The World’s Largest ETH Holder - Tom Lee on Treasuries, Ethereum Dominance, and Wall Street
Tom Lee:
[0:00] I think the upside case for ETH is actually higher than, let's say, Bitcoin did 100x. You know, could Ethereum do 100x? I think that that could happen because there is probably a non, a significant probability that Ethereum could flip Bitcoin as well in terms of network value.
Ryan Sean Adams:
[0:20] Bankless Nation, we have Tom Lee here, legendary Wall Street investor, chairman of the newly launched ETH treasury company, Bitmine. The ticker is BMNR. Tom, welcome back to Bankless.
Tom Lee:
[0:31] Yeah, thanks. Good to see you guys again.
Ryan Sean Adams:
[0:33] It's great to see you. It's been about a year and you've been pretty busy. I got to say, I did not have on my bingo card that Tom Lee in 2025 would create an ETH treasury company. And yet here you are at the time of recording, Bitmine, where you chair, has 833,000 ETH. That's closing in on 1% of all ETH supply. And you are now, I believe, the largest ETH treasury company in the world, at least publicly traded company. How does that feel?
Tom Lee:
[1:03] Well, I guess, I mean, we move very quickly because we started this, announced it on June 30th and it closed on July 8th. So in, you know, like in 27 calendar days since the close, we've moved at very high velocity to acquire this ETH quickly. But I think it's important because MicroStrategy really has demonstrated that his 30 times return, his pivot when MicroStrategy was $13 in August 2020 to now, you know, Bitcoin made a big step move from $11,000 to $120,000. But his treasury strategy delivered another 20x on top of that. That's how he got a 30x total return. And I think Ethereum is one of the biggest macro trades over the next decade. So we want to move quickly because we want to get as much ETH you know, $3,500 or whatever before it makes its step function gain, similar to what Bitcoin's done in the last five years.
David Hoffman:
[2:10] Unlike MicroStrategy, Tom, when you launched Bitmine and just announced that you were doing the ETH treasury company strategy, other ETH treasury companies were hot on your heels. Coincidentally, or maybe not coincidentally, SBET from Joe Lubin Consensus, Sharp Link Gaming, was announced within like five days of you announcing yours. And now there's a whole host of ETH treasury companies. Did you know that there were others that were hot on your heels? How did all of this happen all at once? Why did this all happen seemingly in the same like two week period?
Tom Lee:
[2:42] Maybe great minds think alike. I don't know. You know, you're right. There have been for a long time, there were just Bitcoin treasuries and then a couple of Solana treasuries and a couple of hype ones.
Tom Lee:
[2:57] But Sharplink was the first. ethereum treasury uh that was announced in may so we were we're behind you know we came after sharp link but um i think that you know ethereum itself is makes a lot of sense to do as a treasury play because one um if you're positive on eth itself then that's the reason to do a treasury strategy especially over an etf because the functions of a treasury strategy lets you get stack more ETH. But the second is ETH, I think actually that because of staking and the proof of stake that these treasury companies are essentially infrastructure companies and in exchange you're getting paid, you know, a yield for native staking and that makes them into real businesses. You know, like for instance, the over $3 billion worth of ETH that we hold today, you would earn native staking over 3%. And that's essentially gap net income.
Tom Lee:
[3:57] But the third reason, of course, is that, you know, it's important to create scarcity. You know, I think that the story that we have at BitMine is one of scarcity, because we have a very clear strategy of trying to acquire 5% of ETH. And we have a pristine balance sheet. You know, that's a big advantage and um the stock is super liquid you know it trades 1.6 billion dollars a day which makes it the 42nd most um liquid stock in the in the u.s stock market today actually uber we trade about the same as uber every day and uh i'm just going to check uber's market cap but i think you know um bitmines you know about 4 billion and uber's market cap is 184 billion so we trade as much as Uber Despite a 4 billion market cap versus 183 billion.
Ryan Sean Adams:
[4:50] Tom, let's talk about that 5% number because I've heard you say that before. And we're just like adding up some numbers here. 5% of total ETH supply. So that'd be about 6 million or so ETH. Yes. You're at 833,000 now, but have gotten to that number in like four weeks. So you're moving very, very fast there. Are you serious about 5% of all ETH? Because from my recollection, MicroStrategy, they've been at this for a while, since 2020. I believe MicroStrategy is up to like 3% of Bitcoin or so. And they've been dollar cost averaging in over time. 5% of all Ether, you know, I guess that the current market price is what, like, you know, 20 billion or so. But I assume you can't get there overnight, especially at these prices. How in the world do you get to 5%? And are you serious about that number? Or is 5% kind of a placeholder? It's just kind of like, yeah, we'd like to someday 5%. That sounds good. Or are you serious about it? And do you have an execution plan to get to that 5%? And if so, what does that look like?
Tom Lee:
[5:53] Well, MicroStrategy is 3.2% of the network circulating supply right now. And but, you know, MicroStrategy wants to get to at least a million Bitcoin, which is about 5%. And keep in mind that once MicroStrategy has a million Bitcoin, they have a sovereign put. You know, they are strategically important to the Bitcoin ecosystem. I mean, if the U.S. wants to create a strategic Bitcoin reserve, it's probably difficult for the U.S. to buy a million Bitcoin in the open market. Because as soon as they announce it, sellers are going to shrink and, you know, Bitcoin could go to a million dollars right away. So micro strategy might be an easier way for someone to get to a million Bitcoin. So I call that a sovereign put. Micro strategies achieve the 3% in Bitcoin.
