Current Bitcoin Pullback is Healthy, Says Tom Lee

Neil Dennis

Bitcoin enthusiasts and critics alike have responded strongly on social media to a Tweet sent this week by Fundstrat co-founder Thomas Lee, who said the current bitcoin pullback is healthy.

"It's healthy to see bitcoin pullback here," said the managing partner and head of research at Fundstrat Global Advisory. He added:

As for the search traffic for bitcoin being low, I also think that is a good sign. It means the rise in bitcoin has not been accompanied by massive hype.

According to Google Trends analytic service, search for bitcoin in the US have fallen by around 45% since their end of June peak. But this has not stopped Lee, and many others, making some very lofty price predictions.

Optimistic Price Predictions

Lee has become one of bitcoin's biggest advocates and his price predictions are among the loftier. Not on the scale of cyber-security provider John McAfee, who believes bitcoin will reach $1 million in 2020, but Lee thinks bitcoin's $20,000 high will be taken out and a run up to $40,000 is possible this year.

But the critics are never far away: Peter Schiff, chief executive of Euro Pacific Capital - an arch gold bug who has likened interest in bitcoin to "tulip mania", replied to Lee's Tweet, saying "every sign is bullish according to you".

He added: "Fewer searches shows that new buyers are scarce.  Existing speculators pressing their bets, many using leverage, have pushed prices up.  But without new buyers prices will collapse."

Schiff's comments prompted several of Lee's followers to jump to his defence, with one of them Tweeting that "trolls like you makes every bull run so much more enjoyable".

Trump Effect

US president Donald Trump has also been weighing in on bitcoin recently, slamming the cryptocurreny market as "highly volatile" and values "based on thin air". While the crpto-community thanked him for the free publicity, prices have been weaker ever since his July 11 Twitter outburst.

Bitcoin's price has fallen from just above $12,100 on July 11 to around the $10,400 on Tuesday June 16.

Indeed, as Lee stated, pullbacks in asset prices can be healthy. They may only be a sign of some traders taking profits before buying back in, but whatever the cause, a lower price during what has - very obviously - been a strong bull run can be an alluring buy signal to tempt fresh investment into the market.