Crypto Market May Have Passed Through Bearish Phase, Analysts Predict Rebound

Cryptocurrency analysts Tom Lee and Raoul Pal are predicting a reversal in the market's fortunes, suggesting that it has already passed through much of its bearish phase.

Lee, co-founder of Fundstrat, notes that software stocks have already suffered significant declines, and cryptocurrencies tied to similar liquidity-tightening trends have fallen as well. He adds that short positions have risen to levels typically observed in the middle of a bear market, not at the peak.

Raoul Pal, founder of Real Vision, also points to macro indicators as evidence of a mid-cycle correction. Global M2 is at a record high, and the dollar is showing weakness, he notes. The Institute for Supply Management's indicators are improving, and U.S. liquidity conditions are turning higher.

Market sentiment indicators, such as the crypto Fear & Greed index, are also pointing to a potential rebound. While fund flows remain weak, with digital asset funds seeing outflows of $445 million last week, Pal sees this as a sign that extreme fear is itself a indication of rising odds of a rebound.

Looking ahead, Lee believes that artificial intelligence and tokenization could support demand for blockchain in the medium to long term. This structural demand could draw funds back into bitcoin and Ethereum if macro pressure eases.