Tom Lee, head of research at Fundstrat, told investors to prepare for a rough opening in 2026 before conditions improve later this year. He warned that political friction and tariff discussions could trigger meaningful disruptions for both stocks and Bitcoin, even as blockchain and AI remain strong over the long term.
Tom Lee’s needs and short-term situation
Lee said the U.S. Federal Reserve’s more dovish stance and an end to quantitative tightening set the stage for gains later.
He puts the likelihood of a market correction in the mid-teens, estimating a decline of around 15-20% at one stage.
He noted that geopolitical factors, including the threat of new tariffs, and increasing political divisions are impeding immediate and widespread mobilization. According to the report, he still expects a year-end rebound once policies are eased and liquidity is restored.
Selective support from the White House for certain industries could tilt which sectors lead the recovery, according to the report.
2026 is expected to be similar to 2025.
– Good basics 😀
– Tariff hikes and the White House picking “winners and losers”
– political division
– Tailwinds from AI and blockchain
But: For now, the dovish Fed and QT are over.So while a painful decline may lie ahead, we… https://t.co/7Mp3rcOcP1
— Thomas (Tom) Lee (not drummer) FSInsight.com (@fundstrat) January 20, 2026
Deleveraging is still taking a toll on cryptocurrency liquidity
Lee argued that recent pressures have left the cryptocurrency market vulnerable. Market makers have been weakened by repeated forced exits, which has made prices more volatile.
He also noted that a new Bitcoin all-time high would be an important sign that the market has overcome these stresses, although he did not repeat his previous extreme price targets in his latest remarks.
The report highlights the difference between technological rebounds and movements that support broader adoption and deeper institutional trends.
Massive Bitcoin Sell-Off
Despite warnings that a painful downturn could still unfold, some investors are not backing off completely. According to the report, some in the market continue to view the plunge as a buying opportunity rather than an exit signal.
Despite the uncertainty over tariffs and global politics, Lee and his camp believe that rigorous buying the dip spread out over time offers better odds than trying to hit a perfect bottom while fear dominates the headlines.
Image: MarketWatch photo illustration/iStock photo
“So while there may be a painful downturn ahead, we will ‘buy the dip,’” Lee said in an X post.
As Bitcoin fell, more than $1.8 billion was liquidated in 48 hours, according to the report.
Bitcoin fell to around $88,500 during the downturn, with most of the deleted positions being long positions, according to Coinglass data. This is a signal that traders have taken positions at higher prices.
The sell-off erased gains made earlier this year and sent the cryptocurrency’s market capitalization down sharply, recording its biggest decline since mid-November.
Featured image from Allrecipes, chart from TradingView
editing process for focuses on providing thoroughly researched, accurate, and unbiased content. We adhere to strict sourcing standards and each page undergoes diligent review by our team of top technology experts and seasoned editors. This process ensures the integrity, relevance, and value of the content for readers.