Tom Lee:
[6:50] Five years so they were buying basically 16 cents worth of bitcoin a day every day for the last
Tom Lee:
[6:58] Five years bitmine is if you look at it from inception to now has added about 80 cents to dollar per day in ethereum so it's about 12 times faster than microstrategy so So we would be on a path to get to 5%, presumably like at 12 times the speed of microstrategy. But it makes sense because, you know, we would be a benevolent entity in the sense that we are doing everything 100% compliant with what is the idea of a legally compliant. Ethereum is a legally compliant blockchain and everything that BitMine is doing is keeping every single piece of the operations in the United States. So it is very compliant to what Wall Street and the U.S. Government would want to see in someone who is staking a lot of ETH. And um equally important you know eth itself is going to be really where so much of wall street financializes on the blockchain um so eventually i think someone on twitter made the point that staking eth for wall street is like gamers buying nvidia
Tom Lee:
[8:22] that you would have done better to buy NVIDIA as well as be a gamer or be a gaming company.
Tom Lee:
[8:28] But because of...
Tom Lee:
[8:32] You know really how blockchains work it is actually that exact idea that wall street is if they're going to be tokenizing real world assets from money markets to dollars to stocks that they're going to want to own eth itself but then they want whoever's staking it to actually be uh an entity that is really trying to further the goals of ethereum so i think we really serve an important purpose by staking eth you know tom
Ryan Sean Adams:
[8:59] If you say you're you're moving at the current pace, 12x faster than microstrategy, I mean, that puts you to 5%. If you continue that pace in about one to two years, basically, which would be breakneck speed, do you think a same kind of sovereign put strategy exists for Ether, the asset, as it does for Bitcoin? I've heard you say that all of the commercial banks, the JP Mortgage of the world coming on chain, genius bills, stablecoin legislation, this is effectively treasuries and the US Central Bank coming on chain with their dollars. Ethereum is, of course, leading the pack there. Is there a similar sovereign put type option where the US government or some other sovereign nation, I guess you're legally compliant in the US, you'd hope it would be the US government, comes to you one day and says, hi, Tom, Bitmine, we noticed has a lot of ETH. We want to buy ETH for the US Treasury, U.S. Central Bank, put it on our balance sheet. And we know you have a lot. Can we do an OTC deal? Do you think that's a possibility here?
Tom Lee:
[10:01] Look, I think everything you just said is actually rational. It makes sense. But let's say that our goal isn't to have a put. Like if you just fast forward and Wall Street, right? So Genius Act, SEC wants to move the financial system onto the blockchain. And Ethereum is the largest blockchain, but it's also compliant with U.S. laws. It's a legally recognized blockchain. But this blockchain, of course, can be used by other countries and other, you know, nations. The U.S. obviously wants to strengthen the U.S. position and dominance on this blockchain. And of course, keep in mind that there's not just one storyline here coming onto Ethereum. It's also AI, right? You know, if you're going to tokenize, whether it's robots or other things, you know, You want a blockchain that also, again, can be secured. So tech and Wall Street are converging onto Ethereum.
Tom Lee:
[11:00] Does Goldman Sachs and JP Morgan want Ethereum to be held in millions of different wallets? Not that they're trying to centralize it, but they want to make sure that the staking is done in a compliant way. And not everybody is going to choose to do that. But that's what we said from the beginning. The idea is that Bitmine has a pristine balance sheet, super clean, no exotic capital structure, and everything that is being done. And we haven't announced our staking solution, but we're taking our time because, first of all, $3 billion of ETH, it's a big decision.
Tom Lee:
[11:39] But it's also going to be completely compliant with GAAP and actually how the U.S. would want that to be staked. So I think it's a very thoughtful approach we're taking. But yes, I mean, everything you just said, like let's say, because I don't disagree, it just shows you Ethereum treasury companies are a critical infrastructure. It's not just a treasury play. And in exchange for that, you're earning a staking
Tom Lee:
[12:05] yield at a minimum, but they could be earning other ways of generating income. So I think you're highlighting that these Ethereum treasuries aren't just like an alternative to an ETH ETF. They are playing a really important role in the ecosystem. Right.
Ryan Sean Adams:
[12:20] One thing I can't figure out, Tom, and I think some ETH bulls are with me on this, is how in the world ETH is still trading under 4K? When you just talked about in a month's time, you now have $3 billion in ETH in the BitMine treasury. So $3 billion in ETH purchases, how does that not move ETH price like $4K and above? How are you still getting a bid at $3,500 ETH? Where's all this ETH coming from and how is it not moving our price here?
Tom Lee:
[12:53] Well, we've learned a lot. I don't really want to say too much because as you can imagine, we've probably been one of the largest buyers of ETH and we've learned a lot and I would say in the short term, where fair value for Ethereum is, does not play into what ETH does short term. I mean, look at it. Last week, it got to $3,300 because there are folks who have liquidation levels or they're doing pair trades. Where people think Ethereum's a dead chain, so they're betting on another chain and trying to force levels of liquidation. I think that that's the dynamic near term, but wasn't that Bitcoin at $1,000 in 2017? Actually, if people go back to 2017, because I think Ethereum is having its Bitcoin 2017 moment this year, where Wall Street is finally getting behind ETH. You know, Bitcoin was $1,000 in the early part of 2017, and it wasn't until August, and then it went straight up. I mean, literally went straight up.
David Hoffman:
[14:10] We've definitely haven't seen this level of Wall Street interest in ETH, the asset, and Ethereum, the network in like four or five years now. And I mean, we're seeing the appetite from Wall Street coming in all different corners of the Ethereum ecosystem. When people ask you about why buy an ETH treasury company over a Bitcoin treasury company, if they're shopping around, because there are treasury company options out there. There's been microstrategy. There's not only just microstrategy for Bitcoin, there's others. And then like as you alluded to, there's like a hype treasury company. There's an Athena treasury company. So when you explain why, why specifically ETH? What is resonant about Ether, the asset, and the treasury company model over something like Bitcoin or any other alternative treasury company?
