In today’s newsletter, CoinDesk’s Joshua de Vos breaks down crypto performance in the first quarter, highlighting shifting institutional demand and new regulatory clarity setting the stage for Q2.
-Sarah Morton
Q1 2026 Digital Asset Review
Digital assets closed Q1 2026 under meaningful pressure, extending a decline 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 reversing towards 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 biggest quarterly drop since Q2 2022. Escalating tensions in the Middle East pushed crude oil above $100 a barrel, while the Federal Reserve held interest rates steady at 3.5%-3.75% after 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 remarkable dynamic emerged in the quarter’s second half. Bitcoin had already fallen about 30% from its February peak before geopolitical tensions escalated sharply in late February, suggesting that much of the fear and forced liquidations had been factored in before the event. Since tensions intensified, bitcoin returned 3.54%, while the S&P 500 and Nasdaq fell 5.09% and 4.89%. The CoinDesk Memecoin Index was the weakest 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 vs. selected assets, returns since February 28
Institutional flows in focus
Among US spot bitcoin ETFs, net outflows of 1.81 billion erased USD in January and February much of the institutional demand built up over the previous year. Although March saw a rebound of $1.32 billion. in approach, closed the 1st quarter with net redemptions of approx. $496 million Bitcoin’s stabilization in March coincided with the return of positive net inflows, suggesting that institutional positioning had begun to rebuild before the quarter ended.
Bitcoin ETF Flows and BTC Price, Q1 2026
In the spot ETF era, institutional flow data provides a real-time signal about sentiment that was not available in previous cycles. The rally in March sets a baseline worth watching for Q2, especially as Morgan Stanley is reportedly preparing a 0.14% fee spot bitcoin ETF ($MSBT) designed to integrate into its network of over 16,000 advisers.
The regulation picture makes it clear
A joint SEC-CFTC ruling on March 17 designated 16 assets, including SOL, XRP and DOGE, as digital commodities and thus outside the securities definition. This removes an important regulatory overhang and opens the way for spot ETF approvals across a wider range of assets. Basket and index-based ETPs now rank second only to bitcoin-focused products in number of pending filings, with CoinDesk indices including the CD20 and CD100 increasingly referenced as natural benchmarks for these vehicles.
Number of Pending Crypto ETP Applications, 2025
Looking forward to Q2
Market direction in Q2 will be shaped by two variables: the trajectory of the Middle East conflict and the Federal Reserve’s response to inflation data. A de-escalation would ease energy price pressure and create conditions for recovery; prolonged conflict would keep economic conditions tight. Bitcoin’s October 2025 peak near $126,000 and the subsequent correction is broadly in line with the historical halving cycle, which typically produces an 18-24 month post-ATH pullout. This cycle structural difference is institutionalized ETF demand; on peak days in 2024, supply reached $1 billion, equivalent to absorbing over 30 days of mining in a single session. Combined with a more supportive regulatory environment and a deepening institutional product suite, the structural foundations going into this correction are meaningfully more durable than in previous cycles.
Constituent highlights
Ether fell 29.1% in Q1, with US spot ether ETFs recording net outflows of $758 million. The more significant forward-looking development is Ethereum’s structural position in tokenized assets; 59.4% of the total real-world asset supply is on Ethereum as of Q1 2026. BlackRock’s ETHB Stake ETF, which launched on March 12th with an expected annual yield 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 reached a new record of $832 billion in Q1 2026, reflecting a shift toward payment infrastructure. Solana’s real-world asset count also surpassed Ether for the first time, driven by platforms such as Ondo Global Markets and xStocks.
XRP fell 27.1%, but the narrative is increasingly centered on Ripple’s expanding institutional infrastructure. RLUSD reached a market capitalization 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 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, Head of Research Team, CoinDesk
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- The U.S. Treasury Department is laying out new rules for stablecoin issuers to treat them like any other financial company that must maintain armor against illegal use.
