Futures Now

As bitcoin plunges, mega-bull Tom Lee stands by his $25,000 target

Bitcoin bull stands by his call on the cryptocurrency

Fundstrat's Tom Lee is standing his ground on bitcoin soaring to $25,000.

On Wednesday, the cryptocurrency plunged below $8,000 and traded at around $7,500, essentially giving up most of the gains bitcoin had managed to make from mid-April to early May after hitting 2018 lows.

But not only does Lee believe Wednesday's drop is solely due to "typical crypto volatility," as he said in an email to CNBC, he also identifies three key factors that still have him believing bitcoin will hit $25,000.

The first is the cost of producing and replicating bitcoin. When bitcoin was trading at around $8,000 on Tuesday, Lee appeared on CNBC's "Futures Now" saying the digital currency was actually "trading at cost" because the price of production was actually about that amount. Despite the plunge, Lee also wrote to CNBC that the cost of production for bitcoin on Wednesday was at around $6,000, meaning that in Lee's eyes, bitcoin is still actually worth more than its cost of production.

But among the big catalysts that will boost the crypto space, Lee is keeping an eye on institutional investors.

"I think institutional investors have gained a lot of interest, and they haven't really come into crypto yet because there is still some regulatory uncertainty," he said on CNBC's "Futures Now." "But that sort of ultimate allocation into crypto as an asset class is going to be a powerful reason why bitcoin rallies."

And finally, data compiled by Fundstrat show a historical trend that has Lee encouraging investors to hold onto bitcoin.

"Historically, 10 days comprise all the performance in any single year of bitcoin's price," he said. "If you just took out those 10 days, bitcoin's down 25 percent a year."

"So as miserable as it feels holding bitcoin at $8,000, the move from $8,000 to $25,000 will happen in a handful of days," he added.

With Wednesday's drop, bitcoin is now down 41 percent this year.

Bitcoin's falling, but Fundstrat's Tom Lee stands by bull case for cryptocurrency