In a recent discussion on CNBC, Tom Lee, co-founder of Fundstrat, characterized Bitcoin’s recent 50% decline as a “crypto squall” rather than a sign of a structural collapse. He believes that while the cryptocurrency market has been adversely affected by macroeconomic shocks, the underlying technology and sectors related to cryptocurrency are poised for revival as uncertainties regarding tariffs diminish.
Lee pointed out that the decrease in Bitcoin’s value is not indicative of weakness within blockchain networks but rather a reflection of external pressures. One such pressure is the strong performance of gold, which has diverted risk appetite away from speculative assets such as cryptocurrencies. “Crypto suffers mainly because gold has done so well,” Lee noted, suggesting that with little leverage in the crypto space, investors have turned to precious metals for high-frequency trading opportunities.
The recent ruling by the Supreme Court, which struck down former President Donald Trump’s emergency tariffs, initially sparked relief across the markets. Lee commented that this decision limits executive powers and might benefit sectors like technology, software, and crypto as the uncertainty surrounding tariffs is alleviated. Previously, Trump’s administration had escalated tariffs under Section 122 of the Trade Act to 15%, prompting a risk-off strategy among investors.
In early trading on Monday, Bitcoin’s value slid to below $65,000 before rebounding to around $66,000. Lee observed that the current drawdown contrasts sharply with previous 50% declines in Bitcoin, describing this phase as a gradual and psychologically taxing decline rather than a sudden crash. He described the phenomenon as “classic bear market blues,” where the absence of euphoric peaks often leads to slower, more drawn-out retracements.
Looking ahead, Lee emphasized that monetary policy could play a crucial role in the recovery of crypto assets. With a potential reduction in headline inflation due to the lifted tariffs and a softening labor market, the Federal Reserve may have more flexibility to lower interest rates. This would create a favorable environment for risk assets, including cryptocurrencies.
Lee concluded by encouraging investors to remain patient and consider historical cycles, asserting that the rules governing crypto bear markets have evolved. He believes that opportunities may be found amid this tumultuous environment, suggesting that the market still holds promise for those willing to navigate the uncertainty.
