Cryptocurrency and Stock Market Performance Analysis

The performance of cryptocurrencies alongside stocks since the start of 2024 highlights a troubling trend: altcoin trading seems to mimic regular stock trading.

For instance, the S&P 500 posted a return of about 25% in 2024 and an additional 17.5% in 2025, culminating in a nearly 47% total gain over two years. Similarly, the Nasdaq 100 achieved gains of 25.9% and 18.1% in the same time frame, bringing its cumulative gain to just under 49%.

On the flip side, the CoinDesk 80 index, which tracks the performance of the next 80 crypto assets, saw a staggering decline of 46.4% in the first quarter of 2025, with an approximate 38% drop year-to-date by mid-July.

By late 2025, the MarketVector Digital Assets 100 Small-Cap Index hit its lowest point since November 2020, wiping out over $1 trillion from the total cryptocurrency market capitalization.

This divergence isn’t something to overlook. While various altcoins experienced negative returns with volatility that matched or exceeded stock market fluctuations, major U.S. stock indices were seeing double-digit returns with minimal downturns.

This raises a question for Bitcoin investors: has investing in smaller cryptocurrencies provided worthwhile risk-adjusted returns, or has it just increased exposure to adverse performance while staying closely tied to stock market trends?

Selecting a Reliable Altcoin Index

In an effort to analyze the situation, CryptoSlate examined three altcoin indices.

The first is the CoinDesk 80 Index, which began tracking assets in January 2025 and includes the next largest 80 cryptocurrencies, going beyond Bitcoin and Ethereum.

Next is the MarketVector Digital Assets 100 Small-Cap Index, which focuses on the smallest 50 tokens within a group of 100, reflecting what’s often termed the “junk end” of the market.

Lastly, the Open High Small Cap Index, while not a tradeable product, offers research insights into the small-cap cryptocurrency space.

A combined look at these indices reveals a comprehensive view of different asset categories—spanning broad baskets, volatile microcaps, and analytics-driven perspectives. All three indicate a similar narrative.

When relating back to capital performance, the findings are straightforward.

The decline was moderate, with U.S. large-cap indices showing declines in the mid-20s in 2024 and high teens in 2025. The worst drop for the S&P 500 during this timeframe was in the mid-teens, while the Nasdaq 100 maintained its upward momentum.

Compared to broad altcoin indices, which tell a different story, the CoinDesk 80 had a disastrous quarterly return of -46%, while the large-cap CoinDesk 20 dropped by “only” -23.2%, as reported by CoinDesk Indices.

By mid-July 2025, the CoinDesk 80 was down approximately 38% for the year, whereas the CoinDesk 5, tracking the major assets like Bitcoin and Ethereum, was up between 12% and 13% during the same stretch.

Andrew Baehr from CoinDesk Indices mentioned that while the correlation between CoinDesk 5 and CoinDesk 80 was high (0.9), pointing to them moving similarly, the outcomes were drastically different—with one showing modest gains and the other suffering a steep decline.

It appears that diversifying into smaller altcoins hasn’t paid off significantly, with notable performance penalties evident.

Small-cap performance, based on the MarketVector Digital Assets 100 Small Cap Index, has decayed, hitting a four-year low by November 2025.

Over five years, small-cap indices saw an approximate -8% return, compared to an impressive +380% for large-cap indices. This clearly suggests institutional investments favored reliable assets while shunning riskier alternatives.

In assessing the altcoin performance for 2024, Kaiko noted that small-cap assets plummeted more than 30%, with mid-caps struggling to keep pace with Bitcoin. The real winners came from a handful of larger players like Solana and XRP, indicating a concerning trend where 64% of trading volume in altcoins was concentrated in the top 10.

While liquidity hasn’t vanished in the cryptocurrency space, it’s shifted towards higher-quality assets.

Evaluating Sharpe Ratio and Drawdown

The comparison becomes increasingly unfavorable when considering risk-adjusted returns. The CoinDesk 80 and small-cap alt indices showed profoundly negative tallies, with volatility matching or surpassing that of stock indices.

