Will Crypto Go Back Up in 2026? Tom Lee's Market Outlook Suggests Strong Recovery

After a challenging late-2025 pullback across digital assets, the cryptocurrency market faces a critical question: can it bounce back? According to Fundstrat Global Advisors co-founder Tom Lee, the answer is a resounding yes—though the path forward won’t be smooth. Speaking on CNBC Squawk Box, Lee outlined a detailed vision for how crypto markets will recover and potentially reach new heights throughout 2026, reinforcing his conviction that the worst may be behind us.

Bitcoin’s Path to New Heights: Why January Signals a Turning Point

The catalyst for this optimism centers on Bitcoin’s immediate potential. Currently trading around $88.28K, Bitcoin has yet to peak despite the pullback from its October 2025 all-time high of $126.08K, Lee argues. His forecast is bold: a new record high could materialize as early as January 2026. “We were overly optimistic about achieving the high-water mark before December, but I do believe that bitcoin can hit a new all-time high by the end of January,” Lee stated, emphasizing that dismissing crypto’s upside potential would be premature.

This bullish stance represents an escalation in Lee’s long-running bull case for digital assets. While his August prediction of Bitcoin surpassing $200K by year-end fell short—with the cryptocurrency ultimately peaking near $126K—he remains undeterred. The January window, according to Lee, positions itself as a potential breakout month following what may have been a necessary correction phase. This redemption narrative mirrors market dynamics seen in previous cycles: a temporary retreat setting the stage for sustained advancement.

Ethereum’s Comeback Story: From 2025 Correction to Multi-Year Expansion

Beyond Bitcoin, Lee sees Ethereum entering a transformational phase. Currently at $2.96K, Ethereum has retreated significantly from its 2025 peak of $4.95K. However, Lee views this correction not as weakness but as the beginning of what he calls a “supercycle”—a multi-year expansion phase comparable to Bitcoin’s remarkable 2017-2021 run.

His conviction runs so deep that his own crypto firm, Bitmine Immersion Technologies, is acquiring Ethereum aggressively. The company now holds 4.14 million ETH, signaling Lee’s personal confidence in ETH’s long-term appreciation potential. “Our belief is that Ethereum is dramatically undervalued,” he emphasized. “We believe ETH is entering a supercycle similar to Bitcoin from 2017 to 2021. Acquiring an asset that can appreciate by 10 times or more is a strategic necessity for any modern treasury.”

This reframing transforms Ethereum exposure from speculative trading into institutional portfolio strategy, suggesting that major players will inevitably accumulate ETH as a balance-sheet essential rather than a discretionary bet.

The ‘Two Halves’ Theory: Understanding 2026’s Market Volatility and Recovery

While Lee’s outlook is fundamentally positive, he doesn’t minimize near-term challenges. His framework for 2026 divides the year into two distinct phases: an unstable first half followed by a powerful second-half surge. “The first half of 2026 may be tough as we deal with institutional rebalancing and a ‘strategic reset’ in the crypto markets,” Lee cautioned. However, this volatility is not a harbinger of fundamental problems—rather, it’s a prerequisite for the explosive rally he expects in the latter half.

This two-phase model reflects broader market mechanics. Institutional repositioning, while creating short-term turbulence, essentially clears out weak holders and establishes new market foundations. The reset follows multiple years of outsized gains across risk assets, making a digestion period logically necessary. When this phase concludes, the stage is set for the “massive rally” that Lee forecasts.

Broader Market Signals: Why Crypto Recovery Aligns with Tech and Economic Strength

Lee’s crypto optimism doesn’t exist in isolation—it’s supported by stronger equity market dynamics. He projects the S&P 500 will reach 7,700 by year-end 2026, a notably aggressive forecast reflecting his belief in resilient corporate earnings and AI-driven productivity gains. “If you look at the fundamental strength of the U.S. economy and the AI-driven productivity gains, we are looking at a path to S&P 7,700 by year-end 2026,” he explained.

This macroeconomic tailwind becomes particularly relevant for crypto. Major technology firms—Microsoft and Meta highlighted in recent earnings calls that AI spending shows no signs of slowing—are committing substantial capital to next-generation infrastructure. This capital deployment creates an environment where digital assets benefit from broader economic confidence and technological advancement narratives.

Furthermore, NFT-native brands like Pudgy Penguins demonstrate crypto’s expanding ecosystem beyond pure price speculation. With retail sales exceeding $13 million and over 1 million units sold in phygital products, plus its gaming platform Pudgy Party surpassing 500K downloads within two weeks, the space is generating tangible consumer adoption. The PENGU token, distributed to over 6 million wallets, represents real utility and engagement metrics—evidence that crypto markets are building sustainable, multi-layered infrastructure rather than existing purely on hype cycles.

The Investment Case: Opportunities Amid Volatility

Lee frames market pullbacks and volatility not as warnings but as opportunities for strategic accumulation. The volatility expected in early 2026, rather than signaling structural weakness, creates entry points for those with conviction. His thesis suggests that investors who remain patient and strategic through the turbulent first half will be rewarded by the recovery phase.

For cryptocurrency specifically, the overarching narrative for 2026 centers on recovery and establishment. Will crypto go back up? According to Lee and the emerging market fundamentals, the trajectory points upward—though the journey will require navigating near-term headwinds. The key takeaway is that temporary weakness need not derail long-term positioning; instead, it may represent exactly the kind of correction that precedes renewed appreciation in digital assets.