Tom Lee:
[14:57] Well, first, I'm a big fan of Bitcoin. I think Bitcoin is the way. And our work on the fundstress side shows Bitcoin can get to the million, million and a half dollar per coin. So Bitcoin still has a huge story ahead. Yeah, but Bitcoin and Ethereum operate on different parts of how the world is financializing. And that's the principal difference to me because Ethereum represents the world financializing onto the blockchain, which is not Bitcoin's goal, and the AI world. Creating basically a digitally native way to bridge the real world and, you know, digital security. So that's to me why Ethereum, someone wants to own Ethereum treasuries because they're, I would buy MicroStrategy if I was looking at this. And by the way, it is a granny shot in the Fundstrat ETF. But the reason is that MicroStrategy is growing your Bitcoin holdings every day. So you're going to outperform Bitcoin.
Tom Lee:
[16:12] Ethereum treasuries are really the only way for a U.S. Equity investor to get exposure to Ethereum unless they're buying ETH directly or an ETH ETF. But if you're an institution and this is one of the biggest themes, I don't think they're going to just say, well, in my fund, my $50 billion large cap fund, Ethereum is the biggest trade, so I'll buy JP Morgan. They might, but they're better off saying, how can I be directly exposed to Ethereum? And they can't really buy an Ethereum ETF because that's not within the parameters of their fund. So I think to me, the U.S. Equity market professional investor looks at Ethereum treasuries as really the only way to get exposure to ETH as a. Macro trade. And that's why, you know, we've seen like the Kathy Woods make a big investment in Bitmine and Bill Miller. Today, we announced that he made a major investment last week into Bitmine. So they're institutional investors. They're both, both of those folks are OGs in crypto. Realize this is the best way to have macro exposure to Ethereum.
David Hoffman:
[17:17] In addition to just like the MNAV premium, which has mostly been MicroStrategy's strategy for bootstrapping itself into buying more Bitcoin and accumulating more Bitcoin. Ether treasury companies have a bit of extra tools in their tool belt, simply by nature of what Ethereum is, right? Ethereum has like an on-chain DeFi ecosystem that Ethereum treasury companies can actually leverage. So my question to you is, what's your strategy for accumulating more ETH using the additional tools at your disposal? Because all treasury companies are leveraging the MNAV premium in order to accumulate
David Hoffman:
[17:55] more respective assets under their balance sheet. But there's other strategies beyond just kind of like extracting the premium to accumulate more ether. What else, what other strategies? Assuming the, ignoring the MNAB premium, how else do you get ether on your guys' balance sheet?
Tom Lee:
[18:14] Yeah, David, of course, you're asking a great question and I have many answers of which I can't really share most of them because whatever strategy we pursue, some of this is very proprietary. But I would say investors shouldn't oversimplify their thinking around treasuries because we've become the third largest crypto treasury in the world after Mara Blockchain and MicroStrategy. So we own more crypto than Metaplanet. And so then you realize that companies that are of significant size and liquidity don't simply have to be doing crypto. It's like singular things, you know? So that's probably the difference.
Ryan Sean Adams:
[19:12] Tom, why does an MNAV premium even exist? Can you talk about this? Because I've heard some investors talk about this and their basic view is the MNAV premium should kind of collapse somewhere around one, maybe a bit above one. Of course, in bear markets, it could trade under one. But why is there an MNAV premium in the first place for any crypto treasury company?
Tom Lee:
[19:35] Um yeah can i walk you through that please okay because it's a very good question okay i want to start with a numerical thing and then give you the non-numerical let's say that someone buys us and bitmine is very um strict on cost structure so um it's basically with three billion dollars of ethereum let's say oh you're like okay you're just an etf so let's say you put it at one times um nav okay but then there's a native yield of three percent and let's say you pay that out as net income but let's say you you you go oh well let's just give it a money market multiple so five percent you gross it up so it's a 20 times multiple of your three percent okay that's adding 0.6 to your nav because of the what you earn on the yield does that make sense so
Ryan Sean Adams:
[20:39] We're already at 1.6 just because of each staking yield basically.
Tom Lee:
[20:43] Then the third there's two other components to value. You have to account for velocity because when we started the ETH strategy on July 8, there was only $4 of Ethereum held per share. And now when we announced on July 27th, there was $23 of Ethereum held per share. And it's much higher today. We haven't disclosed it, but it's higher. So it's grown by $19 a share in 20 days, roughly. That's velocity. You have to give a velocity because when you do NAV, the NAV is growing. So you have to give a multiple to that. nav growing micro strategy is getting a 0.7 for adding 16 cents of bitcoin a day but we're doing it 12 times faster so if you did the theoretical math we should be getting more than it should be 0.6 which is micro strategies premium but 12 times faster times 12 now i'm not saying that'll be what's priced but
Ryan Sean Adams:
[21:54] Think about that's like.
Tom Lee:
[21:55] Six points of nav so that's just velocity and then there's liquidity because you know after micro strategy trades about three billion dollars trading a day we're the second most liquid crypto treasury out there because we trade um we trade 1.6 billion a day like meta planet for instance and i'm a big fan of what meta planet's doing but they're trading like i don't know 50 million dollars a day so we have like a quantum quantum log function of liquidity. So that should be worth a premium too. So I think like BitMine just should be one times plus the yield gives you 0.6, so 1.6. And then how much value do you give for the velocity? And we know MicroStrategy is getting 0.6 for adding 13 cents a day and we're 12 times faster. And then what's the premium you should pay for liquidity? Because liquidity is how you can issue other instruments at lower cost.
David Hoffman:
[22:59] So there's a liquidity premium to this product.
Tom Lee:
[23:03] And a velocity premium.
