Wall Street renowned analyst and Fundstrat research head Tom Lee warns investors that the start of 2026 in both the crypto and stock markets may face a “painful decline,” but he remains optimistic about a strong rebound by the end of the year and expects Bitcoin to hit a new all-time high. He believes that the Federal Reserve’s shift to a dovish stance and the end of quantitative tightening will provide support to the market.
(Background: Tom Lee: Now is not the time to leverage! This big drop is just crypto market makers “biting the bullet”)
(Additional context: Uncovering Tom Lee: From Wall Street influencer to Ethereum MicroStrategy leader)

Table of Contents

• Bitcoin’s new high is a key indicator
• Market maker liquidity remains a concern
• Precious metals may once again outperform crypto

Fundstrat research head Tom Lee stated on Tuesday in the “The Master Investor Podcast” that the pattern seen in 2025 will continue into 2026, with blockchain and AI industries still enjoying tailwinds. However, risks from tariffs and political divisions will make it difficult for the market to sustain a continuous upward trend in the early stages. Lee estimates that the stock market could see a 15% to 20% correction this year, but he added, “I believe we will ultimately end the year strongly,” citing the Federal Reserve’s shift to a dovish stance and the end of last year’s quantitative tightening.

Bitcoin’s new high is a key indicator

Regarding Bitcoin (BTC), Lee says he still expects it to reach a new all-time high this year, although he did not reaffirm his previous target of $250,000.

Lee pointed out that a new high for Bitcoin would be a critical milestone, indicating that the market has fully shaken off the shadow of the crash on October 10, 2022—when about $20 billion in leveraged positions were liquidated:

I believe 2026 will be a very important test because if Bitcoin hits a new high, we will know that the deleveraging event is behind us.

Market maker liquidity remains a concern

Lee also explained the recent decoupling of cryptocurrency trends from gold. He believes that cyclical deleveraging cycles will severely impact the market and significantly harm market makers—whom he describes as “the central banks of the crypto market.”

He stated that until cryptocurrencies gain broader mainstream adoption and more institutional support, these disruptions will continue to affect market stability.

Precious metals may once again outperform crypto

Lee is optimistic that energy and basic materials will be the best-performing sectors this year and recommends including gold in investment portfolios.

Benjamin Cowen, CEO of Into The Cryptoverse, shares a similar view, stating on Tuesday: “Precious metals outperformed cryptocurrencies in 2025, and 2026 is likely to repeat that.”

However, unlike Lee, Cowen expects precious metals to face a “significant correction” later this year, during which cryptocurrencies could see deeper declines.

He summarized, “Trade the market you see, not the market you wish for.”