S&P 500 hits a new all-time high, while Bitcoin remains low: Is the crypto market being marginalized by global capital?

As of May 28, 2026, the S&P 500, NASDAQ, and Russell 2000 are all reaching new all-time highs, and gold and silver have also completed strong upward moves previously. However, after experiencing the "1011" major decline, the total market capitalization of the crypto market has only maintained a low-level weak rebound and has not followed the global risk assets in a synchronized recovery.

This divergence is not a short-term fluctuation. From the perspective of relative strength indicators, the ratio of crypto assets to the S&P 500 has fallen to a nearly 18-month low. This indicates that even if global investors hold positive expectations for improved liquidity and risk appetite, capital has not incorporated crypto assets into their allocation scope.

The real issue worth paying attention to is not "why is the crypto market falling," but "why are other risk assets rising while the crypto market is not catching up." This points to a deeper structural judgment: the crypto market is systematically reducing its weight within the global risk asset portfolio.

Why has the improved liquidity expectation failed to effectively transmit to the crypto market?

Since Q4 2025, market expectations for a major central bank rate cut cycle have become clearer. Based on historical experience, easing expectations usually benefit high-beta assets, and crypto assets have traditionally been among the most elastic during liquidity easing cycles.

But in this cycle, the transmission path is clearly blocked. Bitcoin and Ethereum did not show sustained capital inflows during the rising rate cut expectations phase; instead, they experienced a "good news exhausted" type of correction. The total supply of on-chain stablecoins has stagnated, and exchange-held stablecoins are at low levels, indicating that off-chain funds have not entered the trading market via stablecoin channels.

More critically, the correlation coefficient between the crypto market and NASDAQ has significantly decreased over the past six months. This breaks the traditional pricing logic that "crypto assets are essentially high-beta tech stocks." The market no longer simply views crypto assets as leverage substitutes for NASDAQ but begins to assess their risk-return characteristics independently.

What macro or industry signals are funds waiting for?

From a capital behavior perspective, the current crypto market faces a typical "signal vacuum" dilemma. In traditional asset classes, US stocks can trade on AI industry trends, gold can trade on geopolitical safe-haven and de-dollarization, and US Treasuries can trade on rate cut expectations. Each asset has a clear macro narrative as an anchor for capital inflows.

The crypto market lacks similar short-term verifiable signals. The historical effect of Bitcoin halving has been fully priced in, and the inflow of spot ETF funds has transitioned from explosive to stable, lacking new marginal catalysts. Institutional funds need to see clear regulatory progress, application breakthroughs, or user growth inflection points before reassessing their allocation ratios.

Currently, the market is in a state of "no bad news, but also no sufficiently good news." For global capital seeking excess returns, this state increases opportunity costs—funds staying in crypto must bear volatility risks but cannot achieve obvious excess returns compared to US stocks.

Does the internal structure of the crypto market support capital returning?

From a microstructure perspective, the liquidity distribution in the crypto market is highly uneven. The top ten assets by market cap account for over 85% of the total market cap, while long-tail tokens' liquidity has sharply shrunk. Market maker order book depth on major trading pairs is significantly below the average level of 2024.

This structure is very unfriendly to large funds. Institutional investors require sufficient market depth to execute large-scale position building or rebalancing, but current depth is insufficient to support impact-free trading above $100 million. Liquidity concentration and depth decline form a negative cycle: lack of institutional funds → worsening depth → further discouraging institutional entry.

Meanwhile, perpetual contract funding rates have been persistently neutral or low, indicating that leveraged traders are not actively bullish. The implied volatility structure of options shows that the market prices in a much lower probability of large upward moves compared to continued sideways or downward moves. Derivatives market signals are highly consistent: professional traders are not betting on a short-term reversal.

Has the narrative of crypto assets lost its uniqueness in this cycle?

In the past two bull markets, the crypto market relied on unique narratives such as "digital gold," "inflation hedge," and "decentralized finance" to attract incremental capital. In this cycle, these narratives face varying degrees of dilution.

Gold's rise from 2025 to 2026 directly eroded the "Bitcoin as digital gold" narrative. When traditional gold performs strongly and liquidity is ample, investors lack additional motivation to shift into more volatile, shorter-history crypto substitutes. Similarly, the yield advantage of DeFi has significantly narrowed compared to traditional finance, and active user growth on smart contract platforms has plateaued.

The rise of AI tracks further diverts risk appetite capital. Tech giants like Nvidia and Microsoft demonstrate clear profit growth and industry deployment paths, while the application layer in crypto remains at infrastructure-building and narrative-driven stages. For capital seeking certainty, AI offers more transparent return expectations than crypto.

If capital re-enters the crypto market, which tracks will it prioritize?

This question requires distinguishing between two types of capital: macro hedge funds and native crypto funds.