Ryan Sean Adams:
[23:05] Yeah, the liquidity premium you get by being kind of the biggest and baddest and kind of like deepest, right? But the velocity premium, which is kind of interesting, let's dig into that because there's the velocity of in the first month you've moved 12x the speed of microstrategy. The question though is, is that sustainable for the next, let's say 11 months, for an entire year. Talk about that. So how are you able to get that level of ETH velocity in terms of your purchasing? And can that level actually be maintained?
Tom Lee:
[23:35] Well, that's a function of liquidity, right? So it's liquidity and velocity are like two aspects of the same characteristic. We're able to have a lot of velocity because of our liquidity i'll give you an example so today we trade like as of 2 p.m we've traded 800 million dollars of dollar traded volume today and micro strategy has traded Well, $3 billion, so they've gotten a lot. But Ether Machine, which is the third largest holder of Ethereum, traded $7 million today. So we traded 100 times the volume of Ether Machine. And then BTBT, I believe they're the fourth largest holder. They traded $49 million today. so you can see there's a huge difference in liquidity which affects your velocity because everything that you do to get velocity requires your stuff to be super liquid let
Ryan Sean Adams:
[24:46] Me ask the same question uh for velocity though so if if you're saying hey the velocity comes from liquidity and the question is where's the liquidity come from so you're like how do you get more of that.
Tom Lee:
[24:56] Yeah so i think um well that's probably the synergy of the team because it was it's myself you know as chairman but i uh our lead investor in in bitmine from the private investment was mosaics and they're uh a really well-known uh very smart macro hedge fund but that's how we were able to attract uh folks like founders fund and uh you know uh stan druckemiller was revealed in the registration statement as a holder and of course the arcs and the bill miller i mean you you have of literally the biggest blue chip names in traditional markets and VC backing BitMine. That's one element, is that it's obviously the people believe the vision. The second is that I've been a longtime proponent of crypto, you know, and the convergence. And now, you know, we really argued forcefully in 2017 that Wall Street would care about Bitcoin starting in 2017. That was really the year that I became an institutional product, right?
Tom Lee:
[26:05] And ownership grew from there. This is, Ethereum is experiencing its 2017 moment right now. And that's, you know, I think that is logical to the folks that know us. And I think that that's helping support what the Ethereum Treasurers are all trying to accomplish. Of course, I'm really supportive of like Sharplink and what they're trying to do and Andrew Keyes, because we're all doing the same thing. We're trying to stake Ethereum to make it a secure U.S. blockchain.
Tom Lee:
[26:36] Chain. I mean, we're all really working together towards the same goal.
Ryan Sean Adams:
[26:39] Tom, there's a lot of people listening who came to crypto later than 2017. I'm not one of them. I remember seeing you in 2017 on CNBC and you appeared to me the only guy in a suit who would go on traditional finance, Bloomberg, Squawk Box, all of these things and talk about Bitcoin and And talk about it in a way that resonated, I think, to those in crypto and those that saw the Bitcoin story. Can you bring, you've made reference to a 2017 moment for Ether. And maybe you could bring folks back to what you mean by that. 2017, you're comparing it to Bitcoin in 2017 and how it was perceived on Wall Street. Make that connection for us. What was 2017 Bitcoin like and how is this similar to Ether right now?
Tom Lee:
[27:31] Yes, I'd be happy to give the backstory. In 2017 at Fundstrat, Fundstrat is a macro and thematic firm. So we write about big story arcs. We began to do work that led us to Bitcoin, which was we did two different studies. One was we were studying millennials. And in 2017, millennials were in their, the oldest was mid-20s, okay? But we realized that they were going to be a huge driver of the U.S. economy. So that was eight years ago. Today, it's accepted that millennials were big. But our work that we did on millennials was actually so eye-catching that we ended up partnering with Snapchat to do several white papers talking about how millennials would be a cohort that you need to monetize. Snapchat was trying to convince advertisers then to do Gen Z and millennial-specific advertising. Believe it or not, like Pepsi and these guys thought it was just about Gen X. Okay. I know it sounds weird, but that was the story.
Tom Lee:
[28:40] And, but the second thing we discovered was that we noticed Bitcoin, like, because I was at Jay Morgan, it was like $100 when I left in 2014. And we talked about it in 2012. And then suddenly it was like $1,000. I was like, whoa, you know, it's $100 billion. Dollars i've never seen anything go to 100 million dollars that didn't have something behind it so we at funstrat we spent several months trying to understand bitcoin and i never fully understood it but i found that it was driven by two very two explainable things one is that it was 97 of that move of bitcoin from a hundred to a thousand was the number of wallets and the activity per wallet i mean basically network value effect and we could simply say
Tom Lee:
[29:27] In the next couple of years, if more people use Bitcoin, it's going to go up exponentially again. So we thought it would reach by 2022, $25,000, but it could even go to $100,000
Tom Lee:
[29:39] if it got to 5% to 10% of the value of gold. So we started to really push that story as Wall Street needs to understand Bitcoin because it's digital gold. And you're right, Ryan, like maybe other people said it, but we were really the first Wall Street firm to push it to the institutional universe. And remember, 0% of institutions had ownership of Bitcoin. It was 100% retail. And as you know, in the last eight years, Bitcoin has the biggest narrative is it's digital gold. That's a store value. Of course, it's a great payment system, everything else. But really what's resonated is that there's a group of people that own gold. And we did studies back then to show gold was primarily owned by baby boomers. So millennials would own Bitcoin the way boomers owned gold. So it was a generational story on top of a digital substitution story.
