Tom Lee is warning about the risks of leverage amid growing market pressure, while reaffirming the long-term institutional push towards Ethereum.
The recent price drop in the crypto market has reignited concerns among analysts and investors. Bitcoin (BTC) fell sharply in recent hours, trading around $93.000, while Ethereum (ETH) remains relatively stable amidst a volatile environment.
In this context, Tom Lee, president of BitMine and founder of FSInsight, shared a strategic reading on what might be happening behind the scenes: imbalances in the balance sheets of one or more market makers, liquidation pressures, and a clear warning for those who trade with leverage.
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Lee published his analysis on the social network X, where he suggested that the weakening of BTC has “all the signs” of a situation caused by actors with liquidity problems.
According to his view, these types of episodes create opportunities for aggressive operators —the “sharks” of the market— who seek to force liquidations and push prices down.
Although he acknowledges that the “pain” is real, Lee also emphasizes This is a transitional phase that does not alter the structural course of the crypto ecosystem, especially with regard to institutional advancement on Ethereum.
The hidden risk of liquidity in the markets: Lee's warning
Lee's hypothesis points to a recurring phenomenon in markets with low transparency: when one or more market makers face balance sheet problems, the impact spreads rapidly. These players, who typically provide liquidity and stability on asset exchange platforms, may be forced to sell assets to cover losses, triggering a cascade of liquidations on highly leveraged platforms.
According to Lee, the problem is exacerbated because these situations are not usually detected early. The lack of uniform regulation and the opacity in the operations of certain participants hinder early diagnosis. However, the effects are visible: abrupt price drops, as is currently happening with Bitcoin, in addition to increased market volatility and an atmosphere of uncertainty that affects both retail and institutional investors.
Lee doesn't mention specific names or figures, but his warning suggests that structural shifts are underway. The metaphor of "sharks circling" alludes to traders who identify weaknesses and exploit them to generate selling pressure. In this scenario, The use of leverage becomes especially risky.because it amplifies losses and exposes traders to automatic liquidations, he emphasized.
Source: CoinGecko
Ethereum and the institutional supercycle: the current correction does not affect its potential
Despite the adverse context, Tom Lee maintains an optimistic stance on Ethereum. In his post, he affirms that the ETH “supercycle”—driven by Wall Street’s interest in building on blockchain—remains intact. This view aligns with the narrative that has gained traction in recent months: Ethereum as basic infrastructure for tokenized financial products, digital identity solutions, and smart contracts applicable to traditional sectors.
It's important to clarify that the concept of a "supercycle," which Lee mentions, doesn't necessarily refer to a constant increase in the price of ETH, but rather to a profound and structural shift in how the market adopts its technology. According to the expert, the current price correction of the cryptocurrency, which is trading around $3.100, doesn't negate the institutional adoption of Ethereum, but could instead signal a necessary stage for strengthening the ecosystem's foundations and eliminating excesses or speculation.
Additionally, Lee's analysis also highlights a key difference between Ethereum and Bitcoin. While Bitcoin faces challenges related to its primary role as a store of value in a speculative and volatile market, Ethereum is establishing itself as a technological platform with clear practical applications. For him, this distinction doesn't diminish the value of either cryptocurrency, but rather reflects how major institutional players evaluate and leverage their potential from different perspectives.
Source: CoinGecko
Lee warns: prudence and zero leverage in crypto volatility
Following his analysis of the current market, Lee urged investors to avoid leverage. In crypto, Trading with leverage means taking positions with borrowed moneyThis can multiply profits, but also accelerate losses. Therefore, in times of high volatility like the present, Lee points out that this strategy becomes a trap for many traders, especially if they don't have sufficient margin to withstand sharp movements.
The expert warns that “This is not the time to use leverage.”, underlining the importance of prudence.
Looking ahead, Lee predicts the market could begin showing signs of recovery within six to eight weeks, after Thanksgiving. His projection, therefore, suggests the current negative impact is temporary and that once balance sheets stabilize and selling pressures ease, the ecosystem could return to its path of sustained growth.
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