Tom Lee expects Bitcoin and Ethereum to rally when gold and silver cool off

Top Wall Street figure Tom Lee thinks Bitcoin and Ethereum will bounce back once gold and silver stop their current hot streak, even though digital coins have been struggling lately.

Tom Lee from Fundstrat told viewers on CNBC’s Power Lunch program Monday that the basic strengths of cryptocurrencies haven’t changed. He pointed to two factors that should help digital assets: a weaker American dollar and the Federal Reserve getting ready to ease up on tight monetary policy.

Gold and silver rally pulls investors away from crypto

But there’s a problem this time around. Lee explained that crypto markets don’t have the boost they used to get from borrowed money because the whole industry has cleaned up its debt.

“Crypto doesn’t have the leverage tailwind because the industry delevered,” Lee told the network. He said right now, people are chasing after gold and silver instead of putting money into digital currencies.

“There’s a FOMO into buying that instead of crypto,” he added. Lee believes past patterns show that when precious metals take a break from climbing, Bitcoin and Ethereum usually jump higher.

The split between metals and crypto has been clear in recent weeks. Gold reached an all-time high of $5,100 on Monday, going up about 17.5% since January started.

Silver has done even better, shooting up 57% so far this year and hitting $110.

Experts say the metal rally comes from several worries: tensions between countries, threats of new trade tariffs, and the continuing weakness of the dollar. These issues have pushed people toward old-school safe investments.

Lee said crypto is still recovering from a massive debt cleanup that happened on Oct. 10. He described that event as something that “crippled many key players” at trading platforms and among market makers.

The sector is “limping along,” he said, but the basic health of the industry has gotten much better since then.

Bitcoin struggles while institutional interest in Ethereum grows

Bitcoin hasn’t shown those improvements in its price. The biggest digital currency has dropped roughly 30% from where it stood in October. It can’t seem to get back above the $95,000 mark and has recently fallen back toward $86,000.

“The precious metal move has sucked a lot of the oxygen out of the room,” Lee said. He thinks prices aren’t matching up with fundamentals, rather than showing real problems.

Lee clearly still trusts Ethereum. On Monday, BitMine, a company focused on Ether that has ties to Lee, bought another 20,000 ETH for $58 million, based on data from blockchain tracker Lookonchain.

Lee also mentioned that recent talks at the Davos forum showed banks and financial firms are increasingly interested in building on Ethereum and similar platforms.

Not everyone agrees that a weak dollar alone will push Bitcoin higher. GugaOnChain, who analyzes data for CryptoQuant, said recent money leaving ETFs shows people still want gold when they’re worried.

“For BTC to thrive,” they said, “the weakness of the American currency must come from risk appetite, not from fear.“