Despite the implosion of FTX, there is still hope for crypto. Fundstrat’s Tom Lee says Bitcoin continues making sense for some investors.
CNBC interviewed Lee in a Friday interview. He compared this year’s bear market in virtual currencies to 2017-2018, which saw them rebound in the years that followed. Two reasons he remained bullish on a wobbly cryptocurrency sector are that the FTX blowout can be beneficial in that it flushes out bad actors and history has shown bitcoin to have delivered good returns.
“It’s a crucial moment for the industry. It is removing a lot and purging a lot bad players, I believe. But does that mean crypto is dead? Lee stated that crypto is not dead.
He said that the strong crypto companies that emerge after FTX’s fall will be like the ones that survived 2008’s financial crisis, such as JP Morgan. Lee stated that the mistake was to believe that crypto could not be touched.
FTX filed recently for Chapter 11 bankruptcy, claiming that its CEO Sam BankmanFried had resigned. It was triggered by a severe liquidity crisis and rocked crypto markets.
Lee says that there are still many cryptocurrency companies with strong balance sheets, particularly those who have built their businesses around bitcoin.
He acknowledged that the crypto industry is under pressure and said it has been a “terrible year”. The Federal Reserve is aggressively raising interest rates to combat inflation, causing such damage to the digital-asset sector. This led to a crypto crash in early 2018, as investors lost interest in high-risk assets.
“It’s been an awful year for crypto. Lee stated that no one has made any money in crypto by 2022. He said that this is no reason to lose faith in bitcoin and that he still recommends clients to purchase the token.
“We read about bitcoin for the first time in 2017. We recommended that people invest 1% of their money into bitcoin at that time. Bitcoin was less than $1,000. Lee stated that this holding would represent 40% of their portfolio today, without rebalancing.
Bitcoin dropped 2.11% Monday at the last check, to trade at around $16,200, according to CoinMarketCap.
“So, bitcoin still makes sense for someone who wants some kind of ballast?” He agreed.