In just one quarter, the CoinDesk 80 dropped by -46%. The small-cap index has seen its performance dip to pandemic lows as of November, after additional declines.

The broader alternative index has undergone significant peak-to-trough shifts exceeding 50%. For example, small-cap stocks in 2024 tumbled by over 30%, followed by the CoinDesk 80’s staggering Q1 2025 drop of -46%, as the small-cap index flirted with 2020 lows by late 2025.

Conversely, the S&P 500 and Nasdaq 100 achieved total returns of approximately 25% and 17%, with a maximum drop in the mid-teens. Though volatile, U.S. stocks showed resilience, unlike cryptocurrencies, which exhibited far greater swings.

Even with the recognized volatility prevalent in altcoins, the risk-reward ratio during 2024 and 2025 was inferior to holding U.S. stocks.

Broad alt indices recorded negative Sharpe ratios in 2024 and 2025, while the S&P and Nasdaq presented significantly positive ratios before accounting for the elevated volatility of cryptocurrencies. When adjusted, the disparity amplified.

Insights for Bitcoin Investors on Liquidity

Shifts in liquidity focus signify important trends. Coverage of the Market Vectors Small Cap Index suggests that small-cap altcoins have consistently underperformed since early 2024, with institutional funds favoring exchange-traded products in Bitcoin and Ethereum instead.

While altcoin volumes returned to 2021 levels, they concentrated heavily in just the top 10 cryptocurrencies, indicating that liquidity is moving towards higher-quality options rather than completely disappearing from the market.

The so-called “alternative season” has functioned more as a speculative play than true structural outperformance. CryptoRank’s altseason index peaked at around 88 by December 2024 but returned to about 16 by April 2025—essentially a full cycle.

The alternative season of 2024 ended in significant losses. By mid-2025, however, altcoins managed to recover many of their losses, while the S&P and Nasdaq continued to grow.

For advisors and investors looking to expand beyond Bitcoin and Ethereum, the data from CoinDesk offers valuable insights.

The Concentrated Large Cryptocurrency Index (CoinDesk 5) saw modest growth in the low teens through mid-2025, while the Decentralized Alternatives Index (CoinDesk 80) was down nearly 40%. Yet both showed a high correlation of 0.9.

Investors didn’t achieve meaningful diversification by branching into smaller altcoins; rather, they faced considerably worse returns and drawdowns compared to Bitcoin/Ethereum or U.S. stocks—while still being affected by similar macroeconomic factors.

This leads to a conclusion: capital tends to treat most alternative investments as tactical rather than foundational allocations. Spot Bitcoin and Ethereum ETFs have provided a far better risk-adjusted performance during 2024 and 2025.

Currently, altcoin liquidity continues to concentrate in a few “institutional-grade” cryptocurrencies like Solana and XRP, along with a select few others that demonstrate clear catalysts and regulatory clarity. The broad spectrum of altcoin indices is not being rewarded.

Implications for Future Liquidity Cycles

The performance landscape of 2024 and 2025 has tested whether altcoins could either match or surpass diversified returns in a risk-fueled macro environment. Meanwhile, U.S. stocks have achieved sustained double-digit returns with manageable pullbacks.

Bitcoin and Ethereum have gained traction among institutional investors via spot ETFs and have benefited from reduced regulations.

However, broader altcoin indices have experienced losses without providing offsetting returns, maintaining strong correlations with major cryptocurrencies and traditional stocks but failing to compensate for increased risk.

Institutional capital flows align closely with performance trends. The contrast in returns between the MarketVector small-cap index (-8%) versus the large-cap index (+380%) reflects the shift toward well-regulated, liquid assets.

The CoinDesk 80’s dismal first-quarter performance of -46% followed by an approximate -38% by mid-July signifies that this trend toward better-performing assets has only intensified.

For those holding Bitcoin or Ethereum contemplating diversifying into smaller crypto assets, the data from 2024/25 offers a clear takeaway. The broad altcoin basket has underperformed relative to U.S. stocks, underperformed Bitcoin and Ethereum on a risk-adjusted basis, and ultimately hasn’t delivered diversification even with its close correlation to leading cryptocurrencies.