believe the Ethereum Reserve prefers that Ethereum remain stable over the next five years before experiencing significant growth. However, this could happen suddenly and in a step-like manner.
For example, when I predicted S&P 500 returns in 2009, the market fell almost 80%, but by 2010, the S&P 500 had recovered to $60. Today, the S&P 500 is $300, demonstrating that traditional market returns can grow exponentially. Similarly, cryptocurrency network value could reach $20 trillion.
We are witnessing growth similar to that of the stock market. Furthermore, the valuations of cryptocurrency reserve companies are primarily based on their balance sheets, not profitability. Similar to Exxon Mobil, these companies have been valued for decades based on reserves, not profitability. Crypto reserve companies are becoming the new Exxon.
ETH Value Estimation Method
David:
Tom, you mentioned trying to model cryptocurrency valuations, but we recognize that the valuations of these assets are inherently difficult to accurately predict using traditional models. Companies like Coinbase, Robinhood, and Circle are building applications on Ethereum, Layer 2 solutions are also based on Ethereum, and tokenization technologies are also based on Ethereum. I believe these narratives have a significant impact on 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 analyze Ethereum's value and price specifically?
Tom Lee:
I might ask this: David, have you ever seen anyone accurately predict the price of Bitcoin using a spreadsheet model? But in practice, it's never been successful. I don't think anyone has been able to do it.
Or even if they succeed, a year later these models won't explain all the changes. Therefore, I believe those trying to predict Ethereum with spreadsheet models are making the same mistake as those using earnings models or the ISM index to predict the S&P. This is why no one can accurately predict the S&P. There's a saying I learned when I first started working on Wall Street: "Valuation models focus too much on earnings (E) and ignore the importance of the price-to-earnings (PE) ratio." Many people spend too much time trying to model earnings data, but it's the PE ratio that actually drives prices. Ethereum's price isn't determined by a single week's trading data, but by the market's perception of its value five years from now. Therefore, I believe it's wrong to over-rely on models and claim to be able to accurately predict a specific price. I also believe this is true of the stock market, such as the valuations of Palantir and Tesla. Fundstrat has consistently been able to correctly identify these transactions because we're not bound by traditional models.
Ryan:
So, how do you estimate the market size? Do you compare Ethereum to other assets? For example, in 2017, you compared Bitcoin to digital gold, and the total value of gold is about $20 trillion. Would you compare Ethereum to digital oil and use that to discuss its upper limit of value?
Tom Lee:
This is just one part of the valuation equation. I've seen some reports comparing Ethereum to digital oil, and those analyses are quite well done. I'm sure you've seen similar research as well. For example, the Mosaic team built two models for Ethereum: one based on a proxy model for the banking system and the other on a proxy model for the payment system. Ultimately, if there's one thing I've learned from the stock market, it's that you can't be bound by rigid frameworks. Many people try to confine their forecasts to standardized models, like SOPs (standard operating procedures). For example, when the S&P fell in April, many believed that reduced earnings would lead to further declines, yet my team was the only strategist not to lower our annual forecast. As it turned out, the market subsequently experienced a V-shaped rebound. This phenomenon couldn't be predicted with a spreadsheet model, but it reflects the resilience and workings of the market.
I'm not against building a framework, but I think Ethereum is clearly undervalued at its current price of $3,600 . Perhaps that's the most important conclusion, rather than trying to predict prices five years from now using a spreadsheet. I know this sounds like a non-answer, but I think it's actually the best answer.
Strategies for coping with market risks
Ryan:
Tom, do you think that cryptocurrency reserve companies, such as those for Bitcoin, Ethereum, and other assets, will overheat at some point? Perhaps this has to do with post-traumatic stress in the cryptocurrency space, as many of us experienced the GBDC deal and the O Capital debacle, which had an impact on other markets.
We're seeing these reserve companies and new entrants entering the market at premiums to their net asset value (MNAV), with some even comparing them to the investment trusts of the 1920s. Of course, we all know how the 1920s stock market bubble burst. Do you think there's a chance these reserve companies could enter a bubble phase? Where prices rise excessively, premiums reflexively increase, and then suddenly plummet like an escalator, losing all value and potentially triggering systemic risks for cryptocurrencies and the broader market? Is this a concern for you?
Tom Lee:
There is indeed a lot to discuss. First, let's look at the situation in the liquid stock market.
The current stock market rebound has been called the "most awful V-shaped rebound." In our video conferences with institutional clients, we often hear their arguments about why the stock market shouldn't rise and why current valuations are overvalued. However, after each meeting, I leave even more convinced that the market has reasons to continue rising, as this view isn't the prevailing market consensus. In the market, skepticism is often the key driver of price increases. If the audience is optimistic about the market, but the market isn't rising, and everyone is bullish, it could be a sign of a bubble.
The only way cryptocurrency reserve companies could run into trouble is if they use leverage. I believe any company using complex instruments or debt structures, unless their resources are scarce, could be at risk. Companies like Microstrategy and Meta Planet succeeded because they disrupted their industries. Those that fail to innovate could struggle. However, from what I've observed, most cryptocurrency reserve companies have relatively simple structures.
If these companies run into trouble, the result will likely be simply a drop in price. I don't think it's likely to trigger a stock market crash, which is usually triggered by debt problems or external shocks . I think we're still far from a bubble. In fact, the market is betting that these assets are oversupplied, so their value will only rise if the price of Bitcoin rises.
Of course, at some point, the market may enter a bubble phase. However, I have found that people always start declaring bubbles in the middle and late stages of the market, and the true top usually appears when no one is bearish. Currently, everyone is bearish on Bitcoin and the stock market because of the recent market performance.
If we were truly at a market top, a few days of bearish trading wouldn't be a cause for so much concern, but the fact is, everyone is saying this is the market top.
