Bitcoin is experiencing its worst performance for this point in the year in at least a decade, with the cryptocurrency's value plummeting 15% this week - the most significant decline since November 2022 when trading platform FTX collapsed. According to Reuters, bitcoin has lost approximately one-third of its value in 2026, trading around $63,457 and falling 40% lower than when U.S. President Donald Trump took office in January 2025. As NYDIG's head of research Greg Cipolaro explains, "Not one, but several overlapping headwinds are hitting the crypto market at once, weighing on bitcoin's price." The AI trade sits near the top of his list as bitcoin increasingly competes for capital with a sector that has become the market's dominant growth story. The overlap between AI and crypto investors is larger than many assume, with both attracting investors seeking exposure to emerging technologies and outsized returns. As AI-related stocks continue to outperform, capital followed and rotated from crypto, creating significant pressure on bitcoin's price.
Investors are withdrawing from bitcoin at unprecedented rates, with over $2.7 billion in net outflows from bitcoin ETFs in the week to Thursday, representing the fastest pace on record. As reported by Reuters, this brings the net outflow for 2026 so far to $3.1 billion. In stark contrast, the semiconductor sector is experiencing massive inflows, with the four largest semiconductor ETFs pulling in over $3 billion in the first week of June alone and a whopping $21 billion in the year to date. The semiconductor ETFs include VanEck's Semiconductor ETF, Roundhill Memory ETF, State Street's SPDR S&P Semiconductor ETF, and iShares Semiconductor ETF. RBC BlueBay Asset Management chief investment officer Mark Dowding noted that assets can struggle as they move from being the flavor of the month to suddenly out of fashion, as reported by The Economic Times.
While bitcoin struggles, Corporate America is experiencing unprecedented profitability with S&P 500 companies keeping nearly $0.15 of profit for every dollar of revenue in the first quarter, according to FactSet - the highest figure recorded since the data provider began tracking the metric in 2009, and more than double the long-run historical average of around $0.06 going back to 1946. As reported by Bloomberg, the Magnificent 7 alone account for more than a third of the S&P 500's market value and are posting 63.2% earnings growth in Q1, nearly 4x the rate of the other 493 companies. Both operating and net profit margins are at their highest in at least two decades, with the profit boom driven by AI infrastructure beneficiaries who are expected to account for roughly half of all S&P 500 earnings growth this year, according to Goldman Sachs. The capital going into AI-related stocks has to come from somewhere, with U.S. semiconductor stocks surging 170% in the last year, while bitcoin has lost 40%, as reported by The Economic Times.
Bitcoin's dominance in the cryptocurrency market is declining significantly, with the cryptocurrency's market share falling to 56% compared to 63% a year ago, according to CoinGecko data. The rise of stablecoins has particularly impacted bitcoin's position, with stablecoins now accounting for almost 13% of the market, versus roughly 7% a year ago. Even on a daily basis, volume in top stablecoin tether is more than that in bitcoin and ether together, while volume in runner-up USDC is equal to that in the next 10 coins combined, according to CoinGecko data. The ecosystem now includes large rival coins such as ether, solana, and BNB, along with smaller alt-coins that now make up a fifth of the total market. The crypto market has also been grappling with industry-specific concerns, including Treasury Secretary Scott Bessent's claim that U.S. authorities seized roughly $1 billion of Iranian-linked crypto assets, which raised questions about government reach into digital asset markets and challenged one of crypto's core narratives for some investors. The threat of quantum computing has also returned to the conversation after researchers published new work showing that the computational resources required to attack widely used cryptographic systems may be falling faster than previously thought.
Despite the significant decline, NYDIG's onchain analysis suggests bitcoin may be approaching a major bottom. Bitcoin's MVRV ratio has fallen to 1.2, close to the level where market value converges with investors' aggregate cost basis, while the percentage of supply held in profit recently slipped below 50%, another metric often associated with capitulation. However, the drawdown itself remains relatively modest by historical standards, with bitcoin falling down roughly 53% from its peak of $126,000 in October, a much shallower decline than the 75%-90% drawdowns seen in prior cycles. The previous three bitcoin bear markets lasted more or less a year from peak to trough, with the exception of its first-ever bear market ending in 163 days in 2011. Friday's sub-$60,000 plunge came only 242 days after the peak, which is significantly faster than historical patterns. As Cipolaro notes, "The onchain data suggests the market has undergone a meaningful reset," but whether the low is already in place depends on whether institutional demand has structurally altered bitcoin's cycle behavior or merely delayed a deeper reset.
