Bitcoin has not yet peaked! Tom Lee: New high in January, S&P 500 hits 7,700 points

Fundstrat founder Tom Lee reiterated his bullish stance on CNBC, stating that Bitcoin has not yet peaked and could hit a new high as early as January. Lee describes 2026 as a “dual-speed” year: higher volatility in the first half and a strong rebound in the second half. Besides digital assets, he predicts the S&P 500 could rise to 7,700 points by the end of the year, driven by robust corporate profits and AI-driven productivity improvements.

Bitcoin January Turning Point: From $88,500 to a New High

(Source: Trading View)

Lee’s comments come after Bitcoin’s price experienced a significant correction at the end of 2025. According to CoinDesk, Bitcoin fell from a record above $126,000 in October to around $88,500 on December 31, a decline of about 30%. Lee believes January could be a turning point and describes this correction as part of Bitcoin entering a broader consolidation phase after several years of substantial gains.

This optimistic outlook is based on historical cyclical patterns. In the past three bull markets, Bitcoin has experienced corrections of 20% to 40% after reaching previous highs, followed by new all-time highs. In September 2017, Bitcoin retraced from $5,000 to $3,000, then surged to $20,000 two months later; in May 2021, it halved from $64,000 to $30,000 before reaching a new high of $69,000 in November. The current correction magnitude and timing closely align with these historical patterns.

Lee describes 2026 as a “dual-speed” year for the crypto market, expecting significant volatility in the first half, mainly due to institutional portfolio rebalancing and risk asset strategy adjustments. However, he emphasizes that this process is not a sign of structural weakness. Historically, such turbulence often sets the stage for stronger rallies later in the cycle, with a more vigorous rebound expected in the second half.

This “dual-speed” logic reflects institutional investor behavior. Early in the year, institutions typically reassess allocations and adjust positions, which can trigger short-term volatility. Once rebalancing is complete, their long-term holdings provide stable demand support. Coupled with ongoing inflows into Bitcoin ETFs, the second half could see supply tightening and demand rising in resonance, pushing prices to new highs.

Three Support Levels for the S&P 7700 Points

In addition to digital assets, Lee is also optimistic about the stock market. He predicts the S&P 500 could reach 7,700 points by the end of 2026, about 26% higher than the current level of approximately 6,100 points. This forecast is based on two main pillars: strong corporate profitability and productivity gains driven by artificial intelligence.

Synergy Between Corporate Profits and the AI Revolution

Corporate Profitability Reaches Historic Highs: U.S. corporate net profit margins hit record highs in 2025, with tech giants like Microsoft, Apple, and Google experiencing continuous growth in free cash flow. This profitability boost is not cyclical but a structural improvement, stemming from digital transformation and long-term cost optimization benefits.

AI Productivity Boom: Enterprise-level AI applications from OpenAI, Anthropic, and others are significantly boosting labor productivity. From automating customer service to code generation, AI is reducing operational costs while increasing output. This productivity uplift is expected to continue over the coming years, supporting corporate earnings growth.

Federal Reserve Policy Shift Expectations: While rates remain unchanged in January, markets anticipate 2 to 3 rate cuts in the second half of the year. Lower interest rates will reduce corporate financing costs and boost valuations, serving as a traditional catalyst for stock market gains.

Lee’s target of 7,700 points implies a P/E ratio for the S&P 500 of about 22 to 23 times, which is not unusual historically. During the 2021 bull market peak, the P/E ratio exceeded 25. If corporate profits continue to grow, current valuations are not in bubble territory. Lee states that any short-term pullback should be viewed as an opportunity rather than a warning, consistent with his outlook on Bitcoin.

Ethereum’s Severe Undervaluation and the Super Cycle Theory

Lee is particularly optimistic about Ethereum, believing its value is severely undervalued and that it is entering a multi-year expansion phase similar to Bitcoin’s cycles from 2017 to 2021. Despite Ethereum’s previous underperformance relative to expectations, Lee reinforces this view through tangible actions. His crypto-focused company, Bitmine Immersion Technologies, continues to increase its ETH holdings, viewing this as a strategic capital management decision rather than speculation.

Ethereum’s undervaluation is based on several dimensions. First, the technological upgrade cycle: Danksharding and Layer 2 scaling solutions are significantly reducing transaction costs and increasing network throughput. Second, institutional adoption is accelerating, with BlackRock’s tokenization funds and JPMorgan’s Onyx platform choosing Ethereum as the underlying infrastructure. Third, relative valuation advantages: compared to Bitcoin, Ethereum’s exchange rate is at multi-year lows; returning to its historical average could mean over 50% upside.

Lee positions Ethereum as the beginning of a “super cycle,” implying sustained growth over the coming years rather than a single explosive year. This perspective requires investors to adopt a long-term view and not be distracted by short-term volatility. For high-risk-tolerance investors, current conditions may be an opportune moment to allocate to Ethereum, as market consensus has yet to form and valuations remain relatively reasonable.