Fundstrat head of research Tom Lee has warned investors to brace for a “painful decline” across the crypto and stock markets in 2026 amid geopolitical tension, before a recovery towards the end of the year.

In an interview on Tuesday with The Master Investor Podcast with Wilfred Frost, Lee said 2026 will mirror 2025 with tailwinds for the blockchain and AI industries, but risks from tariffs and political divides would hold the market back from a sustained rally initially.

Lee estimated a stock market correction of 15% to 20% this year, but added, “I think we really finish the year strong,” in part due to a more dovish US Federal Reserve and the conclusion of quantitative tightening last year.

He also said the White House picking “winners and losers” may also influence which sectors outperform this year.

For Bitcoin , Lee said he still expects it to set a new all-time high this year, but didn’t mention the $250,000 Bitcoin price predictionhe made in previous months.

Deleveraging has hurt the crypto market, says Lee

Lee said a new Bitcoin all-time high would be a key milestone as it would indicate the market has fully shaken off the Oct. 10 market crash, which saw around $20 billion worth of leveraged crypto positions wiped out:

“I think 2026 will be a really important test because if Bitcoin makes a new all-time high, we know that that deleveraging event is behind us."

Lee noted that crypto’s recent divergence from gold was partly due to these deleveraging cycles, which periodically shake the market and severely impair market makers, whom Lee described as the “central bank of crypto.”

Until crypto sees broader mainstream adoption and more institutional support, these disruptions will continue to impact market stability, Lee said.

Metals could beat crypto again in 2026, analysts add

Lee tipped energy and basic materials as the winning sectors in 2026, adding that gold should be included in a portfolio.

Into The Cryptoverse CEO Benjamin Cowen sees a similar pattern unfolding, stating on Tuesday that “metals outperformed crypto in 2025 and will likely do so again in 2026.” 

However, unlike Lee, Cowen expects metals to face a “big correction later this year,” during which crypto could decline even more.

“Trade the market you have, not the market you want.”