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At least that is the latest conclusion from one top Wall Street Strategist.

Tom Lee is the first major Wall Street Strategist to issue a report solely dedicated to Bitcoin and Bitcoin's future price.

Ironically, Lee has been one of the most bullish strategists on the US stock market over the last several years, but just recently has turned to one of the most bearish on the street.

His price targets for Bitcoin are anything but bearish...

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Tom Lee predicts that based on his models, Bitcoin could hit $20,000-$55,000 by the year 2022.

Yes that is quite a large range, but either way, that represents massive returns from current levels.

Some might read this as just another analyst throwing out some numbers to see his name in the headlines. However, I have followed Tom Lee for some time now dating back to my time trading stocks for a private equity fund, and he's the real deal.

This guy has been right an awful lot and I encourage you to go back and look at some of his recent calls. You will find that he is right far more often than he is wrong.

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How does Lee get to that price target, you may ask?

According to Lee it's quite simple:

"We believe that one of the drivers of Bitcoin prices is that cryptocurrencies are cannibalizing the demand for gold. Based on this premise we can take a stab at establishing a valuation framework for Bitcoin. Based on our model, we estimate that Bitcoin's value per unit could be $20,000 to $55,000 by 2022."

Gold's total market value is $7.5 trillion, which is substantially higher than Bitcoin's current $41 Billion.

That is all well and good but then when you look at good ol' supply and demand, things start to swing in favor of Bitcoin.

The current supply of Gold is surging as mining has been soaring to new all time highs. As the price of gold goes up, more supply comes on to the market thus pulling the reigns as price increases.

Bitcoin is exactly the opposite.

As time goes by the supply of Bitcoins keeps slowing. The total number of Bitcoins ever created will be 21 million, and it will reach that number by roughly 2040. It will actually reach 98% of that number by 2030.

Basically the supply of gold is ever increasing and the supply of Bitcoin is ever decreasing.

The supply of Gold to outpace the supply of Bitcoin

According to Lee, a simulation shows that Bitcoin supply will start growing slower than gold's as soon as 2020, all the while with a much smaller market cap.

The constraints on Bitcoin's supply is a big reason for it's potential. Combined that with ever increasing use cases and you have the potential for a digital currency with high demand and a limited supply, which will drive up prices.

While the supply and demand aspect will get it part of the way to his price target, Lee says there is one aspect that really will be a game changer...

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According to Lee, Central Banks will start buying digital currencies when/if the total market value eclipses $500 Billion.

As part of his thoughts, Lee referenced a recent news article about Central Banks looking into the possibility of owning digital currencies.

It can be read here:

https://www.bloomberg.com/news/articles/2017-06-28/rise-of-digital-coins-has-central-banks-considering-e-versions

According to Lee, this will be the real game changer when they start to get involved in a big way.

It will enhance the legitimacy of the currencies as well as likely accelerate the substitution of cryptocurrencies for gold by investors.

Conclusion:

Basically, substantial upside exists in owning digital currencies at current prices. :)

Stay informed my friends!

Sources:

http://www.cnbc.com/2017/07/07/strategist-tom-lee-weighs-sees-bitcoin-going-as-high-as-55000.html

https://www.bloomberg.com/news/articles/2017-06-28/rise-of-digital-coins-has-central-banks-considering-e-versions

Image Sources:

http://thinkaboutnow.com/2016/06/the-horrendous-truth-about-central-banking/

http://www.theeventchronicle.com/finanace/german-central-bank-warns-not-use-bitcoin-not-backed-central-bank/

http://www.cnbc.com/2017/05/02/theres-a-strange-disconnect-in-the-market-warns-strategist-tom-lee.html

https://www.technologyreview.com/s/600980/a-bitcoin-style-currency-for-central-banks/

Follow me: @jrcornel