The crypto market has been absolutely brutal lately, and if you’ve been watching your portfolio bleed, you’re not alone. I came across this video from Tom Lee — the Fundstrat co-founder who’s been one of Wall Street’s most vocal Bitcoin bulls — and he breaks down exactly why crypto is dumping right now. Let me walk you through what he said and add some extra context I dug up.
The Crypto Bloodbath in Numbers
Before we get into Tom Lee’s take, let’s set the scene. Bitcoin has dropped over 50% from its all-time high of around $126,000 back in October 2025. In early February 2026, BTC briefly broke below $61,000 — a level that would have seemed unthinkable just a few months ago. And it’s not just Bitcoin. Ethereum pulled back over 33% in a single week, and Solana hit a two-year low around $88. According to CNBC, more than $2 billion in leveraged positions were liquidated in just one week. The total crypto market lost roughly $2 trillion in value during this sell-off, per Reuters.
Tom Lee’s Explanation: Why Crypto Is Dumping
So what does Tom Lee think is going on? In his view, this isn’t some random crash — it’s a structural reset. He’s been saying that 2026 would be “a year of two halves,” and the first half was always going to be rough. Here’s the core of his argument:
The dump is largely driven by institutional repositioning. The same big players — hedge funds, ETF managers, corporate treasuries — that fueled the rally to $126K are now rebalancing their portfolios. CryptoQuant confirmed this in a recent report, noting that “institutional demand has reversed materially.” U.S. Bitcoin ETFs, which were once absorbing massive amounts of BTC, have seen significant outflows.
Lee also points to de-leveraging as a major factor. He compared the current environment to the period after the FTX collapse, where forced liquidations create a cascading effect. When overleveraged traders get margin-called, their positions are automatically sold, which pushes prices lower, which triggers more liquidations. It’s a vicious cycle, and we’ve seen billions wiped out through this mechanism alone.
The Macro Backdrop Making Things Worse
It’s not just crypto-specific issues. The broader macro environment has been working against risk assets. A few key factors are piling on:
U.S.-Iran tensions escalated sharply in late January and early February, sending shockwaves through global markets. When geopolitical risk spikes, investors tend to flee to safety — and despite the “digital gold” narrative, Bitcoin has been trading more like a tech stock than a safe haven.
The surging U.S. dollar, partly driven by Kevin Warsh’s Fed nomination, has put pressure on all risk assets. A stronger dollar typically means weaker crypto prices, and this time has been no different.
Tech stocks are selling off too. The State Street Technology Select Sector SPDR ETF (XLK) dropped for three straight days in early February. Bitcoin’s correlation with tech has been stubbornly high, so when Nasdaq bleeds, crypto bleeds harder.
Deutsche Bank analyst Marion Laboure put it bluntly: “This steady selling signals that traditional investors are losing interest, and overall pessimism about crypto is growing.” Meanwhile, gold has surged 61% over the past year while Bitcoin is down nearly 40% in the same period. That’s a painful comparison for anyone who bought the “inflation hedge” thesis.
But Tom Lee Is Still Bullish — Here’s Why
Here’s where it gets interesting. Despite all the carnage, Tom Lee hasn’t turned bearish. Not even close. He sees this dump as the setup for what comes next. His thesis is that the first half of 2026 is a “strategic reset” — painful but necessary — and the second half will bring a massive rally.
Lee has been calling for Bitcoin to hit $250,000, a target he reiterated in January 2026. His argument rests on a few pillars:
First, he believes the traditional four-year Bitcoin cycle is breaking down. The common view is that 2026 should be a “down year” based on historical halving patterns. But Lee argues that because so many people are front-running this expectation by selling early, the cycle itself gets disrupted — potentially setting up a stronger-than-expected rebound. As 247 Wall St. reported, this cycle-breaking thesis is central to his $250K target.
Second, Lee points to the “untapped market” thesis. Most investors still don’t own Bitcoin through their brokerage or retirement accounts. As access improves and regulatory clarity increases, he believes adoption could grow by “200 times” from current levels. That’s a bold claim, but it speaks to how early we still are in terms of mainstream financial integration.
Third, he’s extremely bullish on Ethereum, calling it “dramatically undervalued.” His crypto mining firm Bitmine Immersion Technologies has been aggressively accumulating ETH, now holding over 4.14 million tokens. Lee compared ETH’s current position to Bitcoin’s 2017–2021 run and suggested it could appreciate 10x or more from here.
Should You Be Worried or Buying?
Look, I’m not going to sugarcoat it — Tom Lee’s track record on timing has been mixed. He predicted Bitcoin would hit $200K by end of 2025; it peaked at $126K. He called for $15,000 ETH; it topped out around $4,830. A leaked Fundstrat internal document even suggested Bitcoin could fall to $60,000 — which is almost exactly where we are now. So his directional calls tend to be right eventually, but his timelines are often too aggressive.
That said, his framework for understanding why crypto is dumping makes a lot of sense. This isn’t a fundamental breakdown of the technology or the asset class. It’s a combination of institutional rebalancing, forced de-leveraging, macro headwinds, and a market that got ahead of itself. These are cyclical forces, not existential ones.
The key level to watch right now is $60,000–$65,000 for Bitcoin. James Butterfill from CoinShares called $70K a “key psychological level,” and we’ve already broken below that. If $60K doesn’t hold, things could get uglier before they get better.
The Bottom Line
Tom Lee’s message is essentially this: yes, crypto is dumping, and it might dump more in the short term. But the reasons behind the sell-off are temporary — institutional repositioning, macro shocks, and cascading liquidations. He believes the second half of 2026 will be dramatically different, with Bitcoin potentially making a run toward new all-time highs.
Whether you agree with his $250K target or not, understanding the mechanics of why we’re here is valuable. The market isn’t crashing because crypto is dead — it’s crashing because markets do what markets do. They overshoot on the way up and overshoot on the way down. If Lee is right about the cycle breaking, the current pain could be setting up one of the biggest buying opportunities we’ve seen in years.
Stay safe out there, and don’t invest more than you can afford to lose. This is not financial advice — just my take on what Tom Lee is seeing and what the data is telling us.