A new assessment says the cryptocurrency market has already moved through a substantial bearish stretch, and that current investor sentiment and positioning are closer to a bottom than to a typical peak.

Blockchain outlet BeInCrypto reported on May 3 that Fundstrat co-founder Tom Lee said about half of the stock market and the crypto market have already passed through a hidden bearish phase.

In an interview on Fundstrat's research channel, Lee said software stocks have already suffered steep declines and that cryptocurrencies, tied to the same liquidity-tightening trend, have fallen as well. He added that short positions have risen to levels typically observed in the middle of a bear market, not at a standard cycle peak.

He also said pessimism among market participants has grown too quickly. He said positioning and sentiment turned defensive ahead of the headlines, but leading indicators are showing signs of stabilisation. Lee judged that this gap resembles past reversal phases more than the start of a deeper decline.

Lee also drew a line on credit markets. He said recent pressure in private credit is closer to cyclical credit stress than to a systemic crisis like 2008. He said big banks could benefit even as conditions change.

Another figure offered a similar view based on macro indicators. Real Vision founder Raoul Pal said global M2 is at a record high and the dollar is showing weakness. He said Institute for Supply Management indicators are improving and U.S. liquidity conditions are turning higher. He said in an interview: "The current move does not look like the end of the cycle but a mid-cycle correction."

Market sentiment indicators are also among his reasons. Pal pointed to the crypto Fear & Greed index as the clearest measure of sentiment. It recorded the longest stretch on record staying below 10, and fell to 8. He interpreted this as a phase showing the possibility of a reversal rather than a signal of further declines.

Actual fund flows remain weak, however. Digital asset funds saw outflows of $445 million last week, and Ethereum posted the biggest outflow at $222 million. Even so, Pal said the persistence of extreme fear itself is a sign that the odds of a rebound are rising. Referring to the index falling to 8, he called it "the longest sustained stretch of extreme fear on record."

Lee said over the medium to long term, artificial intelligence and tokenisation could support demand for blockchain. He argued that stablecoin payment rails and on-chain payment systems could become infrastructure that AI agents will use at scale. He also said that if macro pressure eases, such structural demand could draw funds back into bitcoin and Ethereum.

Whether the market actually moves into a rebound phase will depend on the pace of liquidity expansion. Another variable is whether investor sentiment continues to lag changes in underlying indicators. The core debate now is less about prices themselves and more about whether market positioning and sentiment have already reflected a substantial share of bottoming signals.

Fear & Greed just hit 8. Extreme fear. The longest sustained stretch at this level on record. We've been below 10 longer right now than at any point in the 2022 bear market. Meanwhile, the data: $445M in digital asset fund outflows last week ETH hit hardest: $222M outflows,… pic.twitter.com/SYOPVTBlhv