Is Bitcoin Positioned to Outperform the Market in 2026?

According to data from asset manager BlackRock, Bitcoin (CRYPTO: BTC) has produced a higher return compared to every other asset class in eight of 11 years from the start of 2013 through 2023. Bitcoin was then up 119% in 2024.

That hot streak is about to end this year, with the top digital asset declining 7% in 2025 (as of Dec. 23). At the same time, the S&P 500 index has produced a total return of almost 18%, marking its third straight year of double-digit percentage gains.

Maybe next year will be better for Bitcoin. Is the world's dominant cryptocurrency positioned to bounce back and outperform the market in 2026?

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Macro conditions might favor Bitcoin in the near term

In September 2024, the Federal Reserve decided to cut its benchmark interest rate for the first time since it raised the rate in July 2023. After this, the central bank conducted five more rate cuts. Generally speaking, declining interest rates are a boon for risk assets, a group that includes Bitcoin. From an investor's perspective, lower yields in fixed income products are not as attractive, leading to a greater focus on assets that could earn higher returns. These rate cuts are also accommodative to the economy, which can drive revenue and earnings growth for companies, in turn supporting higher valuations and stock prices.

Additionally, the U.S. central bank has effectively started quantitative easing (QE), having announced plans to purchase $40 billion of Treasury Bills each month. The last time QE started was on March 15, 2020, to jump-start the economy after the onset of the COVID-19 pandemic. Over the subsequent 12 months, Bitcoin soared more than 1,000%.

Lower interest rates and QE provide a very favorable environment in which more liquidity gets pumped into the financial system. Bitcoin, as a global macro asset, is definitely affected by this. Investors can look at two key metrics to watch this trend: federal debt and M2 money supply. Both have rapidly expanded in the recent past, with no reason to believe they shouldn't do the same in 2026.

The macroeconomic situation looks to be working in Bitcoin's favor as we set our sights on the new year.

Bitcoin's 2026 performance could trounce the market

Based on its historical average, the S&P 500 generates an annualized 10% total return. If this is what happens in 2026, then Bitcoin has a very low hurdle rate to clear in order to outperform the benchmark index. In addition to the macro forces already mentioned, there are two reasons the leading cryptocurrency is poised to do extremely well next year.

This year is on pace to be Bitcoin's fourth down year in the past 12 years. In the following year after a loss, the price has typically rallied in remarkable fashion. For instance, after a 65% decline in 2022, the digital asset came roaring back with a monster 156% gain in 2023. Past trends aren't indicative of what the future will bring. However, this track record shows that Bitcoin can't stay down for long and that 2026 could be a huge year.

There has been a lot of fear, uncertainty, and doubt (FUD) recently about quantum computing and the potential negative impact it could have on the Bitcoin blockchain. Theoretically, quantum computing could break Bitcoin's security, allowing foul actors to access users' private keys from their public keys, and essentially taking ownership of the crypto. This would undermine any trust people have in Bitcoin, likely making the network worthless.

These concerns might be overblown, though. Experts argue that quantum computers today are too expensive, have high error rates, and are not powerful enough. What's more, Bitcoin developers are working on quantum resistance tools. It's still a potential long-term threat, but it's a focal point for important stakeholders.

Once the FUD topic of the day starts to dissipate, Bitcoin can benefit from improving market sentiment throughout 2026.

Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool recommends BlackRock. The Motley Fool has a disclosure policy.