Tom Lee:
[30:35] That's the sort of the backstory and i did many webinars you know actually at funstrat believe it or not we lost we got fired from our institutional clients we actually had a decline in paying clients at funstrat because they thought we completely lost our mind they said how can you even recommend something that only drug dealers and dark web people to use use and you're saying it's a legitimate asset class. And so our reputation was actually harmed. But as you know, Bitcoin now is 120,000, so it was 120X. Our clients that invested in and followed us, because we recommended one to 2%, for some it became 100% of their portfolio. So they've gone full degen as a result. And I think that's happening with Ethereum today because Ethereum's been kind of a dormant chain. People wanted faster, networks uh you know or more novel ways to do essentially validation but ethereum's had zero downtime that is what matters to wall street zero downtime in 10 years so i think that wall street has already decided ethereum is the chain they're going to build wall street onto and it's lower than it was five years ago there's
David Hoffman:
[31:52] Been a lot of recent things uh that has happened in the last like six months. The Circle IPO was just absolutely gangbusters. Coinbase stock has performed very well. Robinhood has launched or announced the incoming launch of its layer two on Ethereum. And then this word tokenization is just taking off like wildfire. There's a lot of things happening that in the background are all supported by Ethereum. You know, Circle's USDC grew and was born on Ethereum. Coinbase, the largest crypto public company, is building an Ethereum layer too. Robinhood, a traditional finance company, is building a layer too. They're not even a crypto company. They're a normal TradFi company coming into crypto and legitimizing some of the technology being born here. Does Wall Street understand that Ethereum is the backbone for a lot of the movements that are happening? And is that why you think there are just incredible tailwinds behind these ETH treasury companies? Or is that like a narrative that I'm spinning up in my head?
Tom Lee:
[32:55] Well, David, everything you've described 100% logic fits. But Wall Street doesn't connect until they can start making money. I'll give you an example. Many of these listeners owned Apple for years or Amazon for years or NVIDIA for years. NVIDIA is a good example. That is an exponential growth stock. But as you know, there have been times when NVIDIA has done nothing for a year, like literally dead money or Palantir, dead money for years. And then suddenly has a step function where the market's like, oh, wait, not only do I get it, we have to reprice it. That's what's happening to Ethereum now because we know on-chain activity has surged to all-time highs, right? So Ethereum is, the community has been regalvanized because the price, of course, has recovered, but also more people are using Ethereum. And then it's very obvious that the Genius Act really benefits a smart contract blockchain. As much as it benefits Bitcoin, but Bitcoin won't host a stablecoin.
Tom Lee:
[34:05] So do I think that the fact that Ethereum is not at 15,000 today is a bad sign? I've seen this before. I mean, we've recommended Tesla and we've recommended NVIDIA and it's a granny shot since 2019. It funds Drek Capital's ETF and it's been part of the research portfolio for a long time. It has not tracked revenues. It has moved in step functions. And I think Ethereum... Look, I'd love to see it stay here for five years because that means we can acquire it at a much more attractive price. I mean, if it is at $17,000, that's much more expensive for the Ethereum treasuries to acquire Ethereum. Of course, their stock prices will benefit. But to me, it's actually great that it's actually here.
Ryan Sean Adams:
[34:54] So like 2017, Wall Street did not understand Bitcoin. You're saying 2025, Wall Street still doesn't understand Ether, the asset. maybe they're starting to get it. And it's hard for me not to see the fractal pattern, because at that time, I remember you back in 2017, and we're talking about Bitcoin price. It was something in the 2000s, 3000, something like this. And you would go on traditional finance, as you're doing with Ether now, but you go on Squawk Box or something and say something that they thought was audacious. You'd call 25K Bitcoin price, 40K Bitcoin price, those types of audacious numbers. I'm not surprised to hear you say, yeah, a lot of people at Wall Street thought we were crazy and they stopped giving us their money for a period of time. But that trade, that investment proved incredibly right. Now we see Ether at similar numbers, right? It's like Bitcoin was around the 3000s in 2017 when you first started telling Wall Street about it. Well, now Ether is at 3000, and you're calling for, I think, some pretty high prices. At least these are blowing mines in traditional finance for ETH. Do you think it could do a similar thing as Bitcoin did? Like, what's your kind of call for a price for Ether right now?
Tom Lee:
[36:09] I actually think that there's upside, a bigger upside story to Ethereum. Um, because there's more skepticism to start with. Bitcoin wasn't necessarily something people shorted. They just didn't believe it. Um, and so the upside case, you know, like when we wrote about a hundred thousand in 2017, it seemed insane, but it didn't take that long from 2017 to now to get there. You know, it was within our lifetimes that it was a hundred X and Ethereum. I think you're hitting it spot on is just like Bitcoin in 2017.
Tom Lee:
[36:47] Wall Street is not professionally convinced Ethereum is even a surviving chain because there was some fair criticisms and, you know, and it did move to proof of stake. And there might have been too much ETH out there for a bit of time, but it's being fixed. And there's still skepticism that Wall Street going on to ETH,
Tom Lee:
[37:07] they're even going to stake ETH or even use ETH. Everyone's kind of more there are probably more people who think that it's a layer two story that nothing benefits the layer one and i think that that's what's going to be shattered and when it does it'll be a step function so i think the upside case for eth is actually higher than let's say bitcoin did 100x you know could ethereum do 100x i mean joe lubin sort of has that kind of upside in his mind uh you know because joe and i are in dialogue i mean it you know we are really partners in trying to push eth as a treasury as a digital infrastructure and um i think that that could happen because there is probably a non a significant probability that ethereum could flip bitcoin as well in terms of network value and then so then if you're you know someone thinks bitcoins at a million, then imagine what it means for Ethereum, because it is not just Wall Street financializing onto blockchain, but it's AI, but it's also part of the U.S.,
Tom Lee:
[38:13] Focus on ai dominance right ethereum plays a strategic role there now if if micro strategy had tripled the upside of bitcoin then that means in theory the ethereum treasuries could triple whatever ethereum could do so you know like i don't think you're going to go wrong saying that the ethereum treasuries are a good investment class but if you're looking at what bitmine's doing. It's those other things I was saying, distinguish it. And that's why, you know, maybe we will be at the front end of that. But they should all do well because Ethereum itself is undervalued.
