Tom Lee, head of research at Fundstrat, told investors to brace for a tough start to 2026 before conditions improve in the second half of the year. He warned that political friction and tariff negotiations could cause significant setbacks for both stocks and Bitcoin, even if blockchain and AI remain strong in the long term.
Tom Lee’s call and immediate outlook
Lee said the Federal Reserve’s more dovish stance and the end of quantitative tightening set the stage for the subsequent rally.
He put the chance of a market correction in the mid-teens range, predicting a decline of about 15% to 20% at some stage.
He noted that geopolitics and growing political divisions, including the threat of new tariffs, would put a brake on a broader rally in the near term. He still expects a recovery at the end of the year once policy is eased and liquidity is restored, according to the report.
According to reports, the White House’s selective support for certain industries could tip the scales as to which sectors will lead the recovery.
2026 is shaping up to be similar to 2025.
– Good foundation 😀
– Tariff hikes and the White House picking “winners and losers”
– political division
– Tailwinds from AI and blockchain
But: Fed is dovish now, QT is overSo there may be a painful decline ahead, but we will… https://t.co/7Mp3rcOcP1
— Thomas (Tom) Lee (not the drummer) FSInsight.com (@fundstrat) January 20, 2026
Deleveraging continues to hurt crypto liquidity
Lee argued that the recent squeeze has made the cryptocurrency market vulnerable. Repeated forced exits have weakened market makers, making price movements even more volatile.
He also noted that Bitcoin’s new all-time highs would be an important signal that the market has weathered these stresses, although he did not reiterate his previous extreme price targets in his recent remarks.
The report highlights the difference between a technological backlash and a movement backed by broader adoption and deeper institutional currents.
Significant decline in Bitcoin
Despite warnings that a painful decline could still occur, some investors are not leaving completely. According to reports, some in the market still view the sharp pullback as a buying opportunity rather than an exit signal.
Despite the uncertainty surrounding tariffs and global politics, Mr. Lee and his camp believe that disciplined buy-in, spread out over time, has a better chance of winning than trying to time the perfect bottom while fear dominates the headlines.
Image: MarketWatch photo illustration/iStock photo
“Therefore, we will ‘buy the dip’, although a painful decline may be in store,” Lee said in the X post.
According to a report, over $1.8 billion was liquidated in 48 hours as Bitcoin lost ground.
Bitcoin fell to around $88,500 during the selloff, and data from Coinglass shows that the majority of positions eliminated were long, indicating that traders were taking positions in hopes of hitting the highs.
The decline wiped out gains made earlier this year and caused the cryptocurrency’s market capitalization to plummet, the biggest drop since mid-November.
Featured images from Allrecipes, charts from TradingView
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