Wall Street veteran Tom Lee's 2026 prediction: Why ETH will crush BTC behind the S&P 7700 points?

When Tom Lee, Chairman of BitMine and co-founder of Fundstrat, casually predicted on CNBC that "the S&P 500 will reach 7700 points," the entire financial world trembled. This is not just a bold stock market forecast but also a signal that the crypto market is about to explode—because the two major policy variables supporting this judgment are pushing traditional finance and the crypto world onto completely opposite trajectories.

1. Policy Scissors Effect: Credit Card Rate Restrictions and the "Clarity Act" Dividend

Tom Lee's core logic is "policy arbitrage": Washington is brewing to limit credit card interest rates, which will directly impact bank lending capacity and weaken traditional financial profitability; meanwhile, the advancement of the "Clarity Act" is clearing regulatory fog for the crypto market. This "shrinking vs. expanding" effect will drive capital from traditional finance to the on-chain world.

Card Ratings CreditCards data shows that the average credit card interest rate in the US has surpassed 24%. Once the interest rate cap is forcibly lowered, banks will be forced to shrink subprime and consumer loans. This seems to protect consumers but actually cuts off the most lucrative profit sources for financial institutions. Credit tightening → liquidity drying up → stock market pressure. Tom Lee's target of 7700 for the S&P 500 is based on this "policy-driven capital reallocation" scenario.

In contrast, the promotion of the "Clarity Act" is like spring rain for the crypto market. In October 2025, the crypto market suffered heavy losses amid regulatory uncertainty, but Tom Lee believes that over time, away from the shock point, the market will see "a considerable recovery." His judgment perfectly matches current on-chain data: spot Bitcoin ETF has seen net inflows of $6.63 billion over the past five weeks, and BlackRock's crypto portfolio has surged from $54.77 billion at the start of the year to $102.09 billion. This is not retail speculation but institutional reconfiguration ahead of regulatory clarity.

2. Bitcoin vs. Ethereum: The "Tortoise and Hare Race" in 2026

Tom Lee's attitude towards Bitcoin is "cautiously optimistic"—expecting a new high—while he is "more positive" on Ethereum. Behind this judgment is a profound shift in the underlying logic of the 2026 crypto market.

Bitcoin (BTC): The $105,000 "Safe-Haven Ceiling"

As of January 18, BTC fluctuates between $105,000 and $109,000, with the hourly Bollinger Bands continuously contracting. Exchange reserves have fallen to a three-year low of 12.3%, indicating strong conviction among long-term holders to lock in positions. This is good (supply tightening) but also a hidden risk (short-term liquidity drying up could amplify volatility).

Technical clues:

• Resistance: $109,000–$110,000 (failed test points)

• Support: $105,000 (psychological level) → $103,500 (December 2025 low)

• Key signals: MACD forming a golden cross below zero and histogram turning red, combined with RSI breaking above 50, confirming a short-term bullish reversal

But Bitcoin's "ceiling" is obvious: it remains the narrative of "digital gold," lacking application scenarios. After the "Clarity Act" promotes institutional entry, BTC will be used as a "macro hedge" in portfolios, with stable but limited gains. Tom Lee's "new high" forecast is more based on continuous ETF fund inflows and Fed rate cut expectations (55.8% probability of a June cut) rather than technical breakthroughs.

Ethereum (ETH): The $1,750 "Staking Revolution"

ETH is currently around $1,788, up 2.59% in 24 hours, with the ETH/BTC rate rebounding above 0.019, indicating a springtime frenzy in the altcoin season. Although the Pectra upgrade may be delayed to Q3 due to testnet vulnerabilities, this creates a "buy-the-dip window."

Technical clues:

• Critical level: $1,750 (risk zone for large-scale staking liquidations)

• Breakout level: $1,850 (after breaking, quickly test $1,900)

• Ecosystem signals: Layer2 leaders like MATIC, LINK rose 3.5%-4.1% simultaneously, indicating funds are penetrating into application layers

Ethereum's real moat is "programmability." Tom Lee favors ETH outperforming BTC because he sees three major catalysts:

1. Staking Economy: Ethereum's staking rate exceeds 25%, making staked ETH a core way for institutions to earn stable yields (4% annualized). This locks up circulating supply and creates deflationary pressure.

2. Layer2 Explosion: After the Cancun upgrade, Layer2 costs decreased by 90%, making 2026 the year of native Layer2 application explosion. Leaders like OP, ARB continue to grow TVL, capturing value far beyond Bitcoin's ecosystem.

3. RWA Tokenization: As previously mentioned, the "$16 trillion trapped capital unlock," Ethereum is the main battlefield for asset tokenization. When BlackRock's BUIDL fund exceeds $5 billion, ETH as a settlement layer will see exponential growth in value.

3. Policy Dividend "Double Time Window"

Q1 2026 is a rare "policy vacuum dividend period":

• "Clarity Act" expected to pass before April: providing clear legal frameworks for staking, DeFi, stablecoins, accelerating institutional inflows

• Fed may cut rates in June: rate cuts will boost risk assets broadly, but Bitcoin may be partly sold off due to its "safe-haven" attribute, shifting funds to higher-yield ETH staking and DeFi

• Trump administration "crypto-friendly" but "protecting domestic": this means meme coins like TRUMP, RUSSIA, MELANIA may receive policy tilt, but mainstream assets like BTC/ETH will benefit from overall regulatory relaxation

Core insight: The best window for "spring planting" is before April. Once the "Clarity Act" is enacted, ETH will be the first to start, followed by BTC but with a lag—this is the underlying logic of Tom Lee's "ETH outperforms BTC."

