Fundstrat saw Bitcoin hitting $200,000 before it fell to $16,000. Here’s why they’re still hopeful after a ‘horrific year’ for crypto

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Cryp­to has had a tumul­tuous year, to say the least. And even its bull­ish investors are admit­ting 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. That was before the Cryp­to Win­ter of May when sev­er­al cryp­tocur­ren­cies and lenders failed, and that turned out to just be a pre­lude to last month’s shock­ing col­lapse of FTX, one of the largest cryp­to exchanges in the world, in a mat­ter of 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 “hor­rif­ic year,” but insists that cryp­to isn’t 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 Clos­ing Bell: Over­time last week. “I think it is clean­ing a lot of and cleans­ing 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.’”

While he rec­og­nized it’s been bad, say­ing “nobody’s made mon­ey in cryp­to in 2022,” he said that it’s not so dif­fer­ent from the Cryp­to Win­ter of 2018, which was when some of the best projects were created.

FTX’s implosion—triggered by a liq­uid­i­ty cri­sis after Chang­peng Zhao, the CEO of rival exchange Binance, tweet­ed that the exchange would sell its hold­ing of FTX’s FTT token—sparked a sell­off that led it to quick­ly file for Chap­ter 11 bank­rupt­cy, and founder and CEO Sam Bankman-Fried to resign. But Lee said FTX’s col­lapse was­n’t 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 is impor­tant to cre­ate, essen­tial­ly, some sort of func­tion­ing cen­tral-bank-like activ­i­ty that can con­duct oper­a­tions when there is stress,” he said. “So I don’t think the FTX mod­el was flawed; it’s just, FTX itself was not capa­ble of play­ing that role.”

Ear­li­er this month, in the after­math of FTX’s fall, Bit­coin dropped 77% from its peak trad­ing in Novem­ber of last year. How­ev­er despite Bitcoin’s ongo­ing decline, Lee said he’s still advis­ing clients to buy the token.

“We first read about Bit­coin in 2017, and we rec­om­mend­ed peo­ple put 1% of their funds into Bit­coin at the time,” he said. “Bit­coin was under $1,000—that hold­ing today would be 40% of their port­fo­lio with­out rebal­ance. So, does Bit­coin still make sense for some­one who wants to sort of have some sort of bal­last? Yes.”

So what’s next for the indus­try? We could see greater loss or a sort of rise-from-the-ash­es sit­u­a­tion, Lee said.

“Is it going to have anoth­er ter­ri­ble year? I think if there’s more fraud, yes. But if this was the moment of finan­cial stress, what we’re going to see emerge from this is com­pa­nies that emerged out of the [glob­al finan­cial cri­sis],” he said.

And what if there’s a cryp­to ver­sion of a Wall Street bank out there?

“The ascen­dan­cy of banks like JPMor­gan real­ly came out of ’08,” Lee said. “And I think the mis­take peo­ple made in the GFC was to say banks were untouch­able, and I think that’s what’s hap­pen­ing with cryp­to now.”

This sto­ry was orig­i­nal­ly fea­tured on Fortune.com

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The 5 most com­mon mis­takes lot­tery win­ners make

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