Bitcoin bull Tom Lee, co-founder of Fundstrat Global Advisors, is sticking to his forecast of a bitcoin price in the $20,000 range by year’s end, he told CNBC’s “Fast Money” on Friday. Lee said he is “trying to change the calendar year” with respect to his prediction, but remains bullish about it. Hedge Funds Play A Bigger RoleLee said hedge funds are playing a bigger role in the bitcoin market, which he thinks can have an impact on its price.”I do think in 2018, trading has shifted,” Lee said. There is now more bitcoin trading in the U. S. as certain exchanges have attracted hedge funds. “I do think hedge funds are playing a role right now,” he said. More of the analysts hedge funds are hiring are interested in cryptocurrencies, Lee said, but hedge funds are not yet aggressively adding bitcoin into their portfolios. Wondering where #bitcoin is going next? @fundstrat’s Tom Lee says this could be a leading indicator $BTC https://t.co/YpPafDgjw8 pic.twitter.com/0QLU3CA7Uj— CNBC’s Fast Money (@CNBCFastMoney) August 25, 2018Another factor he noted is the impact of traditional stocks on bitcoin’s price. Lee presented a chart showing the relationship between the bitcoin price and the S&P 500 index. As the emerging markets rallied at the end of 2017, bitcoin’s price soared. Since then, both indicators have sharply declined. Lee pointed to two factors that connect the two indicators. One is hedge funds which usually “rent” emerging market stocks. The hedge funds “risk on and risk off,” he said, and when they risk off, “bitcoin also suffers because they risk off.”The second reason connecting the two indicators is the wealth effect. This refers to the impact of stock activity on bitcoin buying. When people invested in emerging markets experience a fallout, they have less money to invest in bitcoin.”That affects the network effect because you can’t buy bitcoin,” Lee said. Challenges RemainLee recognized some challenges facing mainstream bitcoin trading.”There’s still this complication about how you store the bitcoins,” he said, noting that the hedge fund investors don’t want to take custody of the bitcoin themselves. Another challenge is understanding valuation models due to the scarcity of bitcoin valuation research. Bakkt, a company created by the New York Stock Exchange, Microsoft, and Starbucks, is designed to make digital assets easier for institutional investors, which is a “big deal” since it simplifies the trade processing, he said. “It’s one day settled,” he explained. “Pretty soon we’ll see potential for custody products around that to develop.”Also read: How the efforts of Bakkt could lead to the approval of the first bitcoin ETFBitcoin Investors WaryMeanwhile, feedback from clients has been negative in reaction to the current bitcoin market, he said.”Reflexivity is much bigger in crypto,” Lee said. Where it is not uncommon in traditional markets for investors to be looking to be contrarian 80% of the time, in the crypto market it is difficult to be contrarian in a bearish market. The Bitcoin Misery Index, which Lee created as a sentiment-based metric for cryptocurrency analysis, is now 36, which qualifies as very miserable and signals that it may be a good time to buy. The past week has seen setbacks, such as the SEC rejecting bitcoin ETF applications, and China announcing a “re-ban” as part of a move to clamp down on cryptocurrency. Lee is nonetheless bullish about bitcoin’s price. One of the panelists concurred, noting that bitcoin jumped from $6,000 in the middle of last November to $20,000 by year’s end. Featured Image from Upfront Ventures/YouTube