Tom Lee on 2026 Crypto Crash, IBIT Volumes, and Volatility

• Tom Lee says the selloff resembles past cycles, driven by sentiment shocks and leverage despite stronger crypto fundamentals.
• Record IBIT ETF and options volumes suggest U.S.-led leverage, not exchange liquidations, amplified the downturn.
• Removal of ETF options caps expanded leverage, worsening volatility as Bitcoin and Ethereum saw sharp dips.

Crypto markets recorded sharp losses over the past 10 days, with Ethereum down 40% and Bitcoin down 30%. Bitmine Chairman Tom Lee discussed the selloff. Lee attributed the decline to reflexive sentiment, external shocks, and structural leverage tied to U.S. trading activity.

Sharp Price Declines and Historical Dips

According to Tom Lee, recent losses triggered widespread “rage quitting” across crypto markets. He noted that many commentators blamed structural problems for the decline. However, Lee said similar volatility has appeared repeatedly in crypto history.

Since 2018, Lee said Ethereum has suffered drawdowns of 60% or more seven times. He added that this pattern appeared almost every year. In 2025, Ethereum recorded a 64% decline, according to his data.

Lee said the 2026 drop felt worse because prices fell alongside improving crypto fundamentals. He contrasted this with 2022, when NFT failures and collapses at Three Arrows Capital and FTX defined the downturn. In comparison, Lee said recent pressure came from events outside crypto markets.

He cited the October 10 market shock, followed by a Truth Social post linked to Greenland, rising gold and silver prices, and a Kevin Warsh announcement. Lee said these factors weighed on sentiment despite limited direct crypto exposure.

IBIT Volume, Options, and Trading Dynamics

Lee pointed to analysis from Parker, shared on X, regarding unusual activity in BlackRock’s IBIT ETF. Parker reported that IBIT posted its highest-ever trading volume at $10.7 billion. Options premiums also reached a record $900 million.

Notably, Parker said Bitcoin and Solana fell together during U.S. trading hours. Meanwhile, centralized exchange liquidations remained relatively low. He suggested that a large IBIT options position drove the selloff.

Parker added that some IBIT holders operate single-asset funds, many based in Hong Kong. He said these structures likely isolate margin risk. Parker also noted links to unwinding yen carry trades and heavy losses in silver markets.

Contract Limits, Leverage, and Market Structure

Lee highlighted that Nasdaq recently removed options contract caps for major Bitcoin and Ethereum ETFs. Parker said Nasdaq requested immediate approval from the SEC, which granted the change on January 21. Bitcoin prices dropped sharply on January 29.

Parker said the removal expanded leverage through IBIT beyond crypto-native venues. Lee also said excessive leverage worsens volatility during unstable periods.

Lee added that Bitcoin has never posted a negative four-year return. He also said Ethereum continues to show strong usage growth. He noted that Bitmine holds no debt and earns staking and cash interest, while MicroStrategy stock reacted positively to recent earnings.