In a recent interview with CNBC, he explained that the events of October 10 did more than trigger price swings. They damaged the balance sheets of major market makers, the firms responsible for providing buy and sell quotes that keep the digital asset ecosystem functioning smoothly.
When these firms take heavy losses, they are forced to pull back, and that shrinkage can push the entire market into a fragile period where even small trades move prices more than usual.
Why Market Makers Matter
Market makers in crypto play a role similar to central banks in traditional finance. They help stabilise prices and ensure that traders can enter or exit positions without causing major disruptions. When the October liquidations wiped out large positions, many of these firms had to unwind their exposure. Balance sheets tightened, and trading desks shifted into capital-preservation mode.
This process creates what Lee called a multi-week deleveraging cycle, where reduced activity feeds more volatility, which then forces further pullbacks. Liquidity is simply the ease with which an asset can be traded without big price swings, and Lee noted that the current environment shows how quickly liquidity can evaporate when market makers step back.
A recent example came during a sharp intraday move in Ethereum in early November, when a relatively small burst of selling caused a deeper drop than expected on several major exchanges. Analysts linked the move to thin order books, a telltale sign of stressed liquidity conditions. It reflected the same dynamic Lee described: when key liquidity providers retreat, the market becomes far more sensitive to routine activity.
Lee also emphasised that in these weak conditions, assets like Bitcoin and Ethereum react to risk sooner than traditional equities. This makes crypto a leading indicator for broader market sentiment. Recent data support this idea. During a mid-November downturn in global equities, Bitcoin began falling almost a full day before major stock indexes showed weakness. Investors often view this early movement as a sign that crypto price action can reveal stress before it spreads.
More About Tom Lee
Tom Lee recently highlighted that crypto stablecoins have become the largest buyers of gold globally, driving price increases since early 2026. He noted that this trend is not bearish for Bitcoin but instead sets the stage for higher future prices for $BTC.
this reinforces what we said earlier this year…
– crypto stablecoins are the biggest buyer of gold in the World
– and have been the singular driver of higher prices since early 2026This is not bearish for Bitcoin $BTC but is setting a higher future price for BTC https://t.co/x4GlytXn94
— Thomas (Tom) Lee (not drummer) FSInsight.com (@fundstrat) November 26, 2025
The accumulation of gold by stablecoins reflects growing institutional and crypto-linked demand for safe-haven assets, while Bitcoin benefits indirectly, as market participants anticipate stronger cross-asset flows and enhanced liquidity in digital markets.
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