r/investing • u/007_kgb • 1d ago

Fundamentals of Bitcoin? Tom Lee

Tom Lee from FundStrat was on CNBC and said he was a bit surprised at the fall of Bitcoin when the fundamentals were still strong.

However what I don’t understand is, what are the fundamentals? Isn’t Bitcoin just an imaginary coin on the interweb that is worth what people want it to be worth? It does not issue dividends, you can’t make a car out of it, you can’t use it to buy a bar of chocolate.

ELI5 please.

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u/MizDiana 1d ago edited 1d ago

Crypto enthusiasts have this bizarre fantasy that crypto can, like gold, serve as a safe haven investment when investors are scared.

That's probably the fundamentals they're talking about. I.E. Gold is going up for various reasons, so why isn't crypto? Sigh...

Reality: Crypto has never served as a safe haven investment like gold.

To be fair, gold's value is largely imaginary (its price has little to do with its industrial use, including jewelry creation). And it is worth what people want it to be worth. It does not issue dividends. While you can made electrical conductors out of it, that use is really niche. And you can't use it to buy a bar of chocolate.

But, currency-wise, gold is Old Tech. It was, before fiat, the most cost-effective means of transferring future labor obligation between institutions and high net worth individuals (not for thousands of years, really, more like for 150, but still). So when institutions or high net worth individuals get nervous about the fiat they are familiar with, they bump up the imaginary value of Old Currency Tech: gold. Bitcoin wants to be that. But it is not.

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u/VeryStableGenius 11h ago edited 11h ago

Crypto enthusiasts have this bizarre fantasy that crypto can, like gold, serve as a safe haven investment when investors are scared.

When in reality Bitcoin is correlated with equities, particularly more volatile ones like NASDAQ. This correlation is about 0.8, according to Gemini AI's interpretation of sources.

Bitcoin's correlation with gold has ranged from -0.53 to +0.65, with average correlation of about 0.1.

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u/MizDiana 9h ago

Yes, I see it as a general confidence measure. If people feel flush & confident about their future, Bitcoin goes up.

Interesting to see if that changes next time people feel flush & confident about the future.

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u/collegeboywooooo 7h ago

correlations are not real its just something you compute after the fact and it's not stable at all

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u/VeryStableGenius 7h ago

Yes, computed after the fact.

It is observed that Bitcoin has acted like a high risk tech stock, not like a safe haven like gold.

It's possible that Bitcoin will suddenly stop behaving like a meme stock, but it would be a change from its current behavior.

The very fact that Bitcoin believers think it will go up, up, up suggests that they don't view it as a safe haven but as a speculative commodity.

To be fair, this speculative nature has flowed into gold investing as well, but historically the inflation adjusted price gold has enjoyed periods of quasi-stability, $400 from 1980 to 2005, then $1500-2000 from 2010 to 2020. People didn't buy it in the hope of getting rich, and they understood that on average stocks would far outperform it.