ETH "big short positions" publicly challenges: Tom Lee's bullish logic is wrong, like an idiot.

Author: Andrew Kang, Partner at Mechanism Capital

Compiled by: Azuma (@azuma_eth)

Editor's note: Since Tom Lee became the chairman of the BitMine board and promoted the continuous purchase of ETH by the DAT, Tom Lee has become the industry's number one ETH bull. In various public appearances recently, Tom Lee has repeatedly emphasized the growth expectations for ETH with various reasoning, even boldly stating that the fair value of ETH should be at $60,000.

However, not everyone agrees with Tom Lee's logic. Andrew Kang, a partner at Mechanism Capital, published a lengthy article last night, openly refuting Tom Lee's views and directly mocking him as "like an idiot."

To add a point, Andrew Kang predicted in April this year during the overall market correction that ETH would drop below $1000. Later, during the process of ETH's price increase, he also expressed bearish views... Position determines mindset, so his stance may be at two extremes compared to Tom Lee. It is recommended that everyone view this dialectically.

The following is the original content by Andrew Kang, compiled by Odaily Planet Daily.

In a recent article I read by a financial analyst, Tom Lee's ETH theory is considered "one of the dumbest." Let's analyze his points one by one; Tom Lee's theory is mainly based on the following key points.

Stablecoins and RWA (Real World Assets) adoption;

"Digital Oil" analogy;

The organization will purchase and stake ETH, providing security for the network where its assets are tokenized, and also serving as operating capital;

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

Technical Analysis;

1. Adoption of Stablecoins and RWA

Tom Lee's argument suggests that the increase in stablecoins and asset tokenization activities will boost trading volume, thereby increasing ETH's transaction fee revenue. On the surface, this seems reasonable, but a few minutes of data review will reveal that the reality is not so.

Since 2020, the value of tokenized assets and the trading volume of stablecoins have increased by 100-1000 times. However, Tom Lee's argument fundamentally misunderstands the value accumulation mechanism of Ethereum—he makes it seem as if network fees will increase year-on-year, but in reality, Ethereum's fee revenue has remained at 2020 levels.

The reasons for this result are as follows:

The Ethereum network will enhance transaction efficiency through upgrades.

Stablecoin and asset tokenization activities will flow to other public chains;

The transaction fees generated by tokenizing low liquidity assets are negligible - the value of tokenization is not directly proportional to ETH revenue. People may tokenize a $100 million bond, but if it only trades once every two years, how much in fees can that generate for ETH? It might only be $0.1, while a single USDT transaction generates fees far exceeding that.

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

Will the blockchain trading volume and transaction fees increase? Yes.

However, most of the transaction fees will be captured by other blockchains with stronger business development teams. In the process of moving traditional financial transactions to the blockchain, other projects have 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 shift the trading volume of USDT onto their own chains.

2. The Analogy of "Digital Oil"

Oil is essentially a commodity. The real price of oil, adjusted for inflation, has remained within the same range for a century, with occasional fluctuations returning to the original position.

I partially agree with Tom Lee's view that ETH can be seen as a commodity, but that does not imply a bullish outlook. I'm not quite sure what Tom Lee is trying to express here.

3. The institution will purchase and stake ETH, which provides security for the network and can also serve as operating capital.

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

Do they have plans to buy ETH? No, they don't.

Will banks stockpile gasoline barrels due to continuously paying energy costs? No, the costs are not significant enough; they will only pay when needed.

Will banks buy shares of the asset custody institutions they use? No.

Fourth, ETH will be equivalent to the total value of all financial infrastructure companies.

I really have no words. This is again a fundamental misunderstanding of value accumulation, purely a fantasy, I'm too lazy to even criticize.

5. Technical Analysis

I personally really like technical analysis and believe that when viewed objectively, it can indeed provide a lot of valuable information. Unfortunately, Tom Lee seems to be misusing technical analysis to draw arbitrary lines to support his biases.

Objectively examining this chart, the most obvious feature is that ETH is in a prolonged consolidation range for several years — this is no different from the wide fluctuations in crude oil prices over the past thirty years — it is merely oscillating within a range, and recently it attempted to break through the upper range but failed to overcome resistance. From a technical perspective, ETH is showing bearish signals, and we cannot rule out the possibility of it oscillating in the range of 1000 - 4800 dollars in the long term.

The fact that an asset has experienced parabolic rises in the past does not mean that this trend will continue indefinitely.

The long-term ETH/BTC chart has also been misinterpreted. Although it is indeed in a multi-year oscillation range, it has been overall constrained by a downward trend for the past three years, with the recent rebound only reaching the long-term support level. This downward trend stems from the narrative of Ethereum being saturated and the fundamentals unable to support valuation growth. Furthermore, these fundamental factors have not undergone any substantial changes to date.

The valuation of Ethereum is essentially a product of a lack of financial understanding. Fairly speaking, this cognitive bias can indeed support a considerable market value (see XRP), but its support is not infinite. Macroeconomic liquidity has temporarily maintained the market cap of ETH, but unless a significant structural change occurs, it is likely to fall into a prolonged period of underperformance.