Bitcoin’s Historic Underperformance Raises Questions About What Comes Next
Bitcoin is closing out the first quarter with a sharp decline, extending a rare stretch of sustained underperformance against U.S. equities.
The cryptocurrency has fallen roughly 22% in the first three months of 2026, following a 25% drop in the final quarter of 2025. The back-to-back losses mark an unusually prolonged downturn, especially when compared to stocks. Over the same period, the S&P 500 has posted significantly smaller declines, widening the performance gap.
According to Mark Connors, founder of Risk Dimensions, the duration of bitcoin’s lag is unprecedented. Data shows the asset has trailed equities consistently since early October — a streak not seen before. While bitcoin has experienced sharper corrections in the past, they have typically been shorter-lived.
The broader market backdrop has also been weak. U.S. equities just logged their worst quarter in four years, with the Nasdaq falling more than 10% from recent highs. Together, the declines in stocks and crypto have erased much of the post-2024 election rally.
Policy developments, meanwhile, have been mixed. Regulatory progress has included a more favorable stance toward crypto ETFs under new SEC leadership, as well as legislative efforts such as the GENIUS Act. An executive order signed by President Donald Trump in August also aims to expand access to alternative assets, including cryptocurrencies, within retirement plans, prompting a response from the Labor Department.
Despite the broader weakness, bitcoin showed relative resilience in March.
The escalation of tensions between the U.S. and Iran early in the month triggered volatility across global markets, pushing oil prices and the U.S. dollar higher. The shock rippled across asset classes, with gold experiencing sharp swings as margin calls and liquidity pressures forced widespread selling.
Bitcoin, however, avoided similar forced liquidations. The asset rose about 1% during March, while gold declined roughly 11%. Connors attributed this relative stability in part to earlier deleveraging that had already flushed out excess leverage in the system. Bitcoin’s digital nature, allowing for rapid movement across borders, may also reduce the kind of forced selling seen in more traditional assets.
Looking ahead, bitcoin’s extended period of underperformance could itself become a catalyst. Rolling 63-day data shows the asset has lagged the S&P 500 since October — the longest such stretch on record. Historically, similar imbalances have been followed by reversals.
If that pattern holds, bitcoin may be approaching a phase where relative weakness gives way to renewed demand, particularly as macro pressures tied to rising debt levels and currency expansion continue to build.
Still, the timing of any shift remains uncertain and may hinge more on geopolitical developments than market structure. The trajectory of the Iran conflict — and its impact on energy markets, liquidity and overall risk sentiment — is likely to play a decisive role.
As Connors put it, the turnaround could come quickly — or take much longer: “It’s either two months or two years.”
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