Tom Lee and Raoul Pal Signal Market Bottom as Crypto and Stocks Exit Hidden Bear Phase

Fundstrat co-founder Tom Lee believes that both the equity market and cryptocurrency sector have already experienced a “hidden bear market,” suggesting that the worst of the downturn may be behind investors. According to Lee, many software stocks have already undergone significant corrections, while crypto assets followed suit due to tightening global liquidity conditions.

Lee highlights that short positioning across markets has reached levels typically seen near market bottoms rather than at cycle peaks. This shift indicates that investor sentiment has turned excessively bearish, a condition that often precedes a market rebound. Historically, markets tend to move in the direction that causes the most pain, meaning a sharp upward move could catch pessimistic investors off guard.

He also distinguishes between current credit stress and systemic financial crises like the 2008 meltdown. Lee argues that recent pressures in private credit markets reflect a normal credit cycle rather than a widespread financial breakdown. In this environment, major banks may even benefit as capital rotates within the system.

Real Vision founder Raoul Pal shares a similar outlook, describing current conditions as a mid-cycle correction rather than the end of a broader bull cycle. Pal points to key macroeconomic indicators, including global M2 money supply reaching all-time highs, a weakening US dollar, and improving ISM data. These factors suggest that liquidity is gradually returning to the market, which could support both stocks and digital assets.

One of the strongest signals, according to Pal, is the Crypto Fear and Greed Index, which has remained at extremely low levels for an extended period. Such prolonged fear is often interpreted as a contrarian indicator, signaling potential upside ahead.

Both Lee and Pal emphasize the long-term growth drivers of blockchain technology, including artificial intelligence integration, tokenization, and stablecoin-based payment systems. These innovations could attract renewed capital flows into Bitcoin (BTC) and Ethereum (ETH) as macroeconomic conditions improve.

Ultimately, the pace of liquidity expansion and the alignment of investor sentiment with underlying data will determine how quickly markets recover and whether this hidden bear phase truly marks a turning point.