- Fundstrat’s Tom Lee is confident that the Bitcoin bulls won’t change their tune on the cryptocurrency after Elon Musk’s sudden reversal.
- Lee upgraded his bitcoin price target from $100,000 to $125,000 by the end of the year.
- He said it is possible that Musk will take into account investors’ concerns about ESG over bitcoin.
- Watch more stories on the Insider Business page.
Tom Lee, managing partner of Fundstrat Global Advisors, is confident that bitcoin will continue to rise in the wake of Elon Musk’s sudden reversal on Wednesday to allow Tesla to accept the cryptocurrency as payment.
“I don’t think it will make people passive about bitcoin, but it will make people focus on the problems that arise with digital assets,” he told Insider. “It might be best viewed as a call to action for the bitcoin industry to focus on renewables or more efficient ways to provide proof of action.”
On May 12, the CEO of Tesla suspended car purchases made with bitcoin, citing environmental reasons. The announcement sent shock waves through the digital asset ecosystem.
After the news, bitcoin fell nearly 15%. Other digital assets like ether and XRP, as well as crypto-related stocks including Coinbase, MicroStrategy and Square, all sank as well.
However, Lee is confident enough that the market will weather Musk’s volatility that he has upgraded his bitcoin price forecast from $100,000 to $125,000 for 2021.
Lee, head of research at Fundstrat, said he understands Musk’s decision to suspend bitcoin payments.
“I imagine it has been difficult to accept bitcoin as a form of payment due to the volatility,” he told Insider. “As a practical matter of treasury, unless Tesla is hedging a bitcoin transaction at the time of purchase, I don’t know if it’s great from a company perspective.”
He added that the optimal way to use bitcoin would be if Tesla transacted on the same day, rather than allowing customers to pay first and get the car later, at which point the bitcoin might be worth less.
To the burning question of why Musk made the decision now, Lee said it was possible that he was influenced by people within the organization.
“A lot of people come to Tesla because it’s green, ESG, and ESG,” he said, referring to the ESG metrics that many investors track closely.
“I think some of these people just wondered, well, if you want to accept a digital currency… it probably shouldn’t be bitcoin,” he said.
Concerns about bitcoin’s energy consumption have haunted the world’s most valuable cryptocurrency. To verify transactions, thousands of computers must be turned on, a process that relies on massive amounts of electricity, which critics say comes mostly from fossil fuel sources.
Other potentially more energy-efficient options include Chia, a new, more environmentally friendly cryptocurrency, and Ripple’s XRP, which is said to be the least environmentally harmful among cryptocurrencies.
Read more: ‘Wolf of All Streets’ Crypto Trader Scott Melker Breaks His Money Making Strategy Using ‘HODLing’ and Trades Chances 100 Times – He Shares 5 Unseen Tokens He Thinks Could Explode
Although Musk himself may be leaning towards Dogecoin. Thursday , Tesla chief said It “works with Doge developers to improve system transaction efficiency.”
Where bitcoin needs to consume about 707 kWh per transaction, Dogecoin only requires about 0.12, as the meme code uses fewer calculations to mine and trade the coins.
However, Lee doubled down on the advantages of bitcoin, highlighting that the bitcoin system has not had a single fraudulent entry in its entire history since its founding in 2009.
Lee said he was not deterred by the decline in Bitcoin’s market dominance as the token’s market cap fell to less than 50% of the entire crypto market.
“Bitcoin’s dominance will actually grow during a bear market,” he said.