FTX Crypto Implosion Doesn’t Make Bitcoin Untouchable, Fundstrat Says

• There is still hope for the crypto industry despite FTX’s collapse, said Fundstrat’s Tom Lee.
• The crash flushes out bad actors, he said, adding that bitcoin has historically produced good returns.
• Strong crypto firms will emerge from the turmoil as some banks did after the 2008 crisis, he said.

There’s still hope for the crypto industry despite FTX’s implosion, and bitcoin continues to make sense for some investors, according to Fundstrat’s Tom Lee.

In a Friday interview with CNBC, Lee compared this year’s bear run in virtual currencies to the 2017-2018 sales that they recovered in the following years. He remained bullish on a shaky crypto sector for two reasons – the FTX blowout is potentially beneficial because it flushes out bad actors, while history shows that bitcoin has delivered good returns, according to him.

“It’s an important moment for the industry. 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’s a lot of people throwing gasoline in a crowded theater and yelling fire and it’s just coming to be important to those who really like what decentralization and bitcoin are doing,” Lee said.

He added that strong crypto companies emerging from FTX’s collapse will resemble those banks that survived the 2008 financial crisis, such as JP Morgan. “The mistake was to say the banks were untouchable, and that’s what happened with crypto now,” Lee said.

FTX filed for Chapter 11 bankruptcy recently, saying CEO Sam Bankman-Fried had resigned. It’s eye-popping collapse, triggered by a severe liquidity crisis, rocked crypto markets and caused chaos among other digital asset firms such as BlockFi and Genesis Trading.

But according to Lee, there are still many crypto companies with good balance sheets, especially those that built their business around bitcoin.

Acknowledging the pressure on the crypto industry, he said it has been a “terrible year” for the sector. Such damage to the digital asset industry comes as the Federal Reserve steps up its fight against inflation by aggressively raising interest rates. It triggered a crypto crash earlier this year as investors’ appetite for high-risk assets waned.

“It’s been a terrible year for crypto. No one has made money from crypto in 2022,” Lee said. But there is no reason to lose confidence in bitcoin, he continued, adding that he still advises customers to buy the token.

“We first read about bitcoin in 2017, and we recommended that people put 1% of their funds in bitcoin at the time. Bitcoin was under $1,000. That holding today would be 40% of their portfolio without rebalancing,” Lee said.

Bitcoin fell 2.11% at last check Monday to trade around $16,200, per CoinMarketCap.

“So, does bitcoin still make sense for someone who wants to have some sort of ballast? Yes,” he added.