What’s surprising about the selloff is the macroeconomic context. Investors often casually assume that crypto assets are (or at least should be):

1. Positively correlated with precious metals
2. Negatively correlated with the U.S. dollar (USD)
3. Positively correlated with technology stocks. 

As we will see, the truth behind these assumptions is complicated. That said, over the past year, precious metals prices have risen substantially, despite their recent correction (Figure 2). Meanwhile, the U.S. dollar has weakened versus most other major currencies (Figure 3). Finally, despite a recent loss of upside momentum, U.S. equities have performed solidly since early 2025 (Figure 4).

In the case of the crypto assets’ relationship with gold and USD, correlations are not as strong as many might imagine. BTC and its peers displayed a weak positive correlation with gold in 2020 and 2021 during the height of the Federal Reserve’s pandemic-era quantitative easing (QE). But correlations never got stronger than +0.41 on a rolling 12-month basis. Since 2024, their correlations with gold have dropped to around zero (Figure 5).

Likewise, if one looks at their correlation versus the Bloomberg Dollar Index, cryptocurrencies did indeed have a negative correlation with USD in 2022 and 2023 that was sometimes as strong as -0.4. By 2025 and early 2026, however, that correlation had also weakened towards zero (Figure 6). As such, it’s not entirely surprising that higher prices of precious metals and a weaker USD failed to boost crypto asset prices.

What’s harder to explain is equities. Since 2020, the various crypto tokens have had a consistently positive correlation with the Nasdaq 100. Sometimes, the correlations have been as weak as +0.1 or +0.2, but at other times, including in 2025 and early 2026, those correlations have been as strong as +0.35 to +0.6 (Figure 7). What this suggests is that in 2025 and thus far in 2026, on days when the U.S. stock market rises, crypto assets tend to rise, but not by as much, and on days when U.S. tech stocks are selling off, crypto assets tend to fall by even more than the equity market.

On top of what seems like a favorable macroeconomic context, the regulatory environment has also been favorable to cryptocurrencies, at least in the U.S. with an Administration that has embraced the industry. Given what could have been seen as a favorable environment, why has crypto sold off? Part of the answer may lie in the enormous crypto rally in late 2024, which appeared to anticipate a changing regulatory landscape. But even taking that rally into account, only Stellar Lumens, BTC and XRP have gone up since early 2024 while some of the other tokens such as Chainlink and ETH have fallen by as much as 40-50% (Figure 8).

The answer may lie in the one asset that the various crypto tokens have a higher correlation with than anything else: BTC. Over the past year, correlations between the other crypto tokens and BTC have ranged from +0.7 on the low end (Lumens) and +0.82 on the high end for ETH, XRP, Sol and Link. With the exceptions of Lumens and XRP, which have historically had one-year rolling correlations with BTC as weak as +0.4, correlations with BTC usually fall in the +0.6 to +0.8 range for the other crypto tokens (Figure 9). As such, the answer for why crypto currencies have been falling in value doesn’t necessarily lie in their external environment, it appears to lie within BTC.

What’s interesting about these correlations is that the other crypto tokens have wildly different use cases and coin creation processes than BTC (see appendix for details). Despite that, BTC appears to dominate their price action.

BTC’s value proposition can be boiled down to one word: scarcity. Although it rarely displays strong, positive correlations with gold, it’s often described as digital gold. For BTC’s first four years, there were roughly 2.5 million new tokens per year, but every four years or so, it goes through a “halving” process where the pace of new supply creation drops by roughly 50% (Figure 10). In the 12 months following BTC’s first three halvings, prices soared, rising anywhere from 8,500% after the first halving to around 290% and 550% after the second and third ones, respectively. When BTC’s fourth halving took place in April 2024, what followed wasn’t a rally but a whimper (Figure 11).

BTC suffers from several problems that appear to be preventing its prices from rising like they did in the past. For starters, the BTC user network appears to have stopped growing in late 2017. In BTCs early years, the number of daily transactions rose exponentially. The gains, and occasional falls, in trading volumes appeared to run ahead of bitcoin’s bull and bear markets. In late 2017, volume on the blockchain began to plateau, foreshadowing the slowing of BTCs upside momentum. Bitcoin volumes got one last boost in 2024 when ETFs were introduced but volumes slid back to previous levels in 2025 (Figure 12).

Over time, the number of calculations needed to solve the cryptographic puzzles has risen (Figure 13). Currently, the reward for solving a block is 3.125 BTC and it takes 141 trillion 688 billion (141,688,000,000,000) calculations for each new Bitcoin, requiring enormous amounts of computing power and energy.

Transacting on the blockchain can be expensive with each transaction costing between $70 and $300 to complete just in terms of miners’ revenue alone. If one wants a faster transaction, one must pay an extra fee to the validators. In the past, spikes in transaction costs often presaged downturns in BTC prices –and by extension those of other crypto assets. Prior to the recent peak, miners’ revenue per transaction rose again, presaging the recent selloff. It’s worth noting that trading costs on the blockchain have fallen with the price of BTC in recent weeks to levels that in the past often presaged either sustained rallies or at least temporary reprieves from further selling pressures (Figure 14).

The BTC’s block chain’s other issue is that it’s slow. On average, it takes around 30-60 minutes to get one trade finalized. According to Blockchain.info/Charts on the fastest days, it may take 7-9 minutes, but on a slow day it could take hours. Even on BTC’s busiest trading day ever, the blockchain could only handle 10.5 transactions per second and more typically it’s 3-7 per second. Prior to the most recent selloff, the number of transactions per second dropped towards 2.5 (Figure 15) before rebounding to 4 as BTC put in what could be at least a temporary bottom.

What’s curious is that BTC’s woes appear to be dragging down the entire sector despite the fact that other crypto assets have much faster blockchains and much shorter finality times for trading (Figures 16 and 17).

For a while in 2023 and 2024, SOL and XRP, which have among the fastest blockchains, outperformed. However, when BTC began selling off in late 2025, all of the other tokens fell even more than bitcoin. Their underperformance, however, might be explained by one final factor: relative volatility. For much of 2025, BTC’s one-year rolling realized volatility was around 30-40%. For all of the other cryptocurrencies, it was in the 60-100% range. Given that their realized volatility is roughly 2x as high as BTC’s and that they are all highly correlated to BTC, it’s not surprising that they sold off more than BTC (Figure 18). If crypto prices rebound, the other crypto assets might once again outperform BTC on the way back up.

In addition to having much faster blockchains and much shorter finality times for transactions, unlike BTC, the other cryptocurrencies have real life use cases. XRP is an institutional bridge that banks can use to swap between currencies, dramatically cutting transaction times. ETH can be used to create smart contracts to automate supply chains and to manage tokenized money market funds. SOL can compete with the processing speeds of major credit card networks. ChainLink can be seen as a universal translator that connects different blockchains. Stellar Lumens focuses on financial inclusion and low-cost personal payments. Cardano can be used to provide blockchain-based digital identities that cannot be forged. At some point might one of these coins, whose use cases are so different from BTC’s scarcity-based value proposition, take over the lead of the crypto space or at least decorrelate from BTC?