Written by: Tanay Ved

Translated by: Chopper, Foresight News

TL;DR

• Amid turbulent macroeconomic and geopolitical environments, the cryptocurrency market remains under pressure, but ETF demand has gradually improved this quarter, providing support for Bitcoin's current price level.
• On-chain trading platforms and asset tokenization further drive traditional assets into a 7×24 hour trading market, with perpetual contracts for stocks and indices launched on platforms like Hyperliquid, as well as new stock perpetual products on mainstream exchanges, steadily increasing open interest.
• The total supply of stablecoins remains stable around $300 billion, while the adjusted transfer volume rises to about $21.5 trillion in the first quarter of 2026; regulatory policies regarding stablecoin yield and issuance are gradually becoming clearer, continuously impacting industry development.

The first quarter of 2026 has come to an end, marking a critical point for reviewing the dynamics and core themes of the cryptocurrency market. This quarter, geopolitical instability and macroeconomic uncertainty intertwined, resulting in overall market characteristics of risk aversion and high volatility. Despite challenges faced by the cryptocurrency market, with total market capitalization falling about 22%, sectors such as tokenized stocks and on-chain trading of traditional assets have become highlights, showing substantial progress in industry infrastructure. This article will review the first quarter of 2026 and analyze the trends and core themes shaping the market during this period.

Market Performance

Bitcoin's price fell over 30% in February from around $95,000, marking a 22% decline year-to-date. In addition to macroeconomic pressures, the general sell-off of risk assets and the clearing of the derivatives market further intensified the downward trend, renewing discussions about Bitcoin's hedging properties and store of value function.

However, since the outbreak of the Iran conflict on February 28, Bitcoin has been stronger compared to stocks and gold, demonstrating some resilience and signs of demand recovery.

Data Source: Coin Metrics and Google Finance

The performance of cryptocurrency assets varies significantly internally, with only a few altcoins exhibiting strong narratives and genuine usage growth outperforming the market.

Noteworthy performing tokens include Hyperliquid (HYPE), Bittensor (TAO), and Morpho (MORPHO), each posting over 30% quarterly gains. Hyperliquid benefitted from the growth of the HIP-3 market (particularly in commodity and stock index categories), expanding its business coverage from cryptocurrency assets to more asset classes; Bittensor and Morpho leveraged growth in AI infrastructure and decentralized finance credit markets, with institutional interest in decentralized AI and treasury management businesses continuing to rise.

Data Source: Coin Metrics

Bitcoin Demand Stabilizes Gradually

The risk aversion sentiment in the early part of the quarter reversed in March. Despite ongoing signs of market weakness, the demand for Bitcoin spot ETFs has significantly improved, reversing the continuous outflow of funds since November 2025. Rolling 30-day data shows that net inflows into ETFs exceeded 30,000 Bitcoins, supporting Bitcoin's consolidation around the $70,000 mark.

Data Source: Coin Metrics Network

Whether this demand can be sustained and accelerated largely depends on the macro environment and policy direction. Easing geopolitical risks, slowing inflation, returning interest rate cut expectations, as well as continuous growth in ETF and digital asset treasury (DAT) allocation demand (including the $42 billion Bitcoin fundraising plan by Strategy), are all expected to further consolidate capital inflow.

All-Weather On-Chain Market and Tokenized Stocks

Hyperliquid and Traditional Asset Track

One of the core trends this year is the accelerated integration of traditional financial markets with on-chain infrastructure through asset tokenization and all-weather trading. The growth of perpetual contracts for traditional asset classes is the most direct manifestation of this trend.

After Hyperliquid launched the HIP-3 market covering categories such as stocks, indices, and commodities, the trading volume of non-crypto assets significantly increased to about 45% this quarter. Under the influence of geopolitical conflicts, traders sought all-weather exposure to assets like metals and crude oil, resulting in significant growth in overall trading volume and open interest; among which the open interest for HIP-3 traditional assets accounted for about 28% of the platform's total.

Data Source: Coin Metrics

The Rise of Stock Perpetual Contracts

In this sub-sector, as trading platforms continually expand their offerings, mainstream stocks and index targets have become the fastest-growing category. Kraken launched xStocks stock perpetual contracts in February, and Coinbase International launched stock perpetual products, providing investors with leveraged exposure to US stocks. Meanwhile, Hyperliquid's largest HIP-3 deployer [XYZ] partnered with S&P Dow Jones Indices to launch the first official S&P 500 perpetual contract, further enriching the global stock exposure trading market.

