Here’s Why Fundstrat Says There’s Still Hope for Crypto After a “Horrible Year”

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Crypto has had a tumultuous year, to say the least. And even its optimistic investors admit it.

Fundstrat is one of the main ones. Earlier this year, the equity research firm set Bitcoin’s price target at $200,000 in the coming years. This was before the Crypto Winter in May, when several cryptocurrencies and lenders failed, and it turned out to be just a prelude to the shocking collapse of the last few months of FTX, one of the largest crypto exchanges in the world, in just 48 hours. Now Bitcoin is trading at $16,000 from a high of $70,000.

Fundstrat Global Advisors Managing Partner and Head of Research Tom Lee says it’s been a horrible year, but insists crypto isn’t dead. On the contrary, Lee sees it as a moment of reckoning for the sector.

It’s an important moment for the industry, Lee told CNBC’s Closing Bell: Overtime last week. I think it cleans up a lot and cleans up a lot of bad players. But do I think crypto is dead? No. I think there are a lot of people throwing gasoline in a crowded theater and screaming fire.

While he acknowledged it had been bad, saying no one was making money in crypto in 2022, he said it wasn’t all that different from the Crypto Winter of 2018, which was when some of the best projects have been created.

FTX implosion triggered by liquidity crunch after Changpeng Zhao, the CEO of rival exchange Binance, tweeted that the exchange would sell its holding of FTX tokens the Chapter 11 balance sheet, and founder and CEO Sam Bankman-Fried stepping down. But Lee said FTX’s collapse was not due to a flawed business model, but rather a lack of internal regulation.

If you look at an industry like crypto that’s self-regulated, it’s important to create, essentially, some sort of functioning central bank-like business that can conduct operations under stress, he said. So I don’t think the FTX model is faulty; it’s just, FTX itself was not able to play this role.

Earlier this month, following the fall in FTX, Bitcoin fell 77% from its trading peak in November last year. However, despite Bitcoin’s continued decline, Lee said he still advises customers to buy the token.

We first read about Bitcoin in 2017, and recommended people put 1% of their funds into Bitcoin back then, he said. Bitcoin was below $1000 and today held 40% of their portfolio with no rebalancing. So, does Bitcoin still make sense for someone who wants to have some sort of ballast? Yes.

So what’s next for the industry? We could see a greater loss or some sort of rebirth situation, Lee said.

Is he going to have another terrible year? I think if there is more fraud, yes. But if it was the time of financial stress, what would come out of it would be companies that would come out of the [global financial crisis]he said.

What if there was a crypto version of a Wall Street bank?

The ascendancy of banks like JPMorgan really came out of 08, Lee said. And I think the mistake that people made in the GFC was saying that the banks were untouchable, and I think that’s what’s happening with crypto now.

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