Bitcoin is trading well below that, near $5,539 on Friday, according to data from CoinDesk. This week, the majority of major cryptocurrencies saw double-digit downward swings, and bitcoin hit its lowest level of the year.

A key driver was bitcoin's "break-even" point, the level at which mining costs match the trading price. That level is down to $7,000 from an earlier estimate of $8,000 for the S9 mining machine by Bitmain, according to Fundstrat's data science team. Based on that, Lee estimates that fair value for bitcoin would be roughly 2.2 times the new $7,000 break-even price.

Tom Lee, co-founder of Fundstrat Global Advisors, lowered his year-end target to $15,000 from $25,000 — still well above where the cryptocurrency was trading on Friday.

But Lee is betting on a recovery. He told clients in a note Friday that even in the depths of a previous bitcoin bear market between 2013 and 2015, it "never sustained a move below breakeven."

"While bitcoin broke below that psychologically important $6,000, this has lead to a renewed wave of pessimism," said Lee, J. P. Morgan's former chief equity strategist. "But we believe the negative swing in sentiment is much worse than the fundamental implications."

Much of that price movement was driven by "crypto-specific" events including the contentious argument over bitcoin cash, Lee said. This week, the cryptocurrency community sparred on Twitter over what's known as a "hard fork" of bitcoin cash. The digital currency split into two versions -- "Bitcoin ABC," or core Bitcoin Cash, and "Bitcoin SV," short for "Satoshi's Vision." Bitcoin Cash itself is a result of a fork from bitcoin, after a disagreement on the best way to scale a digital currency.

For much of October, bitcoin seemed immune to a sell-off in global financial markets. The cryptocurrency traded comfortably in the $6,400 range before falling off a cliff on Wednesday.

Still, Lee is bullish on more institutional involvement bolstering prices into the end of this year. The launch of ICE, Starbucks and Microsoft-backed Bakkt and Fidelity entering the market is "part of a broader creation of infrastructure necessary for institutional involvement," he said.