Here’s Why Fundstrat Says There’s Still Hope For Crypto After A ‘Terrible Year’
Crypto has had a tumultuous year, to say the least. And even the bullish investors admit it.
Fundstrat is a prominent one. Earlier this year, the equity research firm set Bitcoin’s price target at $200,000 in the coming years. It was before the crypto winter in May when several cryptocurrencies and lenders failed, and it turned out to be just a prelude to last month’s shocking collapse of FTX, one of the largest crypto exchanges in the world, in just 48 hours. Now Bitcoin is trading at $16,000, down from a peak of $70,000.
Tom Lee, Fundstrat Global Advisors’ managing partner and head of research, says it’s been a “terrible year” but insists crypto is not dead. Rather, Lee sees it as a moment of reckoning for the sector.
“It’s an important moment for the industry,” Lee told CNBC’s Final clock: Overtime last week. “I think it cleans out a lot and cleans out 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 yelling ‘fire.’
While he acknowledged that it’s been bad, saying “no one has made money in crypto in 2022,” he said it’s not that different from the crypto winter of 2018, which was when some of the best projects were created.
FTX’s implosion — sparked by a liquidity crisis after Changpeng Zhao, CEO of rival exchange Binance, tweeted that the exchange would sell its holdings of FTX’s FTT token — triggered a selloff that led it to quickly file for Chapter 11 bankruptcy, and founder and CEO Sam Bankman-Fried is 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, a sort of functioning central bank-like activity that can conduct operations when there’s stress,” he said. “So I don’t think the FTX model was wrong; it’s just that FTX itself wasn’t able to play that role.”
Earlier this month, in the wake of FTX’s fall, Bitcoin fell 77% from its peak last November. But despite Bitcoin’s ongoing decline, Lee said he still advises customers to buy the token.
“We first read about Bitcoin in 2017 and we recommended people put 1% of their money in Bitcoin at that time,” he said. “Bitcoin was under $1,000 – that holding today would be 40% of their portfolio without 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 greater losses or some kind of rise from the ashes, Lee said.
“Is it going to have another terrible year? I think if it’s more fraud, yes. But if this was the moment of financial stress, what we’re going to see emerge from this are companies that emerged from [global financial crisis],” he said.
And what if there’s a crypto version of a Wall Street bank out there?
“The rise of banks like JPMorgan really came out of ’08,” Lee said. “And I think the mistake people made in the GFC was to say the banks were untouchable, and I think that’s what’s happening with crypto now.”
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