Tom Lee: Ethereum Nearing Cyclical Bottom This Week

Fundstrat co-founder Tom Lee has made a compelling case that Ethereum is nearing a cyclical bottom this week, arguing that on-chain fundamentals and relative valuation versus Bitcoin indicate ETH is “pretty close to bottoming.” In an interview with CNBC, Lee linked the current drawdown to a broader crypto correction that began after a sharp liquidation event on October 10, but insisted that Ethereum’s core investment story remains fundamentally sound. Despite the market turbulence, Lee maintains that the underlying value proposition for Ethereum continues to strengthen.

Lee identified two key structural “floor” mechanisms that support his bottoming thesis. First, he cited the value of assets locked on the Ethereum blockchain, noting that this metric has historically signaled major bottoms when the ratio reaches approximately 50% of peak values. “Historically, Ethereum bottoms when that ratio is about 50%,” Lee explained. “So I’d say we’re pretty close to that level. That’s why I think Ethereum is probably bottoming this week.” This on-chain metric provides a tangible foundation for his timing prediction, suggesting that current levels represent significant support.

The second mechanism Lee highlighted involves Ethereum’s valuation relative to Bitcoin, using both price and network value ratios. “The other way to look at Ethereum is really its price ratio or even its network value ratio to Bitcoin,” Lee said. “It currently sits at 0.032.” This ratio sits well below historical averages, indicating potential undervaluation compared to Ethereum’s long-term relationship with Bitcoin. Lee characterized this discrepancy as a buying opportunity rather than a fundamental weakness.

Central to Lee’s bullish thesis is Ethereum’s positioning as neutral infrastructure for the growing institutional adoption of blockchain technology. “There are stablecoin creations. Larry Fink and BlackRock and Wall Street want to tokenize assets, bring stocks, bonds, real estate onto the blockchain,” Lee told CNBC. “And they have to find a neutral 100% uptime blockchain. That’s Ethereum. And that’s the fundamental story.” This institutional narrative represents a significant long-term driver that Lee believes outweighs short-term price volatility.

The involvement of major financial institutions like BlackRock, led by CEO Larry Fink, underscores the growing mainstream acceptance of blockchain technology and Ethereum’s potential role as the foundational layer for tokenized real-world assets. Lee framed this institutional interest as a structural shift that provides fundamental support for Ethereum’s valuation, independent of short-term market sentiment. The convergence of traditional finance with blockchain infrastructure represents what Lee sees as an irreversible trend favoring Ethereum’s long-term prospects.

Lee addressed the extreme volatility in crypto markets as a structural feature rather than a fundamental weakness. “The price, of course, for Ethereum will fluctuate because crypto is hyper volatile. In fact, it’s kind of a… it’s sort of a feature of the blockchain itself,” he noted. This perspective helps contextualize the recent correction as part of normal market dynamics rather than a breakdown in Ethereum’s underlying value proposition.

Lee’s analysis of Ethereum’s valuation relative to Bitcoin reveals significant upside potential based on historical relationships. “The long-term average, like the eight-year average, if we were just to trade to that eight-year average, would put Ethereum at around $12,000,” Lee stated. This projection, based on the historical ETH/BTC ratio, suggests substantial appreciation potential from current levels around $3,018. The current ratio of 0.032 represents a significant discount to this long-term average.

Lee characterized Ethereum as fundamentally undervalued for two primary reasons. “So I think Ethereum is undervalued because number one, the story is gaining relative to Bitcoin this year. But two, we’re getting this sort of intrinsic floor because of the value that the assets locked onto the Ethereum blockchain,” he argued. This combination of improving fundamentals and technical support levels creates what Lee sees as a compelling risk-reward scenario for investors.

The broader market context also supports Lee’s bottoming thesis. He placed the current move within a continuing correction across digital assets driven by macroeconomic factors. “The most correlated factor to Bitcoin prices when you see it… at a peak actually is the ISM,” Lee said, referring to US activity surveys. “So I think we’re still in a correction phase of crypto.” This macro perspective helps explain the timing of Lee’s bottom call, suggesting that the combination of technical, fundamental, and macroeconomic factors are aligning to create a potential inflection point for Ethereum.