Wall Street is piling in, Bitcoin ETFs are humming, and sentiment is euphoric—yet a respected market voice is waving a red flag. Tom Lee warns that Bitcoin can still see a 50% crash, even as institutional flows grow. His message is simple but critical: crypto’s correlation with traditional markets hasn’t gone away, and deep drawdowns can happen fast, especially if equities wobble. For traders, the edge now lies not in guessing direction, but in preparing for two-sided volatility.

What’s happening

Tom Lee, in a recent interview with Anthony Pompliano, reiterated that large Bitcoin pullbacks are still on the table. He notes that: - Equities frequently experience 20–25% drops; in a risk-off shock, BTC can amplify those moves. - Structural demand from ETFs and institutions doesn’t eliminate volatility; it can concentrate flows and magnify swings. - Despite caution, he still projects a long-term path toward $200k–$250k into 2025, meaning even a 50% correction from those levels would revisit prior highs.

Why it matters to traders

If BTC rises into 2025 and then retraces 40–50%, strategies that chased upside without risk controls could be wiped out. Conversely, traders who plan around correlation shocks may turn volatility into opportunity—accumulating during forced selling or hedging efficiently into drawdowns.

Risk map: triggers to watch

- Equity drawdowns: A 20% S&P 500 decline can translate into a 30–40%+ BTC slide. Track breadth, credit spreads, and earnings revisions. - Liquidity shocks: Rising real yields, QT acceleration, or dollar spikes tighten crypto liquidity. - Regulatory shifts: Headline risk around ETFs, exchange supervision, or stablecoins can drive gap moves. - Positioning stress: Elevated perp funding, crowded longs, and high open interest raise liquidation risk.

Actionable playbook

• Define invalidation now: Pre-set max loss per trade and portfolio-level drawdown stops; reduce size as volatility rises.
• Hedge the tail: Use out-of-the-money puts or short dated perps as insurance into key macro/earnings events; cap risk on hedges.
• Stagger entries: Place laddered limit bids 15–50% lower to capture forced selling; pair with alerts on OI/liquidations.
• Watch correlation: If equities crack, rotate a slice into equity hedges or increase crypto hedges; monitor VIX, HY spreads, DXY, and real yields.
• Flow signals: Track ETF net flows, funding rates, and basis; fade overheated funding and chase strength when flows re-accelerate post-washout.
• Keep dry powder: Maintain stablecoin reserves for dislocations; deploy incrementally after capitulation signals (spiking liquidations, negative funding, panic breadth).
• Time horizons: If your thesis is 2025+, separate long-term cold storage from trading stack to avoid emotional de-risking at lows.

Bottom line

The path to $200k–$250k may include a brutal 50% detour. Build for both scenarios: protect against drawdowns while keeping a plan to scale in during stress. In crypto, preparation—not prediction—wins the cycle.

If you don't want to miss any crypto news, follow my account on X.