Bitcoin has underperformed U.S. equities for nearly six months, marking the longest recorded stretch of lagging returns relative to the S&P 500. The cryptocurrency did post gains following the outbreak of the Iran war, but that rally was not enough to offset the broader period of weakness. The extended underperformance has drawn attention from market analysts tracking the asset’s relative strength.
Analyst Mark Connors suggests that the prolonged lag, combined with earlier deleveraging in the market, could be laying the groundwork for a potential rebound. He argues, however, that the timing of any recovery is far from certain. Key variables, particularly geopolitical risks and developments in energy markets, are expected to play a significant role in determining when and whether such a rebound materializes.
The relationship between bitcoin and traditional equity markets has been a subject of ongoing debate among investors. Bitcoin’s recent stretch of underperformance challenges narratives that position it as an asset capable of consistently outpacing stocks during periods of uncertainty. The Iran war outbreak provided a temporary boost, but the broader trend has favored equities over the digital asset.
Energy markets are considered a relevant factor given bitcoin’s energy-intensive mining process, which means shifts in energy costs can directly affect the economics of the network. Geopolitical tensions, meanwhile, can influence investor appetite for risk assets broadly, including cryptocurrencies. Connors points to both of these dynamics as central to any outlook for bitcoin’s near-term trajectory.
The concept of deleveraging — where investors reduce borrowed positions in an asset — is often viewed as a precursor to stabilization or recovery, as it removes some of the downward pressure created by forced selling. Whether the deleveraging that preceded this period of underperformance is sufficient to support a sustained rebound remains an open question. Market participants are likely to watch geopolitical developments and energy price trends closely for further signals.
Originally reported by CoinDesk.
