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The FTX fiasco doesn't make bitcoin untouchable and crypto doomsayers are just 'people throwing gasoline,' Fundstrat's Tom Lee says

Thomas Lee Tom Lee Fundstrat
Tom Lee was formerly JPMorgan's chief equity strategist.Brendan McDermid/Reuters
  • There's still hope for the crypto industry despite FTX's collapse, said Fundstrat's Tom Lee.

  • Its crash flushes out bad actors, he said, adding bitcoin has historically delivered good returns.

  • Strong crypto firms will emerge from the turmoil like some banks did after the 2008 crisis, he said.

There's still hope for the crypto industry despite FTX's implosion, and bitcoin continues to make sense for some investors, according to Fundstrat's Tom Lee.

In a Friday interview with CNBC, Lee likened this year's bear run in virtual currencies to the 2017-2018 sell-off from which they rebounded in the following years. He stayed bullish on a wobbly crypto sector for two reasons — the FTX blowout is potentially beneficial because it flushes out bad actors, while history shows bitcoin has delivered good returns, according to him.

"It's an important moment for the industry. I think it is cleaning a lot of and cleansing a lot of bad players. But do I think crypto is dead? No, I think there's a lot of people throwing gasoline in a crowded theatre and yelling fire, and it's just going to be important for those who really like what decentralization and bitcoin are doing," Lee said.

He added that strong crypto companies that emerge from FTX's collapse will be similar to those the banks that survived the 2008 financial crisis, like JP Morgan. "The mistake was to say that banks were untouchable and that's what happened with crypto now," Lee said.

FTX filed for Chapter 11 bankruptcy recently, saying its CEO Sam Bankman-Fried had resigned. It's eye-popping collapse, triggered by a severe liquidity crunch, rocked crypto markets and wreaked havoc among other digital-asset firms such as BlockFi and Genesis Trading.

But according to Lee, there are still many crypto companies with good balance sheets, especially those that built their business around bitcoin.

He acknowledged the pressure on the crypto industry, saying it's been a "terrible year" for the sector. Such damage to the digital-asset industry comes as the Federal Reserve ramps up its fight against inflation by aggressively raising interest rates. That sparked a crypto crash earlier this year as investor appetite for high-risk assets waned.

"It's been a horrific year for crypto. Nobody has made money in crypto in 2022," Lee said. But that's no reason to lose confidence in bitcoin, he continued, adding that he's still advising clients to buy the token.

"We first read about bitcoin in 2017, and we recommended people put 1% of their funds into bitcoin at the time. Bitcoin was under $1,000. That holding today would be 40% of their portfolio without rebalance," Lee said.

Bitcoin fell 2.11% at last check Monday to trade around$16,200, per CoinMarketCap.

"So, does bitcoin still make sense for someone who wants to sort of have some sort of ballast? Yes," he added.

Read the original article on Business Insider