Crypto IPOs Underperform S&P 500 as Market Sentiment Turns Fearful

VADODARA, January 6, 2026 — In a stark deviation from traditional market correlations, cryptocurrency-related initial public offerings (IPOs) underperformed the S&P 500 in 2025, delivering a weighted average return of 13.9% compared to the index's 16%, according to Cointelegraph. This daily crypto analysis reveals that the underperformance was driven by poor post-listing performance of major crypto firms, exacerbated by Bitcoin's retreat from its October high and prevailing fear sentiment in the broader market.

Market Context & Background

Underlying this trend is a structural shift in capital allocation following the resurgence of Wall Street interest in crypto assets since the start of the Trump administration. Historically, crypto IPOs have mirrored Bitcoin's price action, but the 2025 cycle decoupled as institutional inflows failed to sustain momentum. This mirrors the 2021 correction where speculative fervor led to overvaluation, but with added complexity from macroeconomic factors like interest rate hikes. Market structure suggests that the current fear sentiment, as indicated by a Global Crypto Fear & Greed Index score of 44, has created a Fair Value Gap (FVG) between IPO valuations and underlying asset performance. Related developments include recent market convergence signals, such as Bitget's TradFi launch amid similar fear sentiment, highlighting broader integration challenges.

What Happened?

According to Cointelegraph, the overall IPO market's returns were dragged down by cryptocurrency-related companies, with specific examples illustrating the slump. Circle, the USDC issuer, saw its stock surge 170% on its first day of trading, but by December 31, its closing price fell below that initial close, correlating with Bitcoin's retreat from its October high. Crypto exchange Gemini, which went public in September, was cited as one of the worst performers; its stock price declined from a high of over $32.50 to $9.92 by year-end. Similarly, Bullish, listed in August, showed sluggish performance. On-chain data indicates that these declines coincided with reduced network activity and profit-taking by early investors, creating an Order Block of resistance around IPO price levels.

Technical Analysis & Price Action

Market structure suggests that the underperformance is tied to Bitcoin's volatility, which serves as a benchmark for crypto equity sentiment. Bitcoin's retreat from its October high created a bearish invalidation level at $90,000; a break below this could signal further downside for crypto IPOs. Conversely, a bullish invalidation level is set at $100,000, where sustained trading above might restore confidence. The Relative Strength Index (RSI) for major crypto stocks like Circle and Gemini has hovered near oversold territories, indicating potential for a short-term bounce, but Volume Profile analysis shows weak accumulation at current levels. This technical setup mirrors patterns seen in Bitcoin futures markets where long/short ratios neared equilibrium amid fear, suggesting balanced but cautious positioning.

By The Numbers

Why It Matters

This underperformance matters because it signals a liquidity grab in crypto equities, where capital is being reallocated from new listings to more established assets like Bitcoin or traditional stocks. For institutions, it raises questions about the efficacy of crypto IPOs as diversification tools, potentially slowing future listings. For retail investors, it highlights the risks of timing entries based on hype, as seen with Circle's initial surge and subsequent decline. The Federal Reserve's monetary policy, detailed on FederalReserve.gov, has contributed to this by increasing borrowing costs, dampening risk appetite. Consequently, the convergence of crypto and traditional finance faces headwinds, as evidenced by derivative market tests like BitMart's USDT prediction market launch amid fear sentiment.

Community Sentiment

Market analysts on X/Twitter attribute the slump to "overvaluation at listing" and "macroeconomic pressures." Bulls argue that this is a typical consolidation phase, pointing to historical cycles where crypto assets underperformed before major rallies. However, the prevailing sentiment remains cautious, with many emphasizing the need for stronger fundamentals, such as the network upgrades driving demand in assets like Sui, which defied a $65.1M token unlock. On-chain data indicates that whale accumulation has slowed, suggesting institutional patience until clearer signals emerge.

Price Prediction / Future Outlook

Bullish Case: If Bitcoin holds above $90,000 and the Fear & Greed Index improves to neutral, crypto IPOs could rebound, with Circle and Gemini retesting their IPO prices. This scenario assumes reduced regulatory uncertainty and sustained institutional interest, potentially leading to a Gamma Squeeze in oversold stocks. Market structure suggests a target return of 20-25% for the sector in 2026 if macroeconomic conditions stabilize.Bearish Case: If Bitcoin breaks below $90,000, crypto IPOs may face further declines, with Gemini testing support at $8.00. This would be driven by prolonged fear sentiment, higher interest rates, and weak on-chain metrics. Historical cycles suggest a potential drop to 10% returns or lower, mirroring the 2018 bear market, where IPO activity stagnated for months.