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Longtime crypto bull Meltem Demirors reiterated her confidence in the cryptocurrency Tuesday, telling CNBC she believes the correction in bitcoin is simply weeding out the investors with "paper hands."

Paper hands is a term used in the crypto community to characterize people who sell a digital asset such as bitcoin when turbulence strikes markets. It's the opposite of so-called diamond hands, or ardent believers who say they will hold for the long term.

"We had 200 days of market expansion. You can't have a number go up forever. That doesn't happen in any market," Demirors said on "The Exchange." "What we're seeing is a correction, a contraction, and a lot of what is getting shaken out is what we call the 'paper hands,' the 'weak hands.'"

Demirors, the chief strategy officer at digital asset investment firm CoinShares, pointed to transaction activity on the bitcoin blockchain to support her view.

"There's a lot of retail that entered, didn't do their research, and is now selling. There are not a lot of long-term holders selling," she said. "If we look at on-chain activity, wallets that have been holding for a long time have actually been using this opportunity to accumulate."

Demirors' remarks on CNBC follow a wild ride for bitcoin Tuesday, which began with a heavy drop below the key $30,000 support level beforebouncing back into positive territoryin the afternoon. Analystshad been watchingthe $30,000 level after the cryptocurrency experienced a series of losses in May.

Earlier Tuesday morning, Wall Street strategist Tom Lee hadtold CNBCthat the world's largest cryptocurrency by market value faces a rough technical picture in the near term but that he still believes that bitcoin by market value could reach $100,000 per token by the end of 2021.

Like Demirors, Lee said he believes a lot of the recent selling has been from retail traders who jumped into bitcoin earlier this year when the cryptocurrency was marching higher toward its all-time high near $65,000 in April.

"I think we're going to continue to see consolidation here," Demirors said. "There is a lot of macro-uncertainty. Obviously, there's a lot of uncertainty around policy. There's also a lot of negative headlines."

China has recently been intensifying its crackdown on cryptocurrency.

"I think part of this is just the cycle we go through every several years with crypto, but we are seeing a lot of new inflows. We are seeing a lot of activity, in particular, on the market side," Demirors said.

While Demirors said "bitcoin has always been volatile," she explained that during the steep pullback in May, there was "a bunch of leverage coming off across the board. Now, we're done deleveraging. Now we're seeing a lot of cash selling."

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Crypto strategist says bitcoin pullback is shaking out investors who have 'paper hands' - CNBC