Crypto Fear Index at 8: Tom Lee Says Hidden Bear Phase is Over

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Tom Lee Says Crypto Already Moved Through a Hidden Bear Phase

According to Fundstrat’s Tom Lee, both the stock market and cryptocurrency have likely already gone through a quiet downturn. He points out that current levels of short selling and reduced market liquidity are more commonly found when markets are at their lowest points, not when they’re peaking.

Lee believes a lot of investors are now pessimistic, and historically, markets tend to go in the direction that causes the most trouble. Raoul Pal sees this situation as a temporary dip within a larger upward trend, not the end of the trend.

Hidden Bear Phase Already Played Out

According to Fundstrat’s research, software stocks have already experienced significant declines. Cryptocurrency, facing similar market pressures, has followed suit and also dropped in value, explained Lee.

Short positioning, in his read, sits at levels typically seen at the height of a bear market.

The current situation is important because the underlying market dynamics have changed more quickly than news reports suggest. While investors have become more cautious, key economic indicators haven’t shown significant decline. Lee believes this difference in behavior is similar to what’s been seen at turning points in the past, rather than signaling the beginning of a major market downturn.

He distinguished between typical difficulties with lending and the kind of widespread problems that caused the 2008 financial crisis. He believes the recent challenges in private lending seem more like a normal downturn in the credit cycle, not a repeat of the past crisis, and that large banks are well-positioned to navigate this shift.

Macro Setup Turning Under the Surface

Raoul Pal, founder of Real Vision, has also highlighted positive signs for the market. He noted that the global money supply (M2) is at a record high, while the dollar is becoming weaker. Additionally, recent data from the Institute for Supply Management suggests improving business activity, and liquidity in the US is increasing.

Pal believes the current situation isn’t a sign of a larger downturn, but rather a temporary adjustment within the existing economic trend, as he stated in the interview.

He highlighted the Crypto Fear and Greed Index as the best way to gauge market sentiment. It’s been stuck below 10 for the longest period ever recorded.

The Fear & Greed Index has reached a score of 8, indicating extreme fear. This is the longest period of sustained extreme fear ever recorded. Currently, fear has been below 10 for a longer duration than at any point during the 2022 bear market. Last week saw $445 million withdrawn from digital asset funds, with Ethereum experiencing the largest outflows at $222 million.

— Freedom Capital DA (@FreedomCapitalD) April 3, 2026

Pal treats that reading as a reversal setup rather than a continuation signal.

Lee believes that artificial intelligence and the process of breaking down information into smaller units, called tokenization, strengthen the fundamental reasons why blockchain technology is valuable. He suggests that stablecoins for payments and completing transactions directly on the blockchain will be the essential infrastructure that AI systems need to operate effectively on a large scale.

That overlap could pull capital toward Bitcoin (BTC) and Ethereum (ETH) once macro pressure eases.

If prices continue to rise will depend on how quickly money becomes available and if optimism starts to catch up with the actual economic figures.

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2026-05-04 00:16