On Monday, Bitcoin evangelist Tom Lee (Co-Founder, Fundstrat Global Advisors) appeared on the desk of CNBC’s Fast Money program to provide insights in relation to the sluggish price performance of cryptocurrencies in recent months. A slump that has been spearheaded by market-leader Bitcoin (BTC), whose price continues to dwindle around the low-to-mid US$7,000 mark; more than 60 percent off its December all-time high.
Bitcoin Search Slump a Non-Factor
The Fast Money host, Melissa Lee, began by asking Lee to address the massive drop off that Bitcoin has experienced in relation to the volume of people entering “bitcoin” as a search term on Google – as depicted below (per Google Trends).
The Bitcoin enthusiast – who also serves as managing partner and research head for Fundstrat – responded by stating that “Googles searches aren’t the leading indicator for Bitcoin,” but instead, acts as a “coincident indicator,” and therefore shouldn’t be looked to as some sort of BTC price predictor.
How Quickly We Forget
Whilst admitting that cryptocurrency trading volumes were down some 80 percent since their December highs, Lee cautioned that viewers ought to remember that “December was the parabolic blow-off for Bitcoin.”
This break-out moment for Bitcoin – and cryptocurrencies at large – made for a short-lived period of unprecedented trading activity. To measure trading volume relative to such a frenzied time fails to accurately depict just how far the crypto movement has progressed over the past twelve months. Per Lee:
Compared to just the second half of last year, Bitcoin volumes are up forty percent. And compared to a year ago, [over] the same time (i.e., January to June), Bitcoin volumes are up nine hundred percent.”
Mining Costs Setting BTC Price Floor?
Lee also told the Fast Money panel about a unique hypothesis that considers the cost of Bitcoin mining acts to be a major determinant of $BTC; specifically, when it comes to the establishment of a price floor.
From the Bitcoin bear market in December 2013 to January 2015, Bitcoin bottomed at its mining cost.” – Tom Lee
He made reference to a recent Bitcoin mining cost calculation by Sam Doctor (Quant Strategist, Fundstrat) which found the average all-in cost to mine one Bitcoin as totalling ~US$6,000. Applying this pricing theory, ~$6,000 “should act as the floor for Bitcoin’s price,” Lee explained.
Notable factors that influence mining cost, according to Lee, are Bitcoin’s block reward halving scheme, the level of mining difficulty, and the efficiency of ASICs.
Bitcoin mega-bull Tom Lee of @fundstrat says there’s three things the bitcoin bears are getting wrong pic.twitter.com/FdF5knZyfw
— CNBC’s Fast Money (@CNBCFastMoney) June 4, 2018
Image From Shutterstock