Bitcoin, Ethereum Enter ‘Supercycle,’ Says Lee

Lee links the ISM’s first expansion reading in 3+ years to early-stage crypto rallies, citing BTC and ETH sensitivity to ISM turns.

Fed balance-sheet stabilization is viewed as stealth liquidity easing, helping fuel recent Bitcoin and Ethereum strength.

Historical patterns show BTC reacts early to economic expansion, with Lee suggesting new highs could emerge as soon as January.

The ISM Manufacturing Index moved back above 50 leading to Tom Lee stating that both Bitcoin and Ethereum may be entering a “supercycle.” Lee made the comments noting that the change follows more than three years of readings below 50, which signaled contraction. He linked the new expansion reading to a pattern that historically aligns with strong crypto uptrends.

ISM Expansion Returns After Record Downtrend

Lee highlighted that the ISM crossing above 50 usually signals an improving business cycle. He stated that Bitcoin and Ethereum have shown strong sensitivity to this indicator. Moreover, he noted that crypto tends to react early when the ISM reverses from long contraction periods

This shift, he said, creates conditions that resemble prior early-stage rallies. However, he also pointed to a related change in liquidity conditions. He explained that the period of quantitative tightening drained liquidity from markets

Now, with the Federal Reserve expected to hold its balance sheet steady, he said the effect resembles quantitative easing. The market, he added, anticipated this pivot before the recent meeting.

Liquidity Debate and Market Expectations

Lee argued that holding the balance sheet flat effectively injects liquidity because it stops the prior pace of contraction. He said this shift explains why Bitcoin and Ethereum gained ahead of the policy update

Additionally, he emphasized that the crypto market pays close attention to these liquidity signals. He described Bitcoin as responsive to monetary policy and the broader business cycle during this phase.

This view extended to smaller assets. He mentioned that a potential rate adjustment, combined with expansion in the ISM, supports a broader risk-on environment. He also referenced discussions about possible banking deregulation, which he said could benefit small-cap equities while supporting the wider cycle.

Market Cycles and Timing Signals

Lee stated that Bitcoin often moves earlier than expected during these shifts. He noted that historical patterns suggest new highs can appear surprisingly early, including as soon as January

He also mentioned research showing that detrended Bitcoin prices strongly correlate with ISM movements, much like the copper-to-gold relationship. He said this reinforces the view that crypto markets are reacting to economic expansion rather than behaving as isolated assets.

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