Data Source: Coin Metrics

The open interest of Hyperliquid stock and index perpetual contracts has steadily increased, with core indices like XYZ100 (NASDAQ 100) and S&P 500 now ranking among the top trading categories by open interest, while individual stocks like Nvidia (NVDA) and Micron Technology (MU) have also formed considerable liquidity.

At the same time, the issuance of tokenized stocks and funds has grown in sync, from the xStocks framework to tokenized money market funds and stock funds issued by institutions like Ondo on Ethereum and Solana, all showing growth trends.

The growth of tokenized stocks and real-world asset (RWA) perpetual contracts validates a trend: on-chain platforms are gradually becoming an all-weather extension of traditional markets, rather than merely being crypto-native trading venues.

Stablecoins: Supply Stability with Increasing Usability

Stablecoins continue to play the role of a cornerstone of on-chain liquidity. Despite the overall market decline, the total supply of stablecoins remained stable around $300 billion in the first quarter of 2026, with a slight rebound in supply growth observed on February 30th.

The most notable growth among stablecoins is USDS, issued by Sky Protocol (formerly MakerDAO), a dollar-pegged stablecoin collateralized by crypto assets and real-world assets, with supply increasing by 43% to around $8 billion; Circle's USDC totals $77 billion, while USDT remains stable at around $184 billion.

Data Source: Coin Metrics

While supply remains stable, the velocity and utilization of stablecoins have significantly increased. The total adjusted transfer volume of stablecoins reached $21.5 trillion in the first quarter, approximately three times that of the same period in 2025. Over 80% of this transaction volume came from USDC, with its transactional usage share continuously increasing compared to USDT. This activity is mainly driven by USDC on the Base chain, which alone accounted for a transfer volume of $13 trillion this quarter.

As we analyzed in our recent report, a significant portion of this capital flow originates from liquidity provider rebalancing and flash loans within DeFi infrastructure, rather than end-user payments or settlements, though the latter scenarios are also on the rise.

Data Source: Coin Metrics

In the future, the direction of the stablecoin industry may depend on yield mechanisms and issuance rules. The latest draft of the CLARITY Act proposes to prohibit passive income from stablecoin balances but allows activity-based rewards linked to payments and platform usage. This provision may alter the business models of core participants.

For Coinbase, where stablecoin revenue accounts for over 25% of total revenue, restricting USDC yields may weaken its ability to attract and retain funds; while Circle may be relatively less affected. If high-interest rate environments persist and regulatory rules clarify, its payment and transaction-related earnings are expected to benefit. As the bill progresses, its impact on DeFi lending, yield-generating stablecoins, tokenized government bonds, and other areas remains worthy of continuous attention.

US SEC Releases Digital Asset Classification Framework

This quarter saw important clarifying signals from regulatory bodies. The US SEC and the Commodity Futures Trading Commission (CFTC) jointly released an explanatory document, launching a five-category digital asset classification framework, clarifying the positioning of various assets under existing securities and commodities regulations:

• Digital commodities: Core network-native tokens, whose value primarily relies on the function of the cryptographic system and market supply and demand (such as mainstream public chain tokens), classified as commodities rather than securities.
• Digital collectibles and tools: NFTs, in-game assets, Gas fee tokens, access tokens, generally not subject to securities rules unless they are fragmented or primarily marketed as investment products.
• Payment stablecoins: Fiat and real-world asset-collateralized payment stablecoins are considered quasi-currency instruments, but those yielding returns or with non-compliant designs still require securities classification review.
• Digital securities: Tokenized stocks, bonds, credit-related real-world assets, etc., regardless of whether they are on-chain, are fully categorized as securities.
• Staking, mining, wrapping: Native staking, mining, airdrops and wrapping activities are not classified as securities transactions; however, pooled staking, yield wrapping/structured tokens, if they promise returns to investors, may be deemed investment contracts.

For a deeper understanding of the new token classification framework, progress on the CLARITY Act negotiations, and global regulatory dynamics, please refer to Talos' latest published Regulatory Roundup.

Conclusion

Despite cryptocurrency asset prices still being significantly influenced by macro and geopolitical factors, the underlying infrastructure of the industry continues to iterate. Bitcoin is gradually finding support at the current price level, and on-chain platforms are further penetrating the all-weather trading markets for stocks, commodities, and real-world assets. At the same time, traditional giants like NYSE and NASDAQ are actively positioning in tokenization, promoting the modernization of the stock trading system. Progress on the CLARITY Act and related regulatory policies regarding stablecoin yields will become core variables for the industry; if the macro environment improves, risk appetite for cryptocurrency assets is likely to gradually recover.