In today’s newsletter, CoinDesk’s Joshua de Vos analyzes the performance of cryptocurrencies in the first quarter, highlighting changing institutional demand and new regulatory clarity that sets the stage for the second quarter.
– Sara Morton
Q1 2026 Digital Asset Review
Digital assets closed the first quarter of 2026 under significant pressure, extending a slowdown that began in late 2025. As presented in CoinDesk’s latest “Quarterly Review and Outlook,” the quarter was marked by escalating geopolitical tensions, a cautious Federal Reserve, and institutional flows that turned sharply negative before partially recovering at the end of the month.
Q1 under review
The CoinDesk 20 index fell 27.4% to 1,952, while bitcoin fell 22.1% to $68,228; its second largest quarterly drop since the second quarter of 2022. Escalating tensions in the Middle East sent crude oil above $100 per barrel, while the Federal Reserve held rates steady at 3.5% to 3.75% following its March meeting. The S&P 500 and Nasdaq fell 4.63% and 5.98% respectively; Gold was the standout, rising 8.19% to $4,671.
BTC vs Gold vs SPX vs Nasdaq vs CD20 Index, Q1 2026
A notable dynamic emerged in the second half of the quarter. Bitcoin had already fallen roughly 30% from its February peak before geopolitical tensions escalated sharply in late February, suggesting that much of the fear and forced liquidations had already been priced in ahead of the event. Since tensions escalated, bitcoin has returned 3.54%, while the S&P 500 and Nasdaq have fallen 5.09% and 4.89%. The CoinDesk Memecoin Index had the weakest performance at -41.7%; CoinDesk 80 outperformed Bitcoin, falling 16.5%, with Hyperliquid (+43.8%) and Morpho (+40.9%) leading the positive returns among its components.
BTC and CD20 index against selected assets, performance since February 28
Institutional flows in the spotlight
Among U.S. spot bitcoin ETFs, net outflows of $1.81 billion in January and February erased much of the institutional demand created over the previous year. Although there was a recovery of $1.32 billion in tickets in March, the first quarter closed with net refunds of approximately $496 million. Bitcoin’s stabilization in March coincided with the return of positive net inflows, suggesting that institutional positioning had begun to rebuild before the quarter ended.
Bitcoin ETF Flows and BTC Price, Q1 2026
In the era of spot ETFs, institutional flows data provides a real-time signal of sentiment that was not available in previous cycles. March’s rally sets a base worth watching for the second quarter, particularly as Morgan Stanley reportedly prepares a 0.14% fee spot bitcoin ETF ($MSBT) designed to integrate into its network of more than 16,000 advisors.
The regulatory landscape clarifies
A joint SEC and CFTC ruling on March 17 designated 16 assets, including SOL, XRP, and DOGE, as digital products and therefore outside the definition of securities. This removes a key regulatory overhang and paves the way for the approval of spot ETFs across a broader range of assets. Basket-based and index-based ETPs now rank second only to bitcoin-focused products by number of pending filings, and CoinDesk indices, including the CD20 and CD100, are increasingly referenced as natural benchmarks for these vehicles.
Number of pending crypto ETP applications, 2025
Looking ahead to the second quarter
The direction of the market in the second quarter will be determined by two variables: the trajectory of the Middle East conflict and the Federal Reserve’s response to inflation data. A de-escalation would ease pressure on energy prices and create conditions for recovery; a prolonged conflict would keep financial conditions tight. Bitcoin’s October 2025 peak near $126,000 and subsequent correction are generally consistent with the historical halving cycle, which typically produces a drawdown 18 to 24 months after the ATH. The structural difference of this cycle is the institutionalized demand for ETFs; On peak days in 2024, inflows exceeded $1 billion, equivalent to absorbing more than 30 days of mining supply in a single session. Combined with a more favorable regulatory environment and a deepening institutional product set, the structural foundation going into this correction is significantly more durable than in previous cycles.
Constituent Highlights
Ether declined 29.1% in the first quarter, with US spot ether ETFs recording net outflows of $758 million. The most significant development going forward is Ethereum’s structural position in tokenized assets; 59.4% of the total real-world asset supply resides in Ethereum as of the first quarter of 2026. BlackRock’s ETHB Staking ETF, launched on March 12 with a projected annual return of 3-7%, introduces an income-generating dimension to ETH that could broaden its appeal to yield-oriented allocators.
Solana fell 33.2%, but recorded a notable milestone: peer-to-peer stablecoin transaction volume hit a new all-time high of $832 billion in the first quarter of 2026, reflecting a shift toward payments infrastructure. The number of real-world asset holders of Solana also surpassed Ether for the first time, boosted by platforms such as Ondo Global Markets and xStocks.
XRP fell 27.1%, but the narrative is increasingly focused on Ripple’s growing institutional infrastructure. RLUSD reached a market capitalization of $1.42 billion at the end of the quarter, and Ripple’s acquisition strategy, which encompasses prime brokerage through Hidden Road ($1.25 billion, $3 trillion settlement per year) and treasury management through GTreasury ($1 billion), points toward a comprehensive financial ecosystem built around XRP and RLUSD. The key catalyst for Q2 is whether these integrations translate into measurable on-chain activity.
This summary was created based on CoinDesk Research’s latest report “Digital Assets: Quarterly Review and Outlook, Featuring CoinDesk 5 and CoinDesk 20.”
– Joshua de Vos, Research Team Leader, CoinDesk
Keep reading
- JP Morgan CEO Jamie Dimon says the bank must “move faster” with its blockchain efforts due to the threats banking faces due to blockchain technology.
- Morgan Stanley’s own bitcoin ETF launched this week creating competition on Wall Street.
- The US Treasury is proposing new rules for stablecoin issuers to treat them like any other financial company that must be protected against illicit uses.
