Tom Lee's 2026 Market Scenario: Starting with "Pain," Ending with a Rebound?

Fundstrat Global Advisors’ research director Tom Lee recently painted a picture: 2026 may begin with a “painful” downtrend for cryptocurrencies and stock markets, but a strong rebound is expected before the end of the year. This long-term bull even predicts that despite a difficult start, Bitcoin has the potential to reach new all-time highs within the year.

Divergence in Predictions

As a seasoned strategist on Wall Street, Tom Lee’s views are often seen as a market sentiment indicator. Recently, he publicly stated that influenced by the Federal Reserve possibly turning dovish and the end of the quantitative tightening cycle, Bitcoin could challenge new highs as early as January 2026. This aligns with his long-standing optimistic stance. For example, at the Dubai Summit at the end of 2025, he predicted Bitcoin could surge to $250,000 “within a few months.” Such public, highly infectious bullish narratives have become mainstream in the market’s perception of Fundstrat.

However, when looking inside the institution, a more intriguing shift emerges. A leaked internal outlook report from Fundstrat, led by Digital Asset Strategy Head Shawn Farrell, presents a starkly different short-term forecast. The report, aimed at its paid subscribers ($249 monthly), suggests that in the first half of 2026, cryptocurrencies could experience a significant pullback.

Bullish vs. Bearish

The internal report sketches a more risk-aware roadmap. It predicts that in the first half of 2026, the market may face a “strategic reset” risk event.

Farrell forecasts that Bitcoin could dip into a “deep value zone” of $60,000–$65,000, Ethereum could fall to $1,800–$2,000, and Solana might retreat to the $50–$75 range. The report considers these levels as “double-dip buying opportunities” for bulls. This divergence isn’t simply about right or wrong. Farrell later explained that there are different analytical frameworks within Fundstrat serving different client needs.

Tom Lee’s perspective leans more toward traditional asset management firms and investors with only 1%-5% of their assets allocated to crypto, emphasizing long-term, structural trends.

Macro Headwinds

Fundstrat’s internal report lists several reasons for its cautious outlook in the first half of the year. It points out that multiple short-term macro headwinds could suppress the market. These include: uncertainty from a potential US government shutdown, fluctuations in international trade policies (especially tariffs), waning confidence in AI investment returns, and policy uncertainties stemming from a change in Federal Reserve leadership.

This aligns with some of Tom Lee’s publicly expressed views. He also mentioned that 2026 might resemble 2025, where blockchain and AI industries will continue to benefit, but risks from tariffs and political divisions could limit the initial rebound. The report emphasizes that these macro factors, combined with high volatility, could trigger a valuation pullback in crypto assets in a relatively tight liquidity environment. However, the tone isn’t turning into a long-term bear market; instead, this adjustment is characterized as a “correction rather than a crash,” with sharp declines often serving as preludes to new rallies.

Market Status

The market indeed showed volatility entering 2026. According to Gate data, as of January 21, 2026, Bitcoin’s price dropped about 3.45% within 24 hours.

Gate’s data shows that in January 2026, Bitcoin traded as high as $97,860.60 and as low as $87,399.41. This over $10,000 wide fluctuation partly confirms the market’s sensitivity and unease at the start of the year.

The current price remains quite distant from the internal Fundstrat warning of the “deep value zone” ($60,000–$65,000), indicating the market is at a critical observation window.

Ethereum’s Advantages

Among many cryptocurrencies, Fundstrat’s report specifically highlights Ethereum’s potential relative advantages. The analysis suggests that after shifting to proof-of-stake (PoS) consensus, Ethereum no longer faces sustained selling pressure like Bitcoin miners, nor does it carry the potential whale sell-off risk associated with entities like MicroStrategy.

Additionally, compared to Bitcoin, concerns about Ethereum being threatened by quantum computing are considered lower. Based on these structural advantages, along with strong narratives like real-world asset (RWA) tokenization, the report sets an optimistic target of about $4,500 for Ethereum by the end of the year. Interestingly, Tom Lee has publicly expressed a strong bullish view on Ethereum, even predicting it will outperform Bitcoin. This consensus on Ethereum’s long-term value contrasts with the divergence on its short-term path.

Investor Considerations

Faced with seemingly contradictory internal Fundstrat views and the current volatile market, investors might consider several perspectives.

First, understanding the target audiences and time horizons of analysts is crucial. Tom Lee’s public statements are generally aimed at a broader audience, focusing on long-term structural opportunities; whereas internal reports serve professional clients seeking tactical deployment, emphasizing short- to medium-term risks and opportunities.

Second, the market’s inherent complexity allows for multiple scenarios like “rise first, then fall” or “fall first, then rise” to coexist. As one analysis article on Gate’s official website pointed out, both scenarios could be correct: Bitcoin might hit new highs in Q1, then sharply retreat in Q2.

For ordinary investors, rather than fixating on a single bullish or bearish forecast, it’s better to focus on market signals such as key support and resistance levels, the flow of mainstream capital, and broader macroeconomic policy trends.

The market is quietly validating some predictions. In just the first three weeks of 2026, Bitcoin’s price has moved from the early January low of $87,399.41 to nearly $98,000, then recently retreated below $90,000, perfectly illustrating a “painful” volatile start. When 2026 ends, will it remember the turbulence at the start, or celebrate the rebound at year-end? Perhaps both. The path depicted by this Wall Street strategist is being sketched out by market movements, and the true answer will be written in every trading battle and every pulse of the global economy.