Tom Lee's speech: ETH will be the beneficiary of Wall Street's construction of the digital asset market

Compiled by Golden Finance, TOKEN 2049's Singapore leg officially launched today. On the OKX Main Stage, BitMine Chairman and Fundstrat CIO Tom Lee delivered a speech titled "Wall Street's Biggest Macro Shift Since the Gold Standard." Lee noted that 2025 marks a critical macro shift for Wall Street since the dollar's decoupling from gold in 1971. He believes that if Bitcoin's network value aligns with that of gold (currently only about 10% of that of gold), its unit price has significant potential. If the Ethereum-to-Bitcoin price ratio recovers to its 2021 high of 0.087, and Bitcoin's year-end price is $250,000, the price per ether could reach $22,000. In the long term, its price is expected to rise to $62,000. Furthermore, Tom Lee mentioned that stablecoins, as "tokenized dollars," can strengthen the dollar's dominance. Currently, the stablecoin market holds $280 billion in Treasury bonds and could become the world's largest holder of Treasury bonds in the future, with a market size expected to reach $4 trillion.

The following is the full text of the speech.

Tom Lee:

Wow, it's great to have TOKEN 2049 in Singapore. I have 20 or 19 minutes to show a lot of slides, and I hope to have a few minutes left for Q&A. My topic is the greater transformation of Wall Street since the gold standard.

