- Fundstrat's Tom Lee says there is still hope for the crypto industry despite FTX's decline.
- Its decline eliminates bad actors, he said, adding that bitcoin has consistently produced good returns.
- He said that strong crypto businesses will emerge from the mess like some banks after the 2008 crisis.
Despite the FTX explosion, there is still hope for the crypto industry, and according to Fundstrat's Tom Lee, Bitcoin still makes sense for some investors.
In an interview with CNBC on Friday, Lee compared this year's decline in virtual currencies to sales in 2017-18, when they rebounded in subsequent years. He remains bullish on a weak crypto sector for two reasons - the FTX breakout is beneficial as it weeds out bad actors, while history shows that Bitcoin offers good returns.
"It's an important thing for the industry. I think it's ripping off a lot of bad players and pushing out a lot of bad players. But do I think cryptocurrency is dead? No, I think a lot of people are throwing gas and screaming. A lot. In theaters. Fire and that will be important for people who really love decentralization and bitcoin," Lee said.
He added that the strong crypto companies emerging from the FTX collapse will be similar to the banks that survived the 2008 financial crisis, such as JP Morgan. "Acatsa was about saying banks are untouchable, and now it's happening with crypto," Lee said.
FTX recently filed for Chapter 11 bankruptcy and announced the resignation of CEO Sam Bankman-Fried. The severe liquidity crunch rocked the cryptocurrency market and caused havoc among other digital asset companies such as BlockFi and Genesis Trading, which was a significant crash.
But according to Lee, there are still many cryptocurrency companies with good balance sheets, especially those that have built businesses around Bitcoin.
He acknowledged the pressure on the cryptocurrency industry, calling it a "tremendous year" for the sector. Such losses in the digital asset industry come as the Federal Reserve aggressively raises interest rates and steps up its fight against inflation. This led to a decline in cryptocurrencies earlier this year as investors' appetite for high-risk assets waned.
"It was a huge year for crypto. No one made money from crypto in 2022," Lee said. But there is no reason to lose faith in Bitcoin, he said, adding that he still advises customers to buy the token.
"We first heard about Bitcoin in 2017, and we advised people not to balance 1% of their funds in Bitcoin," Lee said.
Bitcoin fell 2.11%, trading around $16,200 when last checked on Monday, according to CoinMarketCap.
"So does bitcoin still make sense for someone who wants some sort of ballast? Yes," he said.