The Market "A Song of Ice and Fire" in 2026: Tom Lee Predicts S&P 7700 Points, Cryptocurrency Will Experience a "Purgatory Moment"

BlockBeats News, January 8 — Fundstrat co-founder Tom Lee made a shocking prediction in an interview with CNBC: by 2026, the S&P 500 index will target 7700 points, but the path will be a trilogy of "celebration first, despair later, then rebirth." This Wall Street veteran, known for accurately gauging market pulse, warned: "There will be a moment this year that feels like entering a bear market," but it will rebound strongly, ending on a bullish note.

More notably, he defines this pattern as "joy, depression, and rally," mirroring the market rhythm of 2025. In his view, during this upcoming storm of volatility, a 15%-20% market correction is not an end but a "textbook buying opportunity."

Decoding the "JDR Model": The Market's Heartbeat in 2026

Tom Lee's "Joy-Depression-Rally" model is not just imagination. The 2025 market already previewed this script: AI hype in the first half drove the Nasdaq to surge, summer recession fears triggered over 10% correction, and in Q4, under policy shift expectations, a strong rebound. In 2026, this rhythm may be amplified by policy uncertainty with the new Federal Reserve chair.

Lee specifically pointed out that when the market tests the new Fed chair, a 15%-20% correction may occur, especially in the second half. But this is not the end of the cycle; rather, it’s a window for smart money to position. This resonates with signals from the current crypto market — Bitcoin oscillates around $94,000, spot ETF inflows have continued for five weeks totaling $6.63 billion, and BlackRock’s crypto assets have skyrocketed from $54.77 billion to $102.09 billion.

The "Twin Cities" of Crypto: Institutional Frenzy and Liquidity Alerts

Latest data from CoinDesk shows Bitcoin is aiming for $94,000, but Glassnode data sounds an alarm: spot trading volume has fallen to its lowest since 2023. This divergence of "rising prices, shrinking volume" foreshadows the "depression phase" predicted by Tom Lee.

However, institutional actions tell another story:

• Bitmine Immersion increased holdings by 33,000 ETH this month, reaching a total of 4.14 million ETH (3.4% of total ETH supply), with total crypto assets surpassing $14 billion

• CME Group’s average daily crypto derivatives trading volume in 2025 hit a record $120 billion

• Goldman Sachs upgraded Coinbase to "Buy," stating "regulatory clarity will drive the next wave of institutional adoption"

This divergence of "continuous institutional entry and retail trading contraction" hints that the crypto market in 2026 may undergo a deep "de-retailization" restructuring. When the 15%-20% correction occurs, panic selling might be more intense than before, but institutional capacity to absorb shocks is also stronger.

Federal Reserve "Stress Test": The Coming of Age for Crypto

The core variable Tom Lee warns about is the new Fed chair. The December 2025 FOMC meeting canceled the standing repo facility (SRP) with a daily limit of $500 billion, allowing banks to borrow from the Fed against unlimited government bonds, injecting seemingly unlimited liquidity into the market.

But this double-edged sword could turn in 2026:

1. First half: Easing expectations continue to ferment, risk assets including cryptocurrencies enjoy a "joy" rally

2. Mid-year: If inflation rebounds, the new chair may adopt an unexpectedly hawkish stance to establish credibility, triggering a "depression" phase

3. Second half: Policy clarity emerges, the market realizes the cycle is not ending, and a "rally" begins

For the crypto market, this means regulatory clarity will be a key variable. Currently, the Republican-controlled SEC and CFTC, Japan’s finance minister openly supporting crypto trading on exchanges, and countries like Iran and Turkmenistan legalizing crypto payments — the global regulatory framework is shifting from suppression to regulation.

2026 Crypto Investment "Survival Guide"

Combining Tom Lee’s macro predictions with current market signals, we have prepared three strategies for different investors:

Conservative: Gold-Crypto Hybrid Anchor

Using the asset allocation wisdom previously shared — gold as a risk control anchor (30%-40% position), with the rest allocated to Bitcoin and quality mainstream coins. During the 15%-20% correction, gold provides hedging, and crypto positions wait for rebound.

Aggressive: ETH/BTC Ratio Trading

Tom Lee reiterates ETH is "seriously undervalued." With institutions like Bitmine hoarding ETH and new scaling tools proposed by Vitalik Buterin (PeerDAS already online, zkEVM maturing), the ETH/BTC ratio may reverse in 2026. It is recommended to build positions gradually during the "depression" phase.

Radical: DeFi and RWA Tracks

Goldman Sachs points out that use cases beyond trading will drive the next wave of institutional adoption. Robinhood shifting to advanced traders, Polymarket opening real estate prediction markets, CME derivatives reaching record highs — all point to explosive growth in on-chain financial assets. During corrections, deploying in quality DeFi protocols and RWA (Real World Assets) tokens may capture the strongest beta during the "rally" phase.

Interaction: What is your 2026 investment script?

Tom Lee’s prediction of 7700 points and the "JDR Model" sketch a magnificent market landscape. But predictions are just maps; the real course depends on each investor’s own navigation.

Now, we want to hear your voice:

• Where do you think Bitcoin will fall during the "depression" phase in 2026?

• Will you go all-in during the correction, or dollar-cost average?

• Is ETH really "seriously undervalued" as Tom Lee says?

Follow us to get the latest insights from top analysts like Tom Lee;

Like if you agree that "crisis is opportunity";

Comment and share your 2026 asset allocation strategy;

Share with friends in crypto who are lost, to prepare for this "Song of Ice and Fire";

Leave a message telling us which sector you believe will perform best during the "rally" phase.

Remember, the best investment opportunities often arise in the most despairing moments. The "depression" in 2026 may be the prologue to the next wealth redistribution.

This article is based on Tom Lee’s public interviews and the latest data from authoritative sources like CoinDesk and Cointelegraph, and does not constitute investment advice. Markets are risky; decision-making should be cautious.