First Quarter Performance of Cryptocurrencies: A Comprehensive Review

This newsletter, written by Joshua de Vos from CoinDesk, provides an in-depth analysis of cryptocurrency performance in the first quarter, focusing on shifting institutional demand and the emergence of new regulatory clarity that sets the stage for the second quarter. The first quarter of 2026 ended with digital assets under significant pressure, marking an extension of the downturn that began in late 2025. The CoinDesk 20 Index fell 27.4% to 1,952, while bitcoin dropped 22.1% to $68,228, representing its second-largest quarterly decline since Q2 2022. Escalating tensions in the Middle East led to crude oil prices exceeding $100 per barrel, and the Federal Reserve maintained interest rates at 3.5%–3.75% following its March meeting. The S&P 500 and Nasdaq declined 4.63% and 5.98%, respectively, while gold rose 8.19% to $4,671. A notable trend emerged in the second half of the quarter, where bitcoin had already declined roughly 30% from its February peak before geopolitical tensions intensified, suggesting that much of the fear and forced liquidations had been priced in beforehand. Since tensions escalated, bitcoin returned 3.54%, while the S&P 500 and Nasdaq fell 5.09% and 4.89%, respectively. The CoinDesk Memecoin Index was the weakest performer, declining 41.7%, while the CoinDesk 80 outperformed bitcoin, falling 16.5%. Hyperliquid and Morpho led the positive returns among its constituents, with gains of 43.8% and 40.9%, respectively. Institutional flows were a key focus, with net outflows of $1.81 billion across January and February erasing much of the institutional demand built during the prior year. Although March saw a recovery of $1.32 billion in inflows, the first quarter closed with net redemptions of approximately $496 million. Bitcoin's stabilization in March coincided with the return of positive net inflows, indicating that institutional positioning had begun to rebuild before the quarter ended. The regulatory environment also clarified, with a joint SEC–CFTC ruling designating 16 assets, including SOL, XRP, and DOGE, as digital commodities and thus outside the securities definition. This ruling removes a key regulatory overhang and opens the pathway for spot ETF approvals across a broader range of assets. Looking ahead to the second quarter, market direction 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, while prolonged conflict would keep financial conditions tight. Bitcoin's October 2025 peak near $126,000 and the subsequent correction are broadly consistent with the historical halving cycle, which typically produces an 18–24 month post-ATH drawdown. This cycle's structural difference is the presence of institutionalized ETF demand, with inflows topping $1 billion on peak days in 2024, equivalent to absorbing over 30 days of mining supply in a single session. Combined with a more supportive regulatory environment and a deepening institutional product suite, the structural foundation entering this correction is meaningfully more durable than in prior cycles.