- Fundstrat’s Tom Lee is confident that bitcoin bulls won’t change their tune on the cryptocurrency following Elon Musk’s abrupt reversal.
- Lee upgraded his bitcoin price target from $100,000 to $125,000 by year-end.
- He said it is possible Musk had to consider investors’ ESG concerns over bitcoin.
- See more stories on Insider’s business page.
Fundstrat Global Advisors managing partner Tom Lee is confident that bitcoin will continue to rally in the wake of Elon Musk’s abrupt reversal Wednesday on allowing Tesla to accept the cryptocurrency as payment.
“I don’t think it’s going to get people negative on bitcoin, but it is going to get people to focus on the problems that are being created by digital assets,” he told Insider. “It is probably better to view it as a call to action for the bitcoin industry to focus on renewables or more efficient ways to provide proof of work.”
On May 12, the Tesla CEO suspended vehicle purchases made using bitcoin, citing environmental reasons. The announcement sent shockwaves across the digital asset ecosystem.
Yet, Lee is confident enough that market will move past Musk’s flip-flopping that he has upgraded his bitcoin price outlook from $100,000 to $125,000 for 2021.
Lee, who is the head of research at Fundstrat, said he understands Musk’s decision to suspend bitcoin payments.
“I imagine it would have been tough to accept bitcoin as payment because of the volatility,” he told Insider. “So as a practical, treasury matter, unless Tesla is hedging the bitcoin transaction at the time of purchase, I don’t know if it’s great from a company perspective.”
He added that the ideal way to use bitcoin would be if Tesla transacted the same day, rather than allowing customers to pay first and get the car at a later time, at which point bitcoin may be worth less.
As for the burning question of why Musk made the decision now, Lee said it is possible it was influenced by people within the organization.
“Many people come to Tesla because it’s ESG-friendly,” he said, referring to environmental, social, and governance metrics closely tracked by many investors.
“I think some of these same people might’ve just questioned, well, if you want to accept a digital currency…maybe it shouldn’t be bitcoin,” he said.
Concerns around bitcoin’s energy consumption have hounded the world’s most valuable cryptocurrency. To verify transactions, thousands of computers must be powered, a process that relies on huge amounts of electricity, which critics say comes mostly from fossil fuel sources.
Other potentially more energy-efficient options include Chia, a new greener cryptocurrency, and Ripple’s XRP, said to be the least environmentally damaging among crypto coins.
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Musk himself though may be leaning towards dogecoin. On Thursday, the Tesla chief said he is “working with Doge devs to improve system transaction efficiency.”
Still, Lee doubled down on the merits of bitcoin, highlighting how the bitcoin system never had a single fraudulent entry in its entire history since it was founded in 2009.
Lee said he’s undeterred by bitcoin’s waning market dominance as the token’s market capitalization falls below 50% of the entire crypto market.
“Bitcoin dominance will actually grow during a bear market,” he said.