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Fundstrat's head of digital assets research walks us through his $100,000 and $10,500 year-end price targets for bitcoin and ether — and shares the 8 tokens he's bullish on

David GriderFundstrat Global Advisors

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Back in 2015, David Grider was working at an investment bank when he first heard billionaire investor Chamath Palihapitiya talking about bitcoin and cryptocurrencies

"I respected him so I gave it a look and got in there," Grider, who is now the head of digital assets research at Fundstrat Global Advisors, said in an interview. 

Before long, he fell into the proverbial crypto rabbit hole and started researching the various assets in the nascent industry. In 2016, Grider acquired bitcoin (BTC) at around $600 and ether (ETH) at about $12. The next year, he left the traditional finance industry and started a blockchain-based hedge fund Aenigma Capital.

"People laughed at me for going into crypto. They were like this thing is a bubble and this is going nowhere," he said. "There's so much career risk to anyone going into crypto at that time."

Grider, a chartered financial analyst, did not think twice. Once he got involved with blockchain technology and perused the theoretical aspects of bitcoin and crypto, he learned that "you could never buy enough."

As bitcoin and ether have skyrocketed more than 538% and 1,693% respectively, in the past year, it seems to Grider that many investors in traditional finance are "beating down the door to switch over" to the $2.4 trillion crypto industry. 

Grider's early switch to the crypto space proved prescient. It turns out that his analytical and valuation background was critical to an industry that, until recently, has lacked fundamental institutional research.

"When I first got into crypto, I was developing fundamental valuation models and figuring out how it works from the institutional lens," he said. "And I realized that there actually is a lot of fundamentals for a lot of these cryptocurrencies."

How bitcoin and ether could reach $100k and $10.5k by yearend

Grider has set year-end price targets for bitcoin and ether to reach $100,000 and $10,500 respectively. 

To arrive at the price model for bitcoin, he analyzed market data such as the digital token's price, market cap, and supply; financial metrics including total payment volume, transaction fee revenue, and payment processing costs; key performance indicators like transaction take rate and active bitcoin wallet users; as well as valuation metrics such as value per user and cost-savings multiple. (The specific model inputs are shown below)

Bitcoin price model — fundstratFundstrat Global Advisors

Because bitcoin is a commodity-like token or digital gold as it's often called, there are a lot of costs that go into producing or mining it. He looked at the book value of all the bitcoin, which is how much in total costs has been spent on producing it, and forecasted out the total spend by putting a multiple on it.

"I call it the Grider book value multiple these days," he said. "It's just the market cap of bitcoin over what we estimate as total investment in it over the years via mining, and that's how I got to that $100,000 target for it."

On the other hand, Ethereum's transaction fee revenue, which has been growing at a 1,099% 5-year compound annual growth rate, ended 2020 at around $600 million, according to Grider. 

During the first 17 days of 2021, Ethereum had already recorded $180 million in cloud revenue, which implies that it could capture $3.9 billion in annualized revenue this year, he said.

Because of the plethora of decentralized finance applications built atop the network, Grider believes that Ethereum should be valued like a cloud 1.0 stock with a similar growth-adjusted price-to-sales multiple as those in the Bessemer Venture Partners (BVP) Emerging Cloud Index. 

"Growing at a 1099% 5-year CAGR, and at 1624% year over year from 2019 to 2020, Ethereum is on pace to grow at 554% during 2021," he wrote in January 19 research note. "This compares against 21x price to sales multiple and 38% growth for the Bessemer Venture Partners (BVP) Emerging Cloud Index. On a growth adjusted basis, Ethereum trades at a Price-to-Earnings-Growth (PEG) rate of 0.07x vs. 0.55x for the cloud comps."

His analysis leads to the price model for ether below. 

ETH price modelFundstrat Global Advisors

The 8 digital asset tokens he's bullish on 

Since he got into the crypto space, Grider has been branching out and researching different digital asset tokens. 

"These days, if I want to try out a new DeFi protocol, I have my wallet set up and I play around with it to see how the UX (user experience), UI (user interface), and transactions operate," he said. "I think that gives me a quicker sense of how this protocol functions."

He also dives into the project community chats — whether it's on Telegram, Discord, or Slack — to get a sense of what the "evangelists" and loyal followers are chatting about. 

"In there, you're going to find a lot of links, helpful explainers, and information tools generally," he said. "You can also go to the block explorers and see if they are indeed generating these fees and if this contract is functioning as it says it does. You can tell, in real-time and block by block what the financials are on these networks."

Among the projects that he's conducted due diligence on, Grider is bullish on Solana (SOL), Zilliqa (ZIL), Avalanche (AVAX), Horizen (ZEN), FTX (FTT), Uniswap (UNI), and Cosmos (ATOM).

"The general theme that's emerged with this new wave of technology approaches is that they are trying to make fees cheaper and transactions faster," he said of the DeFi projects

Despite the stigmatized start of Dogecoin (DOGE), he owns some of these Shiba-Inu-themed tokens too. 

"I'm not saying that it's not going to go down, but I'm not saying it won't go up more either," he said. "Dogecoin is really valuable because it has a community of a lot of users that engage with it and a lot of people that own it. That's what makes bitcoin, the dollar, any currency, or any business valuable."

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