Ryan Sean Adams:
[38:49] I think maybe you're blowing some minds with some of these calls, even in crypto terms. So 100x of Ethereum at this point in time, would that be about 40 trillion? And you also said that there's the possibility here that Ether actually flippens Bitcoin, which is not canon, I would say, among crypto natives. So there are a lot of ETH supporters and ETH bulls who have believed this for a very long period of time. But in the more immediate term, I don't know how distant that 100x future is. Where do you see Ether price going, say, the end of this year, or maybe even the end of this cycle, if you still think in terms of cycles, if you think this will play out in the next 12 to 18 months.
Tom Lee:
[39:26] Let's say?
Ryan Sean Adams:
[39:26] Where do you think we go?
Tom Lee:
[39:28] Sure. Well, I think the near-term price people should think about is Ethereum getting to 4,000. Because ethereum should be is a better story than it was in december and it was 4 000 in december so like to me we should at least reach cover to that level and then ethereum is a better story today than it was a year ago and a year ago ethereum was at 0.05 ratio to bitcoin
Tom Lee:
[39:58] To me, it's a stronger story and there's reasons people are using Ethereum. So it's like a narrative. Well, at 0.05 Bitcoin, it's like almost 6,000. So just like saying, give it credit for where it is a year ago versus a year ago, it should be 6,000. But of course, there is going to be a lot happening between now and year end, including other Ethereum treasuries starting to buy Ethereum plus Bitcoin goes up. So I think by the year end, it's not unreasonable to think 7,000, even 12 or 15,000 could happen. And of course, from there, then in 2026, the Fed starts to follow through on what it should be, a dovish pivot. So central bank liquidity is rising. And so Ethereum should build upon those price levels. I don't know if there's a crypto cycle. there should be, it would play in our favor because again, we'd rather Ethereum. I'd personally think that an Ethereum treasury company wants Ethereum to be flat for the next five years and then go up a lot. But it's probably not. It's probably just going to have a step function. But again, just to give you an idea, like when I first wrote about the S&P in 2009, S&P earnings were $65 in 2007.
Tom Lee:
[41:25] And I built a model at J.B. Morgan that says we would get to $60 by 2010. Okay. So remember the stock market fell almost 80%. I don't remember. We had a huge decline. And every strategist didn't have a recovery to all-time high in earnings for five years. And so the buy side was very skeptical of the idea of $60 by 2010, but that would imply the S&P was at 10 times earnings at the bottom in 2009.
Tom Lee:
[41:58] And lo and behold, S&P earnings was over 60 by 2010. And today S&P earnings are 300. So S&P earnings have grown exponentially. That's just the traditional corporate world so the idea that crypto's network value could be 20 trillion for bitcoin it's we witnessed it in our lifetimes with equities so and also like crypto treasuries um are asset based valued on their balance sheet you know micro strategies valued really on its balance sheet not on its earnings power keep in mind from 1990 to 2018 Okay, so one full generation of someone's career Exxon Mobil was the top five largest company in the S&P 500 for that entire period, 1990 to 2018. There was internet and all that, but Exxon was top five. It was never valued on earnings. It was always priced to proven reserves. So crypto treasuries are just the new Exxon.
David Hoffman:
[43:01] Tom, you talk about models and trying to put some numbers behind reasoning about the valuation of crypto. I think it's one of our favorite pastimes here at Bankless to try and do this. And at some point we also understand that you know to some degree these these things are inherently unmodelable uh you know like coinbase robin hood circle they're all building on ethereum layer twos are building on ethereum tokenization is on ethereum these narratives i think carry a lot of weight when it comes to the value of east the current price of east but when you actually try and like unpack the price of east how do you actually do that do you think of this in terms of the demand for Ethereum with its transaction fees? Do you think about the demand for Ether as a store of value inside of DeFi apps or for people that want to stake it? How do you unpack the value, the price of ETH?
Tom Lee:
[43:52] Yeah, that's a good question. I would probably positive this with David. Have you seen anyone's spreadsheet model explain Bitcoin's price correctly?
David Hoffman:
[44:04] I think it's a fun activity to try.
Tom Lee:
[44:07] But I mean, in practical manner. Has it ever been done?
David Hoffman:
[44:10] I don't think it's ever been done. Three months ahead or
Tom Lee:
[44:11] One year ahead. No one's model has ever served to explain everything. So I would say people who are trying to model ETH based on a spreadsheet are the same people that try to come up with an S&P price target based on their bottoms of earnings model or their ISM and that's why no one gets the S&P call correct. Because to me, there's a phrase I learned when I first started on Wall Street, which is it takes a whole lot of PE to offset E People spend too much time modeling the E. That's the spreadsheet thing you're talking about. But it's actually always about PE. Ethereum's price is not going to be based on the contemporaneous transactions recorded in any single week. It's really the recognition of where that number is five years from now. So I would say I don't think people should be building models and saying they can articulate and anchor a view on the price of anything. And actually, I would say that about a stock because you know what? People would have been stopped out of Palantir and Tesla a long time ago. And yet, Fundstrat's been on the right side of that trade because we don't get grounded by that. It takes a whole lot of PE to offset E.
Ryan Sean Adams:
[45:30] So how then do you estimate the size of this market, right? Do you comp it? So of course, you helped pioneer the 2017 Bitcoin is digital gold. There in the comp is what, you know, gold, which is 20 trillion or so in value. Do you comp Ether to something like gold or to a commodity, even like an oil,
Ryan Sean Adams:
[45:51] you know, calling Ether a digital oil? Is that the way you sort of talk about the ceiling value for this asset?
