Dear Reader,
Good morning.
Simmy Adelman here with Behind the Markets.
I wanted to share with you something that caught my eye this morning.
Because it raises a question most investors are afraid to ask out loud.
Something That Has Never Happened Before
In 2026, Bitcoin is down roughly 31%.
Gold is down about 6%.
Every other major asset class is up.
The S&P 500 is up 10%.
Small caps are up 20%.
Value stocks are up 16%.
According to 15 years of market data, Bitcoin and gold have never before finished a calendar year as the two worst performing major assets at the same time.
Never.
Not once.
That is worth sitting with for a moment.
Why Is This Happening?
The answer is actually pretty straightforward once you see it.
The Federal Reserve under Kevin Warsh has kept rates high and signaled they may go even higher.
Inflation is running at 3.8%.
The dollar is strong.
And here is the key thing most people miss.
Gold and Bitcoin have one thing in common — neither pays you a dime to own them. When interest rates are high, that becomes a real problem.
Gold doesn't pay you interest.
Bitcoin doesn't pay you interest.
When you can earn a real return sitting in short-term Treasuries, the opportunity cost of holding either one goes up.
So money rotates out.
That's what's happening.
But Here's the Uncomfortable Question
Dylan laid out the structural case for gold right here last week.
Central banks buying at record pace.
De-dollarization accelerating.
Fiscal deficits compounding.
The long-term case for gold remains intact.
We even have one little-known way you can profit off it.
Bitcoin is a different story.
And this is the part nobody wants to say out loud.
2026 has given Bitcoin exactly the macro environment its believers said it was built for.
Inflation rose above the Fed's target.
There’s been massive fiscal expansion — the Big Beautiful Bill alone adds an estimated $3 to $5 trillion to the deficit over ten years.
A Moody's downgrade of US credit.
Dollar under pressure.
Geopolitical chaos.
If Bitcoin was going to prove itself as a true inflation hedge, this was the year.
And it hasn't.
It's down 31%.
So What Is Bitcoin, Actually?
The honest answer that is emerging from 2026 is this.
Bitcoin behaves like a risk-on asset dressed up in safe-haven clothing.
When liquidity is loose and money is cheap, it soars.
When the Fed tightens and real yields rise, it falls — just like any other growth asset.
Now that's not a death sentence for Bitcoin.
It has delivered extraordinary long-term returns for patient holders.
But it is not what many people think it is in the short run.
It is not a crisis hedge and it is not digital gold.
At least not yet.
The institutional mandate that drives central banks to buy gold does not exist for Bitcoin.
And until it does, Bitcoin will keep behaving like a high-flying tech stock when markets get scared.
What This Means for You
If you own Bitcoin as a long-term bet on adoption and institutional acceptance, the thesis is still intact.
Just be clear-eyed about what you own.
If you own it because you thought it would protect you when things get scary — 2026 is telling you something important.
Have a wonderful Tuesday.
I'll see you tomorrow.
Simmy Adelman, Editor-in-Chief
Behind the Markets
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Written by Simcha Adelman