Bitcoin appears to be back in business.
Having crossed above the $9,000 level on Sunday ahead of Facebook announcing its own cryptocurrency, Libra, bitcoin is now up 146% this year. But that could be just the beginning for its bounce back, says bitcoin bull and Fundstrat Global Advisors’ research chief Tom Lee.
“I think bitcoin is easily going to take out its all-time highs” of $20,000, and has the potential to run to $40,000 if its use cases grow, Lee said Tuesday on CNBC’s “Futures Now.” “We’re deep into a bull market, and people are pretty silent about it.”
In his latest note, Lee wrote that he felt there was a lack of conviction about bitcoin’s recent rally, based on his attendance at the CryptoCompare Digital Asset Summit in London last week.
Many in the crypto space were hesitant to agree that the “crypto winter” was indeed over, Lee wrote. They cited worries around persistent volatility in alt-coins and initial coin offerings, fundraising issues in the digital currency market, general bearishness and residual concerns stemming from crypto’s huge drop in 2018, he wrote.
But Facebook’s latest move serves to legitimize the space in a way that could provide further runway for bitcoin, which could even become a “reserve currency in crypto” down the line, Lee said Tuesday.
“The Facebook announcement is a complete validation that mainstream is now focused on cryptocurrencies,” he said. “I think it really destroys those arguments that say, ‘I believe in blockchain, not bitcoin.'”
And, while Lee saw Facebook’s Libra project as “clearly a cryptocurrency play,” the main thrust of it revolves around the idea of decentralized finance, he said.
“I think it is more targeted at stablecoin and creating a new kind of banking system, and it’s very complementary to bitcoin,” he said. “So I think this is actually a really bullish development for bitcoin. I think it’s really bad for stablecoins and anyone who’s been trying to do decentralized finance.”
Facebook’s project has the backing of payment processors Mastercard and Visa, as well as travel giant Booking Holdings. Lee noted that decentralization in finance is “probably really good for payment processors” but will likely pose a challenge to traditionally structured banks.
“One thing to keep in mind [is] Facebook’s annual revenue per user is probably $50. That might be a little high,” Lee said. “But an average bank generates close to $1,000 per user. So, Facebook has a 20x upside to their customer model if they start doing banking services, and so I can see why banks aren’t really enthusiastic about this.”
Bitcoin was down nearly 3% toward the end of Tuesday’s trading session. The digital currency managed to retrace its 2018 highs in late May.