Tom Lee:
[45:57] I think that that's part of it. I've seen some work done. I actually think ETH's digital oil did a pretty nice job on their report. I'm sure you guys have seen it. I know that the Mosaics team has helped with doing two models for Ethereum. One is basically a banking system proxy model, and then another is payment proxy. But, you know, at the end of the day, if there's anything I've learned in the equity world, You can't be grounded by a rigid framework. And that is the mistake people make. And I think people have tried to pin me on the S&P like, Tom, you realize, remember when the S&P fell in April and we're at the tariff lows, I had everyone say, Tom, earnings are gonna get cut. So your S&P is gonna get massacred. And by the way, you notice every strategy has cut numbers for the year except us. and then they said it won't recover because the Fed's not going to save you so there's no Fed liquidity put and I said it didn't matter because it's a waterfall decline and guess what? It didn't matter. We had a V-shaped recovery. That was not something that anyone built a spreadsheet for but it really is an understanding of how markets work and their resilience and so I would just say for the listener I'm not against trying to build frameworks but to me ETH at $3,600 dollars
Tom Lee:
[47:24] It's kind of ridiculously undervalued. So maybe that's the most important takeaway in not trying to give someone a spreadsheet to build for five years and try to understand it. I know it sounds like I'm not giving an answer, but I think that's actually the best answer to give.
Ryan Sean Adams:
[47:38] Tom, do you think at some point these crypto treasury companies, Bitcoin, ETH, other asset treasury companies get a little overheated? And maybe this is the crypto PTSD talking, but many of us live through the GBDC kind of like trade and the 3-0s capital blow up and how that infected the rest of markets. And looking at these treasury companies and all these new entrants going on in this premium to MNAV, and some are even comparing it to kind of investment trust companies of the 1920s. And of course, we know how the 1920s stock market era ended. Do you think that there's a chance that this gets into bubble territory, that this gets overwrought, that the premiums become reflexive up, and then suddenly, in an elevator down, kind of lose all of this value and cause more systemic effects in crypto into the broader economy? Are you worried about this?
Tom Lee:
[48:36] Well, it's a lot to process there. One, going into the liquid equity world, this is the most hated V-shaped rally. We still, most of our Zooms with our institutional clients is people telling us why the stock market shouldn't be going up and why it's expensive. And every time we get off, it strengthens the case for stocks to go higher because it's a non-consensus view that we should be going up. You need skepticism for markets to go up. If everybody was bullish in the liquid world, that's the top. Just because digital asset treasuries have gone up and you don't own it doesn't mean it's a bubble. A bubble is just your friend making money. A bubble is truly created when everyone is bullish. So if you're bullish, not you, but I'm saying the listener is bullish and then they don't go up and everyone's bullish, then that's a bubble. Now, the only way these crypto treasuries get into trouble is if they use leverage.
Tom Lee:
[49:44] So I would say anyone who's doing exotic instruments, debt structures, unless they're scarce, MicroStrategy can do a lot of things because they've changed the world. And same thing with MetaPlanet. They've changed the world. But the ones that haven't, maybe they're the ones that get into problems.
Tom Lee:
[50:05] But from what I can see, most crypto treasuries are pretty plain vanilla. So what happens? They just go down in price. I don't think that that actually could cause a stock market crash. A stock market crash is usually a debt problem, you know what I mean? Or an exogenous shock. I'd say we're a long way from a bubble. I mean, if things were, if the cost of capital was low, you know, all these Bitcoin treasuries, some of them are trading it now. So it's hardly a bubble. In fact, the market's betting that it's oversupplied already. So they only go up if Bitcoin goes out. But you're right. At some point, something is a bubble. But I think that people always declare a bubble and everyone always rings the bell.
Tom Lee:
[50:47] Fourth inning to the ninth inning, everyone's ringing the bell at the top. You realize you don't really have a top until no one's bearish. And right now, everyone's bearish. Everyone's bearish on ETH. Everyone's bearish on Bitcoin because of last week. And everyone's bearish on stocks because of last week. I mean, if we were at a top last week's five consecutive bearish engulfing days, everyone should have said, oh, nothing. But you know, everybody says this is the top. When you have conviction that paper thin, you're nowhere near a top. Just keep that in mind.
Ryan Sean Adams:
[51:22] So what's your conviction with respect to macro here, Tom? Because that's the other thing that could throw these crypto markets off is if there's some sort of macro event, you know, tariff, you know, recession. I think last year we actually had you on, it was around August as well. We had this yen kind of carry trade that sort of evaporated into nothing. I think you were bullish then. You said this would all go away. And so it has. What's your outlook right now when it comes to macro? Anything in the waters that concerns you? Or do you think we're in a good place?
Tom Lee:
[51:51] Yeah, I am. I'm very worried about how institutions are becoming politicized. I mean, the Fed is independent, should be. And the BLS is independent and should be. They make a lot of the bls revisions are very peculiar but i don't think it's the bls being political look the economy to me is very strong but when i speak to clients the institutional universe they think we're in a recession now people on this podcast you're gonna hear they'll be like tom you're so off base if everyone thinks we're in a recession you're the one that's wrong because we can't say this economy's strong, but reality is I don't think in my 30 years anyone's ever called a recession correctly. When everyone says we're in a recession, guess what? It's not a recession. Because a recession is a sudden change in business conditions that catches everyone off sides. That's how you get a recession. You get a housing bubble and it bursts. You can't get a burst when everyone's cautious. ISM's been below 50 for 29 months. Corporate America is cautious. I'm just going to say that would literally be the first recession in the history of the ISM where you didn't break above 50, and then you had a recession.
