Tom Lee Reveals the Major Factor Behind the Ongoing Bitcoin Drop

Fundstrat’s Tom Lee has highlighted events from the Bitcoin Oct. 10 crash, which he believes have led to the ongoing decline.

Notably, Bitcoin (BTC) continues to lose ground as November nears its close, trading around $84,685 after dropping 22.7% this month. This decline places BTC on pace for its worst monthly fall since June 2022, when it plunged 37.27% after the Terra ecosystem collapse. 

With the market under pressure, Fundstrat’s Tom Lee joined CNBC’s Brian Sullivan to discuss what he sees as the true source of the ongoing downturn.

Bitcoin Still Feeling the Effects of the Oct. 10 Crash

Specifically, Lee highlighted Oct. 10 as the moment the market began to unravel. He explained that crypto prices started weakening immediately after a major shock occurred that day, even before equities showed similar behavior. 

According to Lee, the event severely damaged market makers, who supply essential liquidity and keep trading functioning smoothly across exchanges. When their balance sheets took a hit, they reduced exposure, trimmed trading activity, and contributed to steady selling. 

“I think that this drip that’s been taking place for the last few weeks in crypto reflects this market maker crippling,” the Fundstrat Managing Partner said.

Sullivan asked Lee to explain what caused the break, noting that Bitcoin traded near $125,000 on October 6 or 7, stayed around $120,000 shortly after, and then tumbled into the mid-$80,000 range by November 20. 

A Market Glitch Caused the Oct. 10 Crash

In response, Lee pointed to automated systems that govern crypto trading, especially Auto-Deleveraging (ADL), which forces liquidations when collateral prices fall. He said the catalyst came from one exchange where a stablecoin briefly slipped away from its $1 level due to thin liquidity and internal pricing errors. 

Instead of pulling prices from across multiple venues, the exchange relied on its own quotes, which created a temporary mispricing. Specifically, this mismatch triggered ADL events and set off a wave of liquidations that spread across other exchanges.

Sullivan then asked who was responsible for the issue. Lee declined to identify specific parties but called the trigger a technical flaw in the exchange’s code. He compared the event to earlier episodes in traditional markets, such as portfolio-insurance-driven selloffs in 1987 and structural mortgage issues in 2009. 

He insisted that the ADL pricing failure will not occur again, explaining that developers will adjust the code to prevent a repeat. Lee also pointed out that leverage amplifies such events and urged investors to avoid excessive leverage in crypto markets.

Tom Lee Believes Bitcoin Will Recover Fast

Meanwhile, Sullivan asked whether the market is going through a temporary washout within a broader bull cycle. Lee confirmed this, suggesting that many macro and crypto funds currently sit on large cash positions and prefer to wait until the liquidity damage clears. 

He pointed out that past Bitcoin slumps often reversed quickly once forced sellers exhausted their positions and patient buyers stepped in. 

He suggested that Bitcoin could still test $77,000 and Ethereum could fall toward $2,500, but he expects a swift rebound once the market stabilizes. According to Lee, “The recovery from there to all-time highs will be faster than the decline.”