First, let me lay out the basics. We've been covering cryptocurrencies for about nine years, back when Bitcoin was $963. As you can see, Bitcoin has been an OG asset class, with returns exceeding 100x. Since then, it's doubled Nvidia's, while also significantly outperforming gold. Over the same nine-year period, gold has only increased roughly threefold. Incidentally, Ethereum has even outperformed Bitcoin, reaching a 500x P/E ratio during that time. So let me explain why I believe 2025 will be a dramatic macroeconomic shift. Speaking of the gold standard, we need to go back to 1971. In 1971, the US dollar went off the gold standard, with President Nixon declaring the end of the dollar's peg to gold. This is worth considering for a moment. In 1971, the dollar no longer had any real value other than its value itself or as a promise to pay. When we think about this, most people refer to the gold market in 1971. While gold trading was brisk back then, it wasn't the real big opportunity. In 1971, the financial system suddenly had to find a way to ensure the dollar's dominance, because if the dollar were to break its gold peg and lose its gold-backed convertibility, another currency could become dominant. So what Wall Street did was create a massive market for dollar-denominated money market funds, futures, debit cards, mortgage-backed securities, currency swaps, interest rate swaps, index futures, zero-coupon bonds, collateralized debt obligations, and more. That's the innovation that followed 1971. In fact, today, seven of the 30 largest companies in the world are financial institutions. Well, there's another thing happening now: Wall Street and artificial intelligence are building on blockchain. In the United States, the GENIUS Act laid the foundation, creating conditions for the flourishing of stablecoins. Subsequently, the Securities and Exchange Commission (SEC) launched Project Crypto, bringing Wall Street into the blockchain space. Of course, two other pieces of legislation are also progressing in Washington: the CLARITY Act and the Strategic Bitcoin Reserve Act. This means that in 2025, we are entering a new era where more and more things are becoming synthetic. Therefore, in our view, Bitcoin undoubtedly still holds a pioneering and important position, as it has now become a digital store of value. However, it is necessary to consider the situation from another perspective. What will Wall Street do? In our view, Wall Street will play a crucial role in shaping the digital asset market. Ethereum is poised to be the biggest beneficiary. So let's delve deeper into what this means for the external impact of Bitcoin. Assuming the current price of gold is $4,000 per ounce and could potentially rise to $5,000 per ounce, it's worth considering Bitcoin's relative value to gold. The so-called golden ratio, or the ratio of the value of Bitcoin to gold, is a crucial question. If it's only 10%, then each Bitcoin would be worth $140,000. I think that's too low. I believe it will essentially equal or even exceed the value of gold. This is why Bitcoin's value could reach between $1.4 million and $2.2 million. So, we're still bullish on Bitcoin right now, with a price around $110,000. But let's think about another storyline that's going to develop, and that's Wall Street. Over the next 10 to 15 years, Wall Street is going to innovate on blockchain. And part of that storyline we're already seeing is the stablecoins we're talking about, the tokenized dollar. There are some parallels to the historical events of 1971. But we're talking about tokenized stocks, tokenized credit, real estate credit, and eventually even intellectual property, which are all elements of measurement in today's economy. I think there will be intangible measures being tokenized on the blockchain, like data collection, royalty payments, loyalty programs, smart contract agents, and even important things like human identity. So there's a lot going on in the cryptocurrency space. And we already know that Ethereum experienced a transformative moment similar to ChatGPT's thanks to stablecoins. There are many different companies and institutional entities building stablecoin projects. You might wonder why the US government cares about stablecoins. It's the same reason the US prioritizes a synthetic dollar. The US dollar currently accounts for 27% of GDP, but it holds a staggering 57% of central bank foreign exchange reserves. This 57% share demonstrates that Wall Street's efforts since 1971 to establish the dollar as the standard for transactions have been effective. It accounts for 88% of financial market transactions, get it? But fundamentally, it's almost 100% a stable unit of account. Therefore, a shift to blockchain-based synthetic dollar tokens could further solidify the dollar's dominance. In terms of overall size, stablecoins are now the 12th largest holder of US Treasury bonds globally. Incidentally, stablecoins currently hold $280 billion in Treasury bonds, and Treasury Secretary Bessant believes this market could grow to $4 trillion. Once stablecoins exceed $1 trillion, they will become the world's largest single holder of U.S. Treasury bonds. This goal is not unattainable. It's also worth noting that when companies build their businesses on blockchain, what actually happens is that they are essentially redesigning their business architecture, which allows them to achieve significant operational efficiencies. I believe this is due to a number of factors. Incidentally, many people are probably curious about the role and place of artificial intelligence in the concept of building blockchain-based businesses. a16z has published an excellent white paper exploring this topic. There are about 11 use cases for blockchain-based AI. I'll highlight just a few, like the third one, forward-compatible proof of personhood. This is something like WorldCoin. The sixth one is keeping AI in sync through coded applications. I think one example of this is the device I wear, called the U Critter. It measures the CO2 level in your location. The ideal value is 420, but it's currently 980. We're often asked, what's the benefit for Wall Street building on the blockchain? They'll say banks are doing well. But I don't understand how JPMorgan Chase can become more profitable? In fact, companies built natively on the blockchain are inherently more profitable. For example, Tether is raising funds at a $500 billion valuation. Take a look at the list of the 12 largest banks in the world. Tether is second. Consider this: Tether is 50% larger than Bank of America, a behemoth. It's twice the size of Citigroup, twice the size of Morgan Stanley, and even larger than Goldman Sachs. But interestingly, if you look at Tether's employee count, JPMorgan Chase, with a market capitalization of $869 billion, has 317,000 employees, which translates to a market capitalization of $2.8 million per employee. Tether has only 150 employees. This is even smaller than the size of JPMorgan's junior analyst team and roughly the same size as the team of newly hired analysts (assuming they joined in June). This means that the average market capitalization per Tether employee is a whopping $3.3 billion. We must recognize this fact: Tether, a native blockchain company operating on a public blockchain, has a market capitalization nearly comparable to JPMorgan Chase, yet employs only 150 people. Therefore, it seems clear to me that building companies and rebuilding Wall Street on the blockchain is highly profitable. Okay, now I want to expand on why this is beneficial for Ethereum and even how to consider digital asset reserves. As mentioned earlier, a pivotal moment, similar to the one in 1971, is approaching, and it's of great significance. Why is this so? The reason is that many Wall Street companies have a need to build their businesses in the blockchain space and tend to choose neutral public chains as their underlying infrastructure. As you can see, many companies are choosing Ethereum for these operations. In fact, if you look at metrics like value locked on public chains, Ethereum is the preferred chain. It holds 68% of all total locked value. Of course, TDL has been a bottom support for Ethereum over the past few cycles. Even companies like the Society for Worldwide Interbank Financial Telecommunication (SWIFT) announced