Bitcoin's plunge is a buying opportunity, according to Tom Lee, the cofounder of Fundstrat and one of the earliest mainstream strategists to publish a price target.

Bitcoin fell 27% last week, its worst week in three years.

Lee raised his mid-2018 target on the cryptocurrency to $20,000 from $11,500.

He disagrees that bitcoin is in a bubble and says anyone who pegs the rally on speculation hasn't done the proper homework.



The recent plunge in bitcoin's price has cheapened the cryptocurrency and created another buying opportunity for traders.

That's according to Tom Lee, the cofounder of Fundstrat. This summer, while bitcoin was still below $5,000 a coin, he became one of the earliest Wall Street strategists to endorse its rise.

Last week was the worst in three years for bitcoin. As bitcoin plunged, Lee turned even more bullish, raising his mid-2018 target to $20,000 from $11,500. He estimates that today's fair value for bitcoin is $19,103, or about 26% above its current levels.

"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 a note on Friday.

"Going forward, our projection is wallets (unique IP address) will rise to 50% by mid-2018 and activity per user up 10% from current levels. Think about it, adoption of bitcoin is still in the earliest stages, in US and globally (it's more than a millennial story outside the US). If wallets double in the future, the value of bitcoin would on a log basis (square) to that growth."

Bitcoin recovered some of its losses over the long Christmas weekend and traded near $15,157 a coin at 7:51 a.m. on Tuesday. Lee told Bloomberg TV on Friday that the pullback was "very healthy."

The number of wallets and transaction activity per wallet help explain about 93% of bitcoin's rise since 2013, according to Lee. He also disagrees with the idea that speculation is the only explanation for bitcoin's rise and says anyone who claims that hasn't done the proper homework.

"If someone says bitcoin's a bubble, it's the smallest, least held bubble I've ever met," Lee told Bloomberg TV. "I don't know very many institutions that own bitcoin. So how can something be deemed a bubble that's only held by a few?"