In a pointed critique, Andrew Kang, co-founder of Mechanism Capital, has openly challenged Tom Lee’s recent investment thesis regarding Ethereum, expressing his views in a series of sharp comments on social media platform X. Kang described Lee’s arguments as “one of the most retarded combinations of financially illiterate arguments I’ve seen from a well-known analyst in a while,” while outlining five key pillars that Lee purportedly bases his Ethereum investment outlook on.
Kang’s extensive rebuttal began with a focus on the relationship between tokenization, stablecoin activity, and Ethereum’s fee generation. He asserted that despite a dramatic increase in the value of tokenized assets and stablecoin transaction volumes—reportedly between 100 to 1000 times since 2020—Ethereum’s transaction fees have remained largely unchanged since that same year. Kang attributed this stagnation to several factors, including improvements in Ethereum’s network efficiency, the migration of activity to competing blockchains, and the limited fee generation from tokenizing assets that have low trade velocity.
In his critique, Kang provided an illustrative example to emphasize the disparity between tokenized assets and fee generation, claiming that tokenizing a $100 million bond that trades only once every two years would yield significantly less in fees compared to frequent transactions involving stablecoins. He noted that many competitive blockchains, including Solana, Arbitrum, and Tempo, have been capturing the fee market share due to stronger business development efforts. Kang also pointed out that Tether is actively pursuing new chains intended to redirect USDT transaction volumes within its controlled ecosystem.
Kang dismissed Lee’s characterization of Ethereum as “digital oil,” claiming the analogy is fundamentally flawed. He explained that while Ethereum could be compared to a commodity, such a comparison does not inherently support a bullish outlook. Further, he referenced Ethereum’s performance based on a multi-year price range, arguing that recent price movements indicate resistance points that Ethereum has struggled to breach.
Kang also critiqued Lee’s assumption that institutional investors, such as banks and corporations, will aggressively accumulate and stake Ethereum. He argued that this expectation reflects a misunderstanding of corporate treasury practices and value generation. Kang questioned the premise by asking whether large banks have begun holding ETH on their balance sheets, asserting that the answer is no. He compared the situation to banks not buying fuel barrels simply because they require energy, highlighting a fundamental misjudgment in Lee’s valuation rationale.
Kang concluded with a stark characterization of Ethereum’s current valuation, suggesting it is predominantly fueled by “financial illiteracy” and warning that this type of valuation cannot sustainably maintain itself. He projected a concerning trajectory for Ethereum unless significant organizational changes are made, concluding that it may face indefinite underperformance.
Tom Lee has presented a contrasting view, marking Ethereum as a conducive platform for Wall Street’s tokenization endeavors, with optimistic projections suggesting Ethereum could climb to values ranging from $10,000 to $12,000 by the end of 2025, with prospects for a super-cycle potentially pushing prices up to $62,500. Currently, Ethereum is trading near $4,000, highlighting the divide between differing investment philosophies in the cryptocurrency space.
