Tom Lee Says Crypto Bear Phase Is Already Mostly Over – Raoul Pal Agrees

TLDR

• Fundstrat’s Tom Lee says crypto and roughly half the stock market have already moved through a hidden bear phase
• Short positioning is at levels typically seen at bear market lows, not cycle peaks
• Raoul Pal calls the current move a mid-cycle correction, not the end of the cycle
• The Crypto Fear and Greed Index hit 8, its longest stretch below 10 ever recorded
• Digital asset funds saw $445 million in outflows last week, with Ethereum hit hardest at $222 million

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Tom Lee, co-founder of research firm Fundstrat, says the crypto market has already moved through much of its bear phase. He made the comments in an interview on the Fundstrat research channel.

Lee said roughly half the stock market and the crypto market have already passed through what he called a hidden bear phase. He pointed to steep declines in software stocks and said crypto tracked those moves lower due to the same liquidity tightening.

He added that short positions have risen to levels usually seen in the middle of a bear market, not at a normal cycle peak. In his view, that matters because it suggests much of the damage has already been done.

Lee also said investor pessimism arrived faster than the headlines. Sentiment turned defensive while leading indicators were still stabilising. He sees that gap as a sign of a potential turning point rather than the start of a deeper decline.

He drew a distinction between cyclical credit stress and systemic risk. Recent strain in private credit, he said, resembles a normal credit cycle rather than a crisis like 2008. He said large banks could benefit from that rotation.

Macro Data Points to Mid-Cycle, Not a Top

Real Vision founder Raoul Pal offered a similar view. He pointed to global M2 at all-time highs, a weakening dollar, and improving Institute for Supply Management readings.

Pal also highlighted the Crypto Fear and Greed Index. The gauge fell to 8 and has stayed below 10 for longer than at any point during the 2022 bear market.

He treated that extreme fear reading as a potential reversal signal rather than a sign of further declines. The persistence of fear itself, he argued, raises the odds of a rebound.

Fund Outflows Tell a Different Story for Now

Despite the bullish framing, actual fund flows remain weak. Digital asset funds recorded $445 million in outflows last week.

Ethereum saw the largest single outflow at $222 million. That is a concrete measure of how cautious investors still are.

Lee added a longer-term point around artificial intelligence. He said stablecoin payment rails and on-chain settlement could become the infrastructure that AI agents use at scale.

That overlap, he argued, could bring capital back into Bitcoin and Ethereum once macro pressure eases.

Whether a recovery materialises depends on how quickly liquidity expands. It also depends on whether sentiment continues to lag the underlying data.

The most recent data point remains the $445 million in weekly outflows and the Fear and Greed Index sitting at 8 — its most extreme and sustained fear reading on record.

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