In today’s newsletter, CoinDesk’s Joshua de Vos analyzes the performance of cryptocurrencies in the first quarter, highlighting the shifts in institutional demand and new regulatory clarity paving the way for the second quarter.
-Sarah 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 shaped by escalating geopolitical tensions, a cautious Federal Reserve, and institutional flows that turned sharply negative before partially recovering late in the month.
First quarter review
The CoinDesk 20 index fell 27.4% to 1,952, while bitcoin fell 22.1% to $68,228; it was the second-largest quarterly decline since the second quarter of 2022. Escalating tensions in the Middle East pushed crude oil above $100 a barrel, while the Federal Reserve kept rates between 3.5% and 3.75% after its March meeting. The S&P 500 and Nasdaq fell 4.63% and 5.98%, respectively; gold stood out, rising 8.19% to $4,671.
BTC vs. Gold vs. SPX vs. Nasdaq vs. CD20 Index, Q1 2026
Notable momentum emerged in the second half of the quarter. Bitcoin had already fallen about 30% from its February peak before geopolitical tensions sharply escalated in late February, suggesting that much of the fear and forced liquidations had been priced in before the event. Since tensions escalated, bitcoin has gained 3.54%, while the S&P 500 and Nasdaq have fallen 5.09% and 4.89%. The CoinDesk Memecoin Index was the worst performer at -41.7%; The CoinDesk 80 outperformed bitcoin, down 16.5%, with Hyperliquid (+43.8%) and Morpho (+40.9%) leading positive returns among its constituents.
BTC and CD20 index versus selected assets, returns since February 28
Focus on institutional flows
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 prior year. Although March saw a recovery in inflows of $1.32 billion, the first quarter closed with net redemptions of approximately $496 million. Bitcoin’s stabilization in March coincided with the return of positive net inflows, suggesting that institutional positioning had begun to rebuild before the end of the quarter.
Bitcoin ETF Flow and BTC Price, Q1 2026
In the era of spot ETFs, institutional flow data provides a real-time signal of sentiment unavailable in previous cycles. The March rally is a benchmark to watch for the second quarter, especially as Morgan Stanley has reportedly prepared a spot bitcoin ETF ($MSBT) for a fee of 0.14%, designed to integrate into its network of more than 16,000 advisors.
The regulatory table clarifies
A joint SEC-CFTC decision on March 17 designated 16 assets, including SOL, XRP and DOGE, as digital commodities and therefore outside the definition of securities. This removes a key regulatory burden and paves the way for spot ETFs to be approved for a broader range of assets. Basket and index-based ETPs now rank second only to bitcoin-focused products in terms of the number of pending deposits, with CoinDesk indices including the CD20 and CD100 increasingly referenced as natural benchmarks for these vehicles.
Number of pending crypto ETP requests, 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 the conditions for a recovery; a prolonged conflict would keep financial conditions tight. Bitcoin’s October 2025 peak near $126,000 and subsequent correction are broadly consistent with the historical halving cycle, which typically produces a pullback 18-24 months after the ATH. The structural difference of this cycle lies in the institutionalized demand for ETFs; During the peak days of 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 an increasingly broad range of institutional products, the structural basis of this correction is significantly more durable than in previous cycles.
Constituent Highlights
Ether declined 29.1% in the first quarter, with U.S. ether spot ETFs seeing net outflows of $758 million. The most important prospective development is Ethereum’s structural position in tokenized assets; As of Q1 2026, 59.4% of the total real-world asset supply resided on Ethereum. 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-focused allocators.
Solana declined 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 asset holders of Solana also surpassed Ether for the first time, thanks to platforms such as Ondo Global Markets and xStocks.
XRP is down 27.1%, but the narrative is increasingly focused on Ripple’s expanding institutional infrastructure. RLUSD reached a market cap of $1.42 billion at the end of the quarter, and Ripple’s acquisition strategy, spanning prime brokerage through Hidden Road ($1.25 billion, clearing $3 trillion annually) and treasury management through GTreasury ($1 billion), points to a complete financial ecosystem built around XRP and RLUSD. The main 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, with CoinDesk 5 and CoinDesk 20.”
– Joshua de Vos, Research Team Leader, CoinDesk
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- Jamie Dimon, CEO of JP Morgan, said the bank needs to “move faster” in its blockchain efforts because of the threats banks face from blockchain technology.
- Morgan Stanley’s own Bitcoin ETF opened this week, creating competition on Wall Street.
- The US Treasury is proposing new rules for stablecoin issuers to treat them like all other financial companies that must protect themselves against illicit use.