If macro hedge funds re-enter crypto, the preferred targets are inevitably Bitcoin and Ethereum. These assets have the highest liquidity and cross-market recognition, serving as "gateway assets" for external capital entering crypto. Bitcoin's role in institutional allocation is closer to an "alternative store of value," while Ethereum carries long-term value capture expectations for smart contract platforms.

The reflow path for native crypto funds is more complex. If market confidence recovers, capital typically diffuses layer by layer in the order of "blue-chip L1 → leading DeFi protocols → high-liquidity meme and ecosystem tokens." But currently, there is a lack of price transmission drivers between these layers, rooted in the absence of a sufficiently strong main narrative to ignite risk appetite.

At this stage, no obvious leading sector has emerged. Sector rotation speeds up but lacks persistence, a typical characteristic of stockpile competition rather than new capital inflow signals.

How will global capital rebalancing affect the long-term valuation logic of crypto assets?

Looking at the longer term, crypto assets are undergoing a transition from "an independent asset class" to "a component in the global asset portfolio." This means that crypto asset pricing will increasingly be constrained by relative value comparisons across assets.

When the earnings yield of the S&P 500 diverges from the expected return of crypto markets, capital tends to favor the more certain options. This is not a question of the intrinsic quality of the crypto market but a matter of optimal allocation within global risk budgets. To regain capital inflows, crypto assets need to demonstrate a clear advantage in risk-adjusted returns relative to US stocks, gold, and bonds.

This implies that future crypto market rallies will rely more on fundamental improvements (such as user growth, fee revenue increases, regulatory clarity) rather than solely on macro liquidity easing. The market is shifting from "beta-driven" to "alpha-driven."

Is it possible for the crypto market to be marginalized by the mainstream risk asset system?

Marginalization does not mean zero; rather, it refers to a systematic compression of its weight in global asset allocation to a lower equilibrium level. This manifests as: total crypto market cap growth mainly relying on a few assets like Bitcoin, with the long-tail ecosystem stagnating; institutional allocation ratios no longer increasing; and media and public attention waning.

It is still too early to judge whether marginalization is "irreversible." The crypto market still possesses features that traditional financial markets lack—permissionless access, 24/7 global settlement, programmable money and assets. The value of these features has not yet been fully monetized. If substantial breakthroughs occur in payments, RWA tokenization, or on-chain financial infrastructure, a new round of re-pricing could be triggered.

But in the short term, the market must accept a reality: the decoupling of crypto assets from global risk assets is happening, supported by structural rather than purely emotional factors.

Summary

The relative weakness of the crypto market in May 2026 is not accidental but the result of multiple structural factors: traditional asset classes (US stocks with AI narratives, gold safe-haven logic) divert risk appetite; internal crypto market lacks short-term verifiable catalysts; liquidity depth and concentration structure restrict institutional entry; and core narratives like "digital gold" are being diluted. Global capital is reassessing the relative value of crypto assets within portfolios, and no positive conclusion has emerged at this stage. To reverse the "abandoned" trend, the crypto market must rely on substantive improvements in its fundamentals rather than waiting solely for macro liquidity to recover.

FAQ

Q: Does the crypto market underperform compared to US stocks and gold mean that the "digital gold" narrative of Bitcoin has failed?

Not necessarily. Gold's rally in this cycle absorbed significant safe-haven and de-dollarization demand, which overlaps with Bitcoin's store-of-value narrative. But Bitcoin still has features like programmability, divisibility, and 24/7 global settlement that gold lacks. The narrative's failure is more a cyclical issue than a fundamental logical collapse.

Q: If liquidity continues to improve, will the crypto market necessarily follow suit?

Historical patterns show that high-beta assets tend to lead during liquidity easing cycles, but this cycle's peculiarity is that the transmission path is blocked. As long as the crypto market lacks independent catalysts (such as regulatory breakthroughs or application explosions), even with continued liquidity improvement, capital may prioritize AI or gold first.

Q: Is it possible for the crypto market to be permanently abandoned by global risk assets?

"Permanent" is too absolute. The crypto market still has features that traditional finance cannot replicate—permissionless access, 24/7 settlement, programmable assets. The risk of marginalization exists, but if RWA tokenization, sovereign-level adoption, or on-chain financial infrastructure breakthroughs occur at scale, a re-pricing could be triggered. Currently, focus should be on fundamentals rather than narratives.

Q: As an ordinary investor, how should I view the allocation value of crypto assets at this stage?

The value of crypto allocation depends on investment horizon and risk appetite. In the short term, the market lacks clear upward catalysts, and volatility remains high. In the long term, effects like Bitcoin halving, institutional infrastructure, and application layer development are ongoing. It is recommended to make independent judgments based on your risk tolerance rather than chasing or panicking.