Tom Lee, the founder and head of research at Wall Street firm Fundstrat, foresees a bumpy and “painful” start for the markets in 2026. In a recent podcast, Lee reiterated that 2026 could look like 2025, citing rate escalations, Fed independence and other catalysts.
Lee added that the replacement of Jerome Powell as Federal Reserve chairman could also impact markets.
“The market is always testing a new Fed. The process of identifying, confirming and market testing can cause a correction.”
All things considered, he concluded,
“2026 will be similar to 2025. So there could be a painful downturn ahead, but we would ‘buy the dip’.”
For perspective, the US tax season and April 2025 rates have dragged Bitcoin’s down [BTC] price dropped by 11%. It dropped from $84k to $74k. However, it later rose to $126,000 in October, before wiping it all out by the end of 2025.
Here it is worth pointing out that the market only recovered in the second quarter of 2025 after major tariff agreements were reached with China and other countries.
It should also be said that US President Donald Trump had done so at the time of writing said that an agreement on Greenland was close. This led to the cancellation of the proposed rates and a brief relief from the market. Hence the question: is it enough for a potential BTC rebound?
Consolidation or Capitulation Ahead for BTC?
At the time of writing, the price of Bitcoin was just shy of $90,000. It fell 10% from last week’s high of $98,000, driven by tariff jitters.
However, macro risk, including the Japanese bond market crisis, could keep BTC within a price range, according to analytics firm Swissblock. In doing so, it cited its own Bitcoin Risk Index (BRI).
The BRI rose to 21, just above the High Risk zone of 25 – marking the current consolidation that started in November.
Source: X/Swissblock
Swiss bloc added,
“The bullish case: If this support holds in the near term, we could see clear momentum towards targets of $94.8k and possibly $99k. The bearish case: If sellers manage to consolidate price action below $89.2k, the next line of defense for buyers is at $84.5k.”
That said, institutional demand for BTC through US Spot BTC ETFs has cooled off recently. Bitcoin’s price is closely correlated with ETF inflows. ETFs were net sellers at the end of 2025, but they turned around and became net buyers in early January 2026. This increased the value to $98,000.
However, since then, institutional flows have stagnated around the neutral level, signaling a pause in the recent recovery as players digest the macro landscape and geopolitical tensions.
Source: CryptoQuant
Final thoughts
- Tariffs and a new Fed chairman could roil markets in early 2026, according to Tom Lee.
- Institutional flows improved in early January but have stagnated since then.