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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

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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