The only major Wall Street strategist to formally cover bitcoin raised his price target on the digital currency the day of a massive price rout.

"We are buyers of bitcoin on this pullback," Fundstrat co-founder Tom Lee said in a Friday note. "The intrinsic/fundamental value of bitcoin has risen in the past month given the surge of new wallets and hence, explains the rise in our short-term target price."

Lee increased his mid-2018 price target on bitcoin to $20,000 from $11,500 based on higher user volume.

That implies a 37 percent rise from bitcoin's price on Coinbase of roughly $14,600 Friday afternoon. Bitcoin had plunged to a low of $10,400 in the morning, down 47 percent from a record high above $19,800 reached Sunday.

Bitcoin over the last 12 months

Source: Coinbase

"We are revising our mid-2018 target to reflect the surge in activity in the past few months — that is, the base of users is up," Lee said in the report. "Going forward, our projection is wallets (unique IP address) will rise ... 50% by mid-2018 and activity per user up 10% from current levels."

The increase marks the second time Lee has raised his mid-2018 bitcoin price target since initiating it at $6,000 in August. He had previously raised it to $11,500 in late November.

Even with Friday's declines, bitcoin has soared more than 1,500 percent this year.

"There seems to be some parabolic/speculative surge in bitcoin — this is unhealthy," Lee said. But "we are not surprised to see bitcoin selling off — the rise in recent weeks, while in part, explained by wallet gains, was also fueled by speculation."

From a technical standpoint, Lee's report said $11,000 is becoming an area of support for bitcoin's price. The next levels down are $10,131, $7,918 and roughly $7,000, the report said.

On Friday, Lee maintained his 2022 target of $25,000 for bitcoin. He also raised his mid-2018 price target on the over-the-counter Bitcoin Investment Trust (GBTC) to $2,200 from $1,300. GBTC has soared more than 1,500 percent this year to $1,990.

In July, Lee became the first widely followed market strategist to issue a report focused on predicting bitcoin's price. He was J.P. Morgan Chase's chief equity strategist from 2007 to 2014 before co-founding Fundstrat Global Advisors, where he is managing partner and head of research.