Fundstrat’s Tom Lee says the worst phase of the current Bitcoin and crypto downturn is likely over.

Speaking at Binance Blockchain Week, he argued that digital assets have already “bottomed,” noting that recent weakness does not reflect the sector’s underlying progress.

In his view, the market is now positioned for a gradual but meaningful recovery.

Signs of a Market Turn

Lee said sentiment has darkened since October, with many investors showing fatigue after months of steady declines.

However, despite this mood shift, he believes the selling pressure is nearing exhaustion. He pointed to strengthening fundamentals that continue to grow beneath the surface, emphasizing that such conditions often precede a reversal.

As pessimism peaks, Lee sees renewed opportunity. He emphasized that the long-term trajectory of crypto remains intact. At the same time, he suggested that the most constructive phase of the cycle may be approaching.

Bitcoin Adoption Could Grow 200X

Meanwhile, Lee pointed to the vast discrepancy between Bitcoin adoption and global savings behavior. He said only 4.4 million Bitcoin wallets hold more than $10,000 in BTC, far below the nearly 900 million people worldwide who have more than $10,000 in retirement accounts.

This contrast, he argued, illustrates how early the market still is. If even a fraction of global savers allocate to Bitcoin, he believes adoption could expand as much as 200 times, offering a long runway for growth as the current downturn stabilizes.

Four-Year Cycle No Longer a Dependable Guide

Lee also questioned whether Bitcoin’s familiar four-year cycle still applies. He said recent price action has diverged sharply from earlier patterns, creating conditions that do not resemble past halving cycles.

“Crypto climbed 36% into early October and then reversed quickly,” he said, adding that this dynamic is inconsistent with the traditional cycle.

According to Lee, this decline stems from de-leveraging rather than halving effects. He compared the environment to the post-FTX period, noting that structural adjustments, rather than unpredictable timing events, have shaped the latest pullback. This shift, he said, further supports the idea that the market has already absorbed much of the downside pressure.

Moreover, Lee pointed to long-term returns. He said conventional markets, for example, U.S. equities and gold, delivered solid gains over the past decade. However, Bitcoin and Ethereum demonstrated far higher profitability.

For Lee, this history shows that crypto rewards patience and often recovers sharply after periods of stress, another reason he believes the current bottom is credible.

Tokenization Poised to Drive Momentum in 2026

Looking forward, Lee expects tokenization to dominate digital asset narratives in 2026. He said major financial institutions are preparing to move a wide range of assets onto blockchain infrastructure. If real estate becomes part of that shift, he noted that nearly a quadrillion dollars in financial products could transition on-chain.

This institutional push, he explained, reflects growing recognition of blockchain’s efficiency. Stablecoins, in particular, demonstrated how tokenized assets can generate strong demand.

He added that BlackRock’s Bitcoin ETF has already become one of the firm’s highest-earning fee products, signaling deepening engagement from legacy finance.

Bitcoin’s short-term direction may depend more on Strategy’s financial strength rather than on the recent uptick in miner selling, according to a new JPMorgan analysis.

The bank’s assessment indicates that the company’s ability to maintain its large Bitcoin reserve is becoming increasingly important. Indeed, it is now viewed as a more influential driver of market sentiment compared with the shifting conditions in the mining sector.

Network Weakness and Cost Pressures Weigh on Bitcoin

The analysts, led by Nikolaos Panigirtzoglou, noted that Bitcoin’s recent price softness comes from two main factors. Specifically, they cited weakening network fundamentals and rising concern about the Strategy’s balance-sheet dynamics. These pressures have created a fragile backdrop that continues to shape near-term expectations.

To illustrate this, the team highlighted a drop in both hashrate and mining difficulty. They attributed the decline to China’s renewed crackdown on private mining and to mounting financial strain on operators outside China.

Many miners now face tighter margins as the Bitcoin price hovers near estimated production costs.

This financial strain becomes more evident in JPMorgan’s revised model. It places Bitcoin’s average production cost at $90,000 per coin, a slight decrease from last month’s $94,000 projection. The estimate assumes $0.05/kWh electricity, with even slight increases sharply raising costs for high-expense miners.

As these pressures accumulate, several high-cost miners have turned to selling Bitcoin to cover expenses. Nevertheless, the analysts emphasized that, despite these sales, miner activity is not the dominant factor likely to dictate Bitcoin’s next major move.

Strategy’s Financial Cushion Seen as a Key Market Anchor

This leads to what JPMorgan views as a more consequential force: the Strategy’s ability to avoid selling its Bitcoin reserves.

The company’s ratio of enterprise value to the market value of its holdings stands at 1.13, a level comfortably above thresholds that might indicate financial strain. As a result, the firm is unlikely to face forced selling in the near term.

Supporting this outlook is Strategy’s newly established $1.44 billion U.S. dollar reserve. According to analysts, this reserve could cover roughly two years of interest and dividend payments, providing a meaningful financial buffer. This stability substantially reduces the likelihood that the company will need to sell any of its large Bitcoin holdings.

Although Strategy has slowed its pace of purchasing, its total holdings now exceed 650,000 BTC. JPMorgan argues that this stability is a crucial component of the market’s short-term outlook.

MSCI Index Decision Could Sway Strategy and Bitcoin Prices

Investors are also watching the January 15 MSCI decision, which will determine whether Strategy remains within the index provider’s equity baskets. The outcome could shape investor behavior in the coming weeks.

JPMorgan noted that much of the potential downside is likely already reflected in prices. Since MSCI launched its consultation on October 10, Strategy’s stock has crashed 40%, significantly underperforming Bitcoin.

Previously, analysts estimated that an MSCI deletion could trigger $2.8 billion in outflows—an impact that could grow if other index providers follow.

Despite this, the report suggests that a removal decision would likely have a limited additional impact, as investors have been preparing for this scenario for months. Conversely, if Strategy remains in the indices, it could spark a strong rebound in both the company’s stock and Bitcoin, potentially reversing the steep losses since early October.

Longer-Term Models Still Point to Significant Upside

While near-term conditions remain uncertain, JPMorgan also addressed the longer-term landscape. The analysts warned that if Bitcoin remains below the $90,000 production-cost estimate for an extended period, more miners could face financial pressure, prompting further shifts in production metrics similar to those seen in past market cycles.

Even with these risks, the bank’s broader analysis remains constructive. JPMorgan’s volatility-adjusted comparison between Bitcoin and gold continues to suggest a longer-term theoretical value near $170,000, assuming market conditions stabilize and investor appetite improves.

At the time of publication, Bitcoin trades around $92,340, according to CoinGecko. This is just above the bank’s updated production-cost estimate and represents a delicate point for market sentiment.