When market confidence is very fragile, it is often still a long way from the true top, so remember this.
Ryan:
Tom, what are your thoughts on the current macroeconomic situation? Macro events, like tariffs or a recession, could have an impact on the cryptocurrency market. I remember last year, when we interviewed you in August, the yen carry trade suddenly disappeared. You predicted it would end, and you were right. What is your macroeconomic outlook now? Are there any concerns, or do you feel we're in a good position?
Tom Lee:
I'm very concerned about institutions becoming politicized. For example, the Federal Reserve and the Bureau of Labor Statistics (BLS) are supposed to be independent, but some of the BLS's revisions seem very strange. However, I don't think these revisions are the result of politics.
From my perspective, the economy is currently very strong. When I talk to clients, many institutional investors believe we're in a recession. Some might say, "Tom, if everyone thinks we're in a recession, then you're wrong because you can't say the economy is strong." But in reality, in my 30 years of experience, no one has ever accurately predicted a recession. When everyone thinks we're in a recession, it's usually not a recession. A true recession is often caused by a sudden change in the business environment that catches everyone off guard.
For example, the housing bubble burst, but bubbles don't burst when everyone is extremely cautious. The ISM index has been below 50 for 29 consecutive months, and the business community is extremely cautious. If this is truly a recession, it would be the first time in history that a recession has occurred without the ISM index breaking 50.
This may sound strange, but my observation is that we are currently in the middle or even early stages of the economic cycle. Tariffs were a factor in the recession, and the interest rate shock reset business confidence. This fear actually helped us avoid a recession because it caused businesses to reduce spending.
If you look at the data, corporate earnings are doing well and no one sees a collapse in demand. That's because everyone is being cautious.
What Wall Street Misunderstands About Cryptocurrencies
David:
Tom, I'm betting that Wall Street's phone calls are blowing up. Every single billionaire on Wall Street is calling you, asking about Ethereum, trying to learn more. What other misconceptions do you think Wall Street has about cryptocurrencies, and Ethereum in particular?
Tom Lee:
That's a great question, David. Thanks for asking me. Wall Street loves spreadsheets, so every call starts with, "Tom, can you give me a model of how stablecoin adoption changes gas fees?" And then they follow up with, "What's the volume of stablecoins? How much of that is tied to Ethereum? How much is Layer 2? What about payments?" I think that's the question.
When people rely too heavily on spreadsheets, they often fall into analysis paralysis and lose sight of the bigger picture. The fact that Ethereum is a legally compliant blockchain is crucial. But this isn't limited to Ethereum; a similar situation can be found in S&P 500 analysis. For example, someone might say, "The S&P 500's long-term median P/E ratio is 16, and earnings margins are historically high right now, so margins will decline and the index might fall back to 3,000." But in reality, this kind of analysis never truly pays off.
I suggest that people look back at how these ideas have performed over the last 50 years, and you will see that this kind of analysis has never made money.
David:
My analysis is that people who come to you with spreadsheets are essentially doing a basic "cover job" to justify to their bosses and their bosses' bosses why they're buying a large amount of Ethereum or other assets. They need to do this by creating a spreadsheet. So how can we provide them with a different way to "cover"?
Tom Lee:
That's a great question. We at Fundstrat are evidence-based, but we're not bound by assumptions. For example, the unemployment rate isn't a legal rule, nor is the federal funds rate, nor is the 10-year Treasury yield. They never balance.
For example, Fundstrat launched an ETF called Granny Shots last year. Although only eight months old, Granny Shots has returned 17% year-to-date, while the S&P 500 has only risen 7%. We've outperformed the S&P 500 by 1,000 basis points. Morningstar ranks us in the top 30 of 1,400 funds, or the top 2% of large-cap funds. We use an evidence-based approach, but we're not constrained by traditional earnings forecasts. We are very disciplined in our stock selection.
If someone asked me about Ethereum Reserve, I wouldn't be talking about Bitmine specifically. You should start with the health of Ethereum per share, then consider four factors: velocity, liquidity, scarcity, and their uniqueness. The largest companies should obviously command a premium due to network effects, and then you should ask yourself, what is the price of Ethereum? What are its potential risks and rewards?
If someone tries to calculate the price of Ethereum to the penny or even $100, their analysis will never be valid because Ethereum is never at an equilibrium point. But you should ask yourself, if the price of Ethereum reaches $3,700, what is the risk? What is the lowest price? For example, the lowest point this year was $1,700. And what is the potential reward? Consider Bitcoin's price five years ago, which could have put Ethereum at $20,800. This way you can see the asymmetry of risk and reward.
You can derive a price based on the health of Ethereum per share, combined with velocity, liquidity, and scarcity. This isn't a spreadsheet calculation; it's based on real-life scenarios. If the price of Ethereum reaches $20,000, how much will these companies be worth? If the price drops to $1,700, it will be halved. But if the company's health per share of Ethereum doubles over the same period, its stock price will likely remain the same. Therefore, companies with good 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, such as NFTs (non-fungible tokens), or what are your thoughts on NFTs in general?
Tom Lee:
I do have quite a bit of Pudgy Penguins merchandise. It's really fun, and I shared their designs last week. However, it's hard to keep it all around my office because almost everyone wants a piece.
David:
So is Pudgy Penguins your favorite Ethereum NFT?
Tom Lee:
You could say that. I was particularly drawn to Pudgy Penguins' uniqueness, and its popularity in South Korea is remarkable. South Korea not only has a strong stock market culture, but also boasts one of the most active stock markets in the world. Having worked in South Korea for a while, I've also noticed a strong cryptocurrency culture there. Therefore, Pudgy Penguins' popularity in South Korea further demonstrates its value.
