Bitcoin's worst monthly performance relative to US stocks in over a year reflects a rotation of speculative capital into AI, IPOs and other momentum trades, not a loss of faith in crypto's long-term prospects.
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Bitcoin drops 16% in a month as momentum shifts to AI and IPOs
Bitcoin fell more than 16% over the past month to below $66,000, diverging sharply from the S&P 500's 5% climb to record highs.
"Bitcoin has been in a bear market since October," Jim Ferraioli, director of digital currencies research and strategy at Charles Schwab, said in an interview. "Crypto investors historically go wherever the momentum is, and momentum is out of crypto at the moment."
The divergence marks a break from the years-long pattern of bitcoin and US equities moving in tandem. While the S&P 500 has gained 5% over the past month, bitcoin has shed about 16% of its value, with the selloff accelerating in recent days — the largest cryptocurrency lost 12% in the past week alone, CoinGecko data show.
The underperformance threatens to undermine bitcoin's narrative as a macro hedge and could trigger further rebalancing by retail and institutional investors toward equities and other risk assets that are delivering stronger returns.
The rotation is playing out across multiple fronts. Capital that once chased speculative gains in crypto is increasingly flowing into artificial-intelligence-related stocks, which have generated strong returns as companies race to build out AI infrastructure. At the same time, a wave of high-profile initial public offerings is drawing liquidity away from digital assets. Elon Musk's SpaceX is preparing an IPO that could value the company at as much as $1.75 trillion, while OpenAI and Anthropic are among other anticipated listings that could raise more than $200 billion combined, according to reports.
The competition for capital is not limited to traditional markets. Crypto traders themselves are getting caught up in the IPO frenzy, Ferraioli noted. Decentralized exchange Hyperliquid (HYPE) now offers perpetual contracts tied to private pre-IPO shares, enabling traders to speculate on companies expected to go public without leaving crypto-native platforms. Instead of allocating capital to bitcoin or other digital assets, some traders are using those products to chase the next growth story.
"That shift reflects how investor attention and capital are increasingly drawn toward anticipated IPOs, even in crypto markets," Ferraioli said.
On-chain data confirms the risk-off posture
The flight from bitcoin into dollar-denominated assets is visible on-chain. Bitcoin's dominance rate — its share of the total cryptocurrency market — has fallen to 58.5%, reversing gains that had pushed it as high as 61.2% in April and early May, CoinGecko data show. Meanwhile, tether (USDT) has seen its dominance jump to 8.30%, the highest level since late February, while USD Coin (USDC) has climbed back to levels last seen in early April.
The rising stablecoin share signals a clear flight to dollar liquidity inside crypto, a pattern that has played out in previous selloffs including the sharp drop from above $90,000 to nearly $60,000 in January and February.
The shift is happening even as the crypto industry notches genuine progress. Spot bitcoin ETFs have attracted billions of dollars in institutional capital since their launch. The Clarity Act, a bill that could provide a clearer regulatory framework for digital assets in the US, is awaiting potential passage. Major financial firms continue building crypto products.
Yet none of those developments has been enough to reverse the trend. Ferraioli argued that institutional adoption, while real, remains smaller than many assume, and that bitcoin remains primarily a retail, momentum-driven asset.
"I think you get to those levels and you get people that are saying, 'Hey, I made my money back, maybe I'll revisit it later,'" he said, referring to ETF investors who bought near the highs and are now seeking to exit at breakeven.
A massive $1.26 billion block sale of BlackRock's IBIT bitcoin ETF on May 26, executed off-exchange, was likely a rapid exit by a large investor rather than the unwinding of a common hedge-fund trading strategy, according to NYDIG research.
Seasonality may also be working against bitcoin. Summer has historically been one of the cryptocurrency's weakest periods, as trading activity declines and investor attention shifts elsewhere.
"There's a lack of a reason to be buying here when there's other things you can choose," Ferraioli said.
This article is for informational purposes only and does not constitute investment advice.
[1] Why Bitcoin Is Lagging Behind Stocks Despite Positive Crypto News[2] Bitcoin hits lowest since February as crypto competes for liquidity with blockbuster IPOs[3] Bitcoin isn't crashing because of Saylor, it's losing the momentum trade[4] How single-stock turbulence presents ‘asymmetric’ downside risk for a rather calm S&P 500[5] Bitcoin's slide to $66,000 is accelerating a shift into digital dollars