Tom Lee:
[53:07] So I think this is going to sound very strange. Everything I look at empirically were mid-cycle or even early cycle in the economy. And the tariff was the recession. Interesting. Tariff was such a shock. It reset confidence in the business sector. And that's how you prevent a recession. You get everyone so scared they don't spend money. So that's why, look, look at the data. Look at the corporate earnings. S&P, they've been great. No one's like seeing demand collapse. It's because everyone's cautious.
David Hoffman:
[53:40] Tom, I'm just guessing that you've been inundated with just phone calls from people on Wall Street. Every billionaire on Wall Street is calling Tom Lee to ask about Ethereum and just to learn more about it. What is the biggest misunderstanding that Wall Street still has today about either crypto broadly or Ethereum specifically?
Tom Lee:
[54:01] That's a great question. I'm glad you're asking, David, because Wall Street likes to build spreadsheets. And so every call starts with, Tom, can you give me the model on how gas fees are going to change with stable coins? So give me your assumption on how much stable coin volume is, how much goes to ETH, how much will be layer two and how much gets paid. And I... And I'd say that's the reason people, when you give someone a spreadsheet, then you get an analysis paralysis because then suddenly you don't see the bigger picture that ETH is literally the legally compliant blockchain. And I think it's a big stumbling block for people. But it's the same with the S&P. Like imagine you ask someone, all right, you're a Harvard MBA and you use chat to EPT and you're a genius all at once. Analyze the stock market. And then the mod's going to be like, well, S&P, median PE long-term is 16 times and earnings margins are at all-time high. So margins should go down. S&P should be 3,000. I mean, literally, I'm sure every one of your guests tell you that. And I'd say maybe you should try to align whether their view has worked in the last 50 years. And you'd realize like that analysis literally never made you money.
David Hoffman:
[55:20] Okay, my analysis on the people coming to you with a spreadsheet is that they're doing their basic CYA work. They're covering their own ass. They need to justify to their boss and to their boss's boss why they're about to buy a ton of ETH or buy a ton of, you know, BMNR. And so they need to do the spreadsheet just to check that box. How can we all provide them a different CYA checkbox that does that job?
Tom Lee:
[55:49] Yeah, I mean, that's a fair question. All right. So one thing is, you know, fund stress evidence-based research, but we're not anchored by, ISM to us is not rule of law. The jobless claim number is not rule of law. Fed funds is not rule of law where the tenure is because they don't, they're not, these are not never in equilibrium. And just as proof of evidence, Fundstrat launched an ETF last year called Granny Shots. It's only been eight months, but year-to-date, Granny Shots is up 17%. It only buys S&P constituents. S&P is up 7%, so we outperformed the S&P by 1,000 basis points. Morningstar ranks us as the top 30 out of 1,400 funds. So we're literally top two percentile of large-cap equity funds year-to-date. Because we use an evidence-based approach, but it's not anchored by like, this is what earnings should be. But our stock selection is very disciplined. If someone asked me what an Ethereum treasury companies were, okay, and I'm not going to talk about BitMind specifically, you should start with your Ethereum held per share, okay, and then do the four things I just added.
Tom Lee:
[57:07] Velocity okay liquidity and scarcity you know how unique is what they're doing like the largest one should get a premium obviously right because there's a network effect then you should just say what is ethereum what's your upside downside if someone is doing precision of eth to the penny or even a hundred you know their analysis won't ever work because ethereum's never in equilibrium but you should say if ethereum's 3700 what's your downside case you know should it be the low of this year okay 1700 but what's your upside case a ratio of bitcoin from five years ago so that gets you to like 20 000 eth so now you have asymmetry on your risk reward and you know the eth per share so you do future eth per share plus velocity and liquidity and scarcity, then that's how you should get to your price. And that's not using a spreadsheet. That's really using what would happen in real life. In real life, if ETH is at 20,000, what is it these companies worth? But if it goes to 1,700, it gets cut in half. And the one, let's say ETH gets cut in half, but this company doubles your ETH per share. In the same period of time, the stock will be flat. So the one with the velocity is the best bet because they're going to stack your E.
David Hoffman:
[58:32] Tom, I believe you're rocking a pudgy penguin, an unofficial pudgy penguin profile picture on Twitter. It's official, actually. Oh, that's a real one?
Tom Lee:
[58:41] Yeah. Luca and his crew made this for us, yes. Oh, great.
David Hoffman:
[58:46] Do you own any other Ethereum NFTs or just what do you think about NFTs, generally speaking?
Tom Lee:
[58:51] Well, I have a lot of pudgy penguin merch. last week it's cool stuff yeah but it's it's it's really hard to keep my office because everybody here wants it wants a piece of it
David Hoffman:
[59:03] If so pudgy pudgy penguins are your favorite ethereum nft
Tom Lee:
[59:08] Well i you know what i what really strikes me about pudgy penguins is really unique is it's actually quite popular in kuria and kuria is also a big equity culture you know it's one of the most heavily traded stock markets in the world. And, you know, I spend a lot of time in Korea. And of course, it's a big crypto culture. So to me, Pudgy Penguins, I think it's extra validation because it's so popular at Korea.
Ryan Sean Adams:
[59:36] Tom Lee, this has been exceptional. Thank you so much for joining us. I got to say, I did not anticipate you being so fully into the Ethereum fold, but very glad to have you and excited to have you aboard as you're kind of evangelizing and really sharing what you can do for the world, particularly to Wall Street. So excited to see Bitmine continue to acquire more ETH into the future, up towards 5%. So let's go.
Tom Lee:
[1:00:02] Yeah. Look forward to it.
Ryan Sean Adams:
[1:00:04] Got to let you know, Bankless Nation, of course, none of this has been financial advice. Crypto is risky. You could lose what you put in. But we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless Journey. Thanks a lot.
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