Tom Lee: S&P 500 Faces 20% Drop While Bitcoin Eyes $100K Comeback

TLDR:

• Tom Lee forecasts S&P 500 could drop 20% in 2026 from policy changes despite Bitcoin’s $100K potential by year-end
• October 10 crypto crash liquidated $19 billion in positions, bankrupting one-third of market makers in single session
• The event wiped 1.6 million trader accounts and zeroed 2 million total accounts from pricing glitch and high leverage
• Lee says AI will lead next cycle while 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 Fundstrat Global Advisors co-founder 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 equity outlook, he believes Bitcoin can surpass $100,000 before the end of 2025.

Historic Crypto Crash Erased Third of Market Makers

October 10, 2025 marked the worst single-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 traders globally. Roughly one-third of active crypto market makers went bankrupt during the cascade.

The liquidation spree stemmed from a combination of factors. A pricing glitch triggered automated sell-offs across multiple exchanges. Excessive leverage amplified the damage as margin calls rippled through the system. 

Trading platforms struggled to process the volume of forced liquidations. The event exposed vulnerabilities in market infrastructure that had built up during months of high leverage ratios.

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 Lead Over Crypto in Next Market Cycle

Lee positioned artificial intelligence as the dominant investment theme moving forward. 

He stated that AI rather than cryptocurrencies will drive the next major market cycle. This represents a shift from recent years when digital assets led speculative interest. The strategist sees crypto approaching a bottom following the October liquidations.

Bitcoin has shown resilience in recent weeks. 

Prices have stabilized after the dramatic selloff. Lee maintains confidence in a year-end rally above $100,000 for the flagship cryptocurrency. His forecast relies on historical patterns and institutional accumulation trends.

The equity market warning stems from concerns about three bear markets occurring within five years. Market volatility has tested investor resolve repeatedly. 

Lee highlighted the pattern while emphasizing overall market resilience. His comments come as traders weigh multiple macro risks heading into 2026.

Policy uncertainty remains a key concern for traditional markets. Potential shifts in Federal Reserve strategy could trigger repricing. Political transitions may introduce new regulatory frameworks. These factors combine to create what Lee calls a policy shock scenario.

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