just a few days ago that they would be using Ethereum's Layer 2 network for an on-chain migration experiment. So, companies like SWIFT have indicated their preference for public chains over enterprise chains. Within the AI ​​space, there's been a lot of discussion around Ethereum, which is seen as an ideal platform for building products with chaotic properties. Here's Ethereum's price history. Since 2018, it reached a high in 2021, and then, over the past four years, we can clearly observe a very significant and extensive period of consolidation. Currently, Ethereum's price is beginning to break out of this consolidation range. It's important to pay attention to previous periods of consolidation. Ethereum was in a consolidation phase from 2018 to 2020, after which its token price surged from $90 to $4,000, an increase of more than 50-fold. The low point of this surge was $1,385. So what's next for Ethereum? I have some thoughts to share. But looking again at this price chart, it doesn't present a bearish signal. Another chart worth considering is the ratio of Ethereum's price to Bitcoin's. It's currently at 0.036, with an average of 0.047 and a high of 0.087 in 2021. I think these numbers are important because, in my opinion, Ethereum is at a critical juncture in 2025, just as it was in 1971. I believe its price ratio should at least recover to its previous high of 0.087. So what does this mean? Well, if you look at the price of Bitcoin, we believe it will reach at least $250,000 by the end of this year. Therefore, its price ratio would reach its average value of 0.0479. If it reaches its 2021 high, each Ethereum would be worth $12,000, which I believe is reasonable given the changes in Ethereum's fundamentals. In this scenario, each Ethereum would be worth $22,000. However, given Ethereum's potential, I don't believe this is a price ceiling. Another key milestone is when Ethereum becomes a future payment rail, at which point its network value would be on par with Bitcoin. This would put the value of each Ethereum at $62,000. As you can see, based on Ethereum's current value of $4,100, all three of these value scenarios suggest significant growth potential. So, let me finally discuss my final point: if you're interested in Ethereum, why would you consider holding an interest in a digital asset reserve (DAT) company? We currently publish a monthly "Chairman's Letter" on our website. However, given time constraints, I'd like to briefly outline the key points so that we can cover them in a few minutes and leave time for a Q&A session. A digital asset reserve company aims to increase the amount of Ethereum held per share. The logic behind this strategy is that it can issue shares at a premium. Do you understand the principle? A particularly valuable case study in this area is Microstrategy. The company's stock price climbed from $13 to $335 per share during a specific period of its development, demonstrating the impact and potential of this strategy in the market. Microstrategy achieved this by issuing shares to purchase more Bitcoin. In the five years since Microstrategy launched this strategy, the price of Bitcoin has increased tenfold, from $11,000 to $108,000. This demonstrates that Microstrategy, through its asset reserve strategy, has surpassed Bitcoin in terms of return on investment. BitMine is now emulating this model. It's worth noting that Canaan Inc., the world's second-largest Bitcoin mining rig manufacturer, raised capital more quickly than Microstrategy. There are also numerous DAT stocks in the market. Among these stocks, BitMine is one of the most liquid. In today's US stock market, BitMine ranks 26th, with a daily trading volume of $2.6 billion. Notably, BitMine's daily trading volume exceeds that of Visa and Oppenheimer, and is nearly on par with Marvell Technologies or Inco. This is a significant advantage, as when looking at the 200 DAT stocks, BitMine and Microstrategy account for 84% of all trading volume. Therefore, from the perspective of the companies holding shares, institutional capital flows are concentrated in these two companies. This means BitMine requires substantial capital to rapidly expand its Ethereum reserves. We can observe that in the approximately nine weeks since the company began engaging in Ethereum-related reserve operations, the amount of Ethereum held per share has increased ninefold. This rate of growth indicates that the company's Ethereum reserve growth has far exceeded the typical growth of Ethereum itself. Therefore, from an investment perspective, if investors are optimistic about the Ethereum market outlook and are interested in investment opportunities related to the Ethereum reserve, BitMine's stock could potentially generate additional daily Ethereum returns. Of course, this is only one aspect of this investment opportunity; its potential value is far more extensive. Companies involved in the Ethereum reserve demonstrate confidence in crypto infrastructure. Technically, Ethereum utilizes a Proof-of-Stake (PoS) mechanism. By staking Ethereum, companies provide security for the Ethereum network while earning corresponding returns. From a long-term perspective, given the core need for network security, we believe that anyone involved in cryptocurrency will ultimately choose Ethereum as a key collateral asset due to similar security considerations. That's BitMine's strategy: we'll actively engage with the community, ensure the success of the Ethereum Foundation and Ethereum developers in decentralized finance, and make bold investments that span Wall Street and the cryptocurrency space. That's pretty much it. We have two minutes left for questions. But before I close, I think the future of cryptocurrency is bright. We believe Ethereum will be the home for many of these projects. So, I'd like to open the Q&A session. Question 1: Will only one chain survive in the future? Tom Lee: I don't think so. On Wall Street today, there are dozens of different infrastructures and platforms. Even in areas like exchanges, there are many large exchanges around the world, from the Chicago Mercantile Exchange (CME) to Nasdaq to the New York Stock Exchange (NYSE). So I think the market is big enough. When we think about this, we're talking about $80 trillion in global GDP. Half of all economic activity is financial transactions, which equates to an $80 trillion addressable market annually. A lot of that GDP is generated by intellectual property royalties flowing on-chain, which is about $20 trillion. So, if all of this $100 trillion in economic activity were happening on Ethereum, the theoretical value of Ethereum would be $100 billion. So, there's a lot of room for Layer 1 blockchains focused on specific niches. So, I think there's room for chains like Solana and others to thrive. And I think one thing we have to remember is that we don't want to be too narrow-minded and compartmentalize the current space. I think this is a huge step forward. Question 2: What's your strategy for facing a very bearish market? Because, you know, for crypto, if the global macro market goes down, we go down too. Tom Lee: Okay, that's a good question. The question is, essentially, how can a DAT survive a bear market? I believe a DAT needs to do two things to navigate this situation. First, and foremost, it must maintain a clean balance sheet. BitMine has no debt because, during a downturn, investors who hold shares don't want other assets on the company's balance sheet competing with their equity. After all, debt holders compete with shareholders for equity, and convertible bondholders do the same. This is why companies with complex capital structures can experience share price compression during a recession. Second, the company needs to hold assets in the form of Ethereum per share, assuming a bear market hits in 12 months. Okay, BitMine adds Ethereum every day, so in 12 months, the value of each Ethereum share might go from $40 to $80. Based on the above, even if the crypto market experiences a downturn in the future, the company's stock price could drop by 50%, but it would still be higher than today's level. Therefore, if DAT companies can continuously increase the amount of Ethereum held per share, they will be more resilient to market downturns.

I think I'll wrap up. So, thank you everyone. I hope you learned something.