Andrew Kang Criticizes Tom Lee: 5 Bullish Reasons for ETH Are Laughable

Author: Andrew Kang, Partner at Mechanism Capital

Translation: Tim, PANews

Original Title: Andrew Kang’s Long Critique of Tom Lee: 5 Bullish Reasons for ETH Are Really “Stupid”

PANews Editor’s Note: Andrew Kang posted on Twitter criticizing the bullish views of well-known Wall Street analyst Tom Lee, stating that they lack financial common sense and are “stupid.” However, in the comments section of the tweet, some users did not agree with Andrew Kang’s rebuttal, and some even pointed out that he predicted ETH would fall below $1,000 in April this year. Therefore, this article is somewhat subjective, and readers should make their own judgments.

Tom Lee’s Ethereum theory is the most foolish I’ve seen among well-known analysts recently, completely lacking in financial common sense. Let’s refute them one by one. Tom’s arguments are mainly based on the following points:

1. Adoption of stablecoins and RWA

2. Digital oil narrative

3. Institutions will buy and stake ETH to provide security for their tokenized assets and as operating capital.

4. ETH’s value equals the sum of all financial infrastructure companies

5. Technical analysis

1) Adoption of Stablecoins and RWA

Tom’s view is that on-chain activity of stablecoins and tokenized assets is increasing, which should drive up trading volume and thus increase ETH fees and revenue. On the surface, this seems logical, but if you spend just a few minutes checking the data, you’ll find this is not the case.

ETH daily fees

Since 2020, the total value of tokenized assets and stablecoin transaction volume has grown by 100 to 1000 times. Tom’s argument fundamentally misunderstands the value accrual mechanism, possibly leading people to believe that fees would rise proportionally, but in reality, they have remained basically flat compared to 2020.

The reasons are as follows:

• Ethereum network upgrades have made transactions more efficient

• Stablecoin and tokenized asset activity is shifting to other chains

• The tokenization of low-liquidity assets generates almost no fees. The value of tokenized assets is not directly proportional to Ethereum’s revenue. Someone might tokenize $100 million in bonds, but if they only trade once every two years, how much fee does that generate for ETH? Maybe just $0.1. A single USDT transfer generates a much higher fee than this.

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

Will blockchain transaction volume and fees increase? Yes, but most of the fees will be captured by other chains with stronger commercial viability. In the race to blockchainize traditional financial transactions, all parties have seen the opportunity and are actively seizing the initiative. Solana, Arbitrum, and Tempo have currently captured most of the early gains. Even Tether is supporting two new chains, Plasma and Stable, both aiming to move USDT transaction volume to their own chains.

2) Digital Oil Narrative

Oil is a commodity. The real oil price, adjusted for inflation, has fluctuated within the same range for over a century, with occasional price spikes that eventually fall back. I agree with Tom that ETH can be regarded as a commodity, but this is not a positive. I really don’t know what Tom is thinking here!

3) Institutions Will Buy and Stake ETH to Provide Security for Their Tokenized Assets and as Operating Capital

Have large banks and other financial institutions included ETH on their balance sheets? No.

Have any of them announced plans to do so? Also no.

Do banks stockpile large amounts of gasoline because they continuously pay energy costs? No, because it’s not important—they just pay the fees as needed.

Do banks buy shares of the custodians of the assets they use? No.

4) ETH’s Value Equals the Sum of All Financial Infrastructure Companies

I mean, come on. This is yet another fundamental misunderstanding of the value accrual mechanism—pure fantasy.

5) Technical Analysis

I’m actually a big fan of technical analysis and think it’s very valuable when viewed objectively. Unfortunately, Tom seems to be drawing random lines with technical analysis to support his bias.

Looking at this chart, the most objective conclusion is that Ethereum has been in a multi-year consolidation range. This is very similar to the price trend of crude oil, which has also fluctuated within a wide range over the past 30 years. Currently, Ethereum is not only in a consolidation range, but after recently touching the top of the range, it failed to break through resistance. From a technical perspective, Ethereum’s trend is actually bearish. It’s possible that it could continue to fluctuate between $1,000 and $4,800 for a long time. Just because an asset has experienced a parabolic rise doesn’t mean that trend will continue indefinitely.

Crude oil price

In the long run, there is also a misunderstanding regarding the ETH/BTC chart. Although it has indeed been in a multi-year sideways consolidation, the past few years have mainly been dominated by a downward trend, with a rebound at a long-term support level only recently. The driving factor behind this downtrend is that Ethereum’s narrative has become saturated, and its fundamentals cannot support valuation growth—these fundamentals have not changed substantially to this day.

Ethereum’s valuation mainly comes from the market’s lack of financial understanding. Objectively, this cognitive gap can indeed create considerable market value—just look at XRP. But valuations supported by a lack of understanding have an upper limit. A loose macro liquidity environment is temporarily maintaining ETH’s price level, but unless there is a structural change, it is likely to fall into a prolonged slump.