TLDR:
- Tom Lee predicts S&P 500 could drop 20% in 2026 from policy changes despite Bitcoin’s potential year-end $100,000
- On October 10, the crypto crash liquidated $19 billion in positions and bankrupted a third of market makers in a single session
- The event deleted 1.6 million merchant accounts and zeroed out 2 million total accounts from price errors and high leverage
- Lee says AI will lead next cycle as crypto nears bottom after worst liquidation event in Bitcoin’s 15-year history
Wall Street strategist Tom Lee issued a stark warning about equity markets while maintaining an optimistic stance on Bitcoin’s near-term trajectory.
The co-founder of Fundstrat Global Advisors told CNBC that the S&P 500 could face a 20% correction in 2026 due to policy shifts. Lee cited potential monetary changes or administration decisions as catalysts for the projected decline.
Despite the bearish stock outlook, he believes Bitcoin could surpass $100,000 before the end of 2025.
Historic crypto crash wiped out third of market makers
October 10, 2025 marked the worst one-day liquidation event in Bitcoin’s 15-year history. A total of $19 billion in leveraged positions were wiped out within hours.
The event affected approximately 1.6 million merchants globally. About a third of active crypto market makers went bankrupt during the cascade.
The liquidation dispute was due to a combination of factors. A price error triggered automatic sales across multiple exchanges. Excessive leverage compounded the damage as margin calls flowed through the system.
Trading platforms struggled to process the volume forced liquidations. The incident exposed vulnerabilities in the market’s infrastructure that had been built up over months of high leverage.
Many retail accounts were completely zeroed out.
Two million accounts saw their balances reduced to zero according to data shared by Aaron Bennett. The scale of destruction caught even experienced traders off guard. Recovery efforts began immediately as exchanges worked to stabilize order books.
AI takes charge of crypto in the next market cycle
Lee positioned artificial intelligence as the dominant investment theme going forward.
He said AI rather than cryptocurrencies will drive the next big market cycle. This represents a change from recent years when digital assets led speculative interest. The strategist sees crypto approaching a bottom after the liquidations in October.
Bitcoin has shown resilience in recent weeks.
Prices have stabilized after the dramatic sell-off. Lee maintains confidence in a year-end rally above $100,000 for the flagship cryptocurrency. His forecast is based on historical patterns and institutional accumulation trends.
The stock market warning stems from concerns about three bear markets occurring within five years. Market volatility has repeatedly tested investors’ resolve.
Lee highlighted the pattern while stressing the overall market’s resilience. His comments come as traders weigh several macro risks heading into 2026.
Policy uncertainty remains an important issue for traditional markets. The potential shifts in Federal Reserve strategy can trigger repricing. Political transitions can introduce new regulations. These factors combine to create what Lee calls a policy shock scenario.