4. Practical Strategy: A Three-Dimensional Combat Map Based on "ETH>BTC" Judgment

Conservative investors (total position 30%): Bet on certainty

1. Core ETH position (20%):

• Entry point: $1,750–$1,770 (edge of liquidation zone, highest safety margin)

• Action: Buy and immediately stake via Lido or Rocket Pool, locking in 4% annual yield

• Stop-loss: $1,720 (below liquidation zone)

• Take-profit: $1,950 (expected high point before Pectra upgrade)

• Logic: Even if price doesn't rise, staking yields can cover time costs

2. BTC hedge position (5%):

• Entry point: $105,000

• Action: Hold spot, no staking

• Stop-loss: $102,000

• Take-profit: $115,000

• Logic: Prevent tail risk if "ETH outperforms BTC" prediction fails

3. Stablecoin cash management (5%):

• Action: Transfer to Aave/Compound, earn 8-12% annualized

• Purpose: Prepare for black swan events (e.g., Pectra delay again) as bottom-fishing ammunition

Aggressive investors (total position 70%): Amplify volatility

4. ETH spot + options combo (30%):

• Spot: 20% (cost basis $1,780), staking simultaneously

• Options: Buy $1,850 call options (expiring end of April, covering the "Clarity Act" passage window), premium 5%

• Short put options: Sell $1,700 put options, collect 3% premium (hedging spot downside risk)

• P/L ratio: Max loss 13% (premium paid), unlimited upside potential

5. Low-leverage BTC contracts (20%):

• Entry point: $106,000 (MACD golden cross confirmed)

• Leverage: 3x

• Stop-loss: $104,500 (strict stop, no single loss exceeds 2% of total funds)

• Take-profit: $110,000 (partial take-profit 50%), remaining target $115,000

6. Altcoin hunting (20%):

• When ETH/BTC breaks above 0.02, immediately transfer 15% to Layer2 leaders (OP, ARB)

• 5% allocated to AI + DeFi concept coins (e.g., automated liquidity management protocols), participate in early testnet airdrops

All-weather automation strategies (advanced players):

• ETH staking cycle lending: stake ETH to lend ETH → re-stake → re-borrow, compounding positions (risk: high liquidation threshold, requires close monitoring)

• Cross-period options arbitrage: ETH options implied volatility (IV) reaches 120% on Deribit, short near-month calls and buy longer-dated calls to earn time value and volatility spread

• RWA tokenization arbitrage: buy tokenized government bonds on Ethereum (e.g., BUIDL), 5.2% annualized yield, far above traditional US bonds, while enjoying ETH ecosystem appreciation

5. Ultimate Risk Control: The "Three Major Reefs" for ETH Outperforming BTC

1. Pectra upgrade indefinitely delayed: if testnet vulnerabilities can't be fixed, market confidence may collapse, ETH could fall below $1,700. Countermeasure: set a total fund stop-loss at 5%.

2. "Clarity Act" stalls: if not passed by April, institutional funds may withdraw. Countermeasure: reduce holdings to below 50% one week before voting.

3. Strengthening "safe-haven" narrative for BTC: if geopolitical conflicts escalate (e.g., Middle East negotiations break down), funds may flow back into BTC for safety, causing ETH/BTC to decline. Countermeasure: hold 5% BTC as hedge.

Tom Lee's 7700-point S&P forecast is essentially a mirror of "traditional finance credit contraction." When credit card interest rates are limited, bank profits shrink, and capital seeks higher-yield assets. Ethereum's staking yields, DeFi returns, and RWA tokenization profits provide exactly this outlet.

On the ruins of "financial friction," ETH is building a highway.

A year ago, Trump's TRUMP coin's 8-hour $20 billion myth collapsed 90% to $5.3. This experiment proves that political hype cannot replace technological value. Tom Lee's judgment is based on a deep understanding of "value return"—Bitcoin is "digital gold," but Ethereum is the "financial internet."

When the "Clarity Act" clears regulatory hurdles, when the Fed cuts rates to release liquidity, and when $16 trillion trapped capital is unlocked via Ethereum, ETH outperforming BTC will no longer be a prediction but a certainty.

Now, it's your turn to choose:

• Do you agree with Tom Lee's "ETH>BTC" judgment? How would you allocate your positions?

• Do you think the "Clarity Act" can pass in April? Will it be the catalyst for ETH to break $2000?

• Under the shadow of Pectra delay, will you stake ETH or hold cash and wait?

• Does the TRUMP coin scam make you lose trust in political meme coins altogether?

Follow now for daily updates on the progress of the "Clarity Act." Share with friends still holding only BTC. Like and support our in-depth analysis of Wall Street bigwigs' alpha logic. Comment your strategy; the top 10 most liked will get an internal share of the Fundstrat Q1 2026 research report!

Remember: in 2026, more than price movements, "positioning" matters. Are you waiting in the "digital gold" safe, or racing on the "financial internet" highway?

Disclaimer: This article is for information sharing only and does not constitute investment advice. Cryptocurrency markets are high risk, and Tom Lee's predictions are not guaranteed outcomes. Please do your own research and practice strict risk management.