Tom Lee claims "ETH's fair value is $60,000," Andre Kang retorts "Sounds like an idiot"

Original Title: Tom Lee's ETH Thesis is Retarded

Original Author: Andrew Kang, Partner at Mechanism Capital
Translated by: Azuma, Odaily

Editor's Note: Since Tom Lee became the chairman of BitMine's board and pushed for continuous DAT purchases of ETH, Tom Lee has become the industry's number one ETH bull. In various recent public appearances, Tom Lee has repeatedly emphasized ETH's growth expectations with various arguments, even boldly claiming that ETH's fair value should be $60,000.

However, not everyone agrees with Tom Lee's logic. Last night, Andrew Kang, partner at Mechanism Capital, published a lengthy article publicly refuting Tom Lee's views and bluntly mocking him as "retarded."

As a supplement, Andrew Kang predicted in April during the overall market correction that ETH would fall below $1,000, and later expressed bearish views during ETH's subsequent rise... Position determines mindset, so his stance may be at the opposite extreme from Tom Lee's. It is recommended that everyone view this dialectically.

The following is the original content by Andrew Kang, translated by Odaily.

Among the financial analyst articles I have read recently, Tom Lee's ETH thesis is "one of the dumbest." Let's analyze his points one by one. Tom Lee's theory is mainly based on the following key points.

· Stablecoin and RWA (Real World Asset) adoption;

· "Digital oil" analogy;

· Institutions will buy and stake ETH, both to provide security for the networks where their asset tokenization occurs and as operating capital;

· ETH will be equivalent to the total value of all financial infrastructure companies;

· Technical analysis;

1. Stablecoin and RWA Adoption

Tom Lee's argument is that increased stablecoin and asset tokenization activity will drive up trading volume, thereby increasing ETH's fee income. On the surface, this seems reasonable, but a few minutes of data checking will reveal that this is not the case.

Since 2020, the value of tokenized assets and stablecoin trading volume have increased by 100-1000 times. However, Tom Lee's argument fundamentally misunderstands Ethereum's value accrual mechanism—he makes people think that network fees will rise proportionally, but in reality, Ethereum's fee income remains at 2020 levels.

The reasons for this result are as follows:

· The Ethereum network improves transaction efficiency through upgrades;

· Stablecoin and asset tokenization activities are flowing to other public chains;

· Tokenizing low-liquidity assets generates negligible fees—the value of tokenization is not directly proportional to ETH income. People may tokenize $100 million in bonds, but if they only trade once every two years, how much fee does this bring to ETH? Maybe only $0.1, which is far less than the fee from a single USDT transaction.

You can tokenize assets worth trillions of dollars, but if these assets are not traded frequently, they may only add $100,000 in value to ETH.

Will blockchain transaction volume and fees grow? Yes.

However, most of the fees will be captured by other blockchains with stronger business development teams. As traditional financial transactions move to the blockchain, other projects have already seen this opportunity and are actively capturing the market. Solana, Arbitrum, and Tempo have all achieved some early victories, and even Tether is supporting two new stablecoin public chains (Plasma and Stable), hoping to move USDT trading volume to their own chains.

2. The "Digital Oil" Analogy

Oil is essentially a commodity. After adjusting for inflation, the real price of oil has remained in the same range for a century, occasionally fluctuating and then returning to its original position.

I partially agree with Tom Lee's view that ETH can be regarded as a commodity, but this does not mean it is bullish. I'm not even sure what Tom Lee is trying to express here.

3. Institutions Will Buy and Stake ETH, Both to Provide Network Security and as Operating Capital

Have large banks and other financial institutions already bought ETH for their balance sheets? No.

Have they announced plans to buy ETH? Also no.

Do banks hoard barrels of gasoline because they constantly pay energy costs? No, the costs are not significant enough; they only pay when needed.

Do banks buy shares in the custodians they use? No.

4. ETH Will Be Equivalent to the Total Value of All Financial Infrastructure Companies

I'm really speechless. This is another fundamental misunderstanding of value accrual, pure fantasy, not even worth criticizing.

5. Technical Analysis

Actually, I personally really like technical analysis and believe that when viewed objectively, technical analysis can indeed provide a lot of valuable information. Unfortunately, Tom Lee seems to be using technical analysis as a pretext, drawing arbitrary lines to support his bias.

Objectively looking at this chart, the most obvious feature is that ETH is in a multi-year consolidation range—this is no different from the wide-ranging fluctuations in oil prices over the past thirty years—just range-bound, and recently failed to break resistance after testing the top of the range. From a technical perspective, ETH actually shows bearish signals, and it cannot be ruled out that it may continue to oscillate between $1,000 and $4,800 for a long time.

Just because an asset has experienced a parabolic rise in the past does not mean this trend will continue indefinitely.

The long-term ETH/BTC chart is also being misread. Although it is indeed in a multi-year consolidation range, the overall trend over the past three years has been downward, with the recent rebound only reaching long-term support. This downward trend is due to Ethereum's narrative becoming saturated and its fundamentals unable to support valuation growth. These fundamental factors have not changed substantially to this day.

Ethereum's valuation is essentially a product of financial cognitive bias. To be fair, this cognitive bias can indeed support a considerable market cap (see XRP), but its support is not unlimited. Macro liquidity has temporarily maintained ETH's market cap, but unless there is a major structural change, it is likely to remain in a prolonged period of underperformance.