Despite brutal selling and some of the most extreme readings in Bitcoin, crypto’s laying the groundwork for a bear‑market exit.
Lark Davis, a popular crypto market commentator. argues that despite brutal selling and historic oversold signals, the foundations for a bear-market exit may already be in place — even as most traders are aggressively short and U.S. equities sit just below all-time highs.
The host’s latest breakdown ties together on‑chain positioning, macro stock risk, and the coming wave of AI and tokenization to sketch a market setup he describes as either a “generational wealth opportunity” or a scenario where “we are all cooked.”
Deep Red Positioning: Historic Oversold Readings & $25B In Shorts
Lark Davis notes that Bitcoin’s two‑week RSI is at its second-lowest reading in history, while the crypto fear-and-greed index recently hit 5-6, signaling extreme fear. Bitcoin, he says, is trading in the bottom 5% of its entire price history relative to the 200‑day EMA, citing a “quintile regression” metric: either a historic buying zone or a trap.
Derivatives positioning is similarly lopsided.
According to data discussed in the video, there are roughly $25 billion in BTC shorts that would be liquidated around $104,000, with “almost nobody long” and funding rates turning notably negative around $68,000. “Everyone’s short and that’s where the base forms,” he says, pointing to persistent negative funding as evidence of a crowded bearish trade that “doesn’t unwind gently.”
Altcoins looked even worse on paper.
One chart highlighted shows altcoin indices trading around minus 2.5 standard deviations from their mean — the most oversold in their recorded history, surpassing the 2022 bear-market low and COVID crash on a relative basis. The host pushes back on claims that alts can easily drop another 50% from here, but concedes: “There’s always a chance; altcoins can always go lower.”
Stocks On Edge, IPO Tsunami Coming & The AI Tailwinds For Crypto
On the macro side, the commentator flags weakness in major U.S. indexes. The Nasdaq is getting “a very solid rejection” off its 20‑ and 50‑day EMAs with a fresh bearish crossover; the last similar signal in March 2025 preceded a roughly 22% drop.
The S&P 500, still just about 2% below recent highs, could see a “cool and normal” 6-12% pullback if it revisits the 200‑day EMA or prior resistance levels, he says.
Individual names like Tesla and Meta are failing breakouts and slipping back below key moving averages, reinforcing the short‑term risk-off tone.
Yet the host argues policymakers and markets are incentivized to “run it super hot” because an estimated $15 trillion in IPOs — including SpaceX and AI firms like Anthropic and OpenAI — are expected over the next 6-18 months. In his view, Wall Street “needs you as exit liquidity,” implying continued efforts to keep risk assets buoyant after any correction.
Longer term, Lark leans on a comment from Elon Musk that AI and robotics are a “supersonic tsunami” that will demonetize labor and intelligence.
Mr. Davis sees this as structurally bullish for crypto rails: AI agents transacting at machine speed on chains like Solana, institutional DeFi partnerships such as BlackRock linking up with Uniswap, Rockefeller-backed research into quantum-resistant Bitcoin, and trillions in tokenized real‑world assets projected on-chain by 2030.
For now, Bitcoin sits in a falling wedge, with a downside technical target near $60,000-$61,000 and potential relief back toward $72,000 and the 20‑day EMA if it breaks upward. ETH and Solana are both deeply oversold on daily RSI and MACD, with Solana stuck in oversold territory for about two weeks.
The analyst’s trading plan is blunt: “If we get a break to the upside, long it. If we get a break to the downside, short it.”
For crypto investors, the message is conflicted but clear: structural adoption, AI-driven demand, and tokenization are advancing in the background, even as current flows show U.S. spot demand “completely gone” and Coinbase premiums negative for 25 straight days.
ntil that turns and holds positive for several days, he warns, buyers are “catching knives in a vacuum” — but in a market where, historically, the biggest altcoin rallies have begun when sentiment felt this bad.
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