Author: 137Labs
In the first quarter of 2026, the crypto market did not rebound; instead, it worsened further from the downward trend that began at the end of 2025, gradually entering a more pronounced "bear market phase." Under the dual impact of a tightening macroeconomic environment and geopolitical conflicts, the entire industry exhibited clear characteristics of contraction and restructuring.
If I had to summarize this quarter in one sentence:
The market is not just falling, it's being reshuffled.
I. Overall Market: The decline is merely a symptom; the key issue is the "loss of growth momentum."
In Q1 2026, the total market capitalization of the crypto market shrank significantly:
- Total market capitalization fell to $2.4 trillion
- A decline of approximately 20% in a single quarter.
- Compared to the high point in October 2025, the overall pullback is close to 45%.
This marks the second consecutive quarter of decline.
More importantly, the decline mainly occurred in a short period of time, from mid-January to early February.
A key trigger was Kevin Warsh's nomination as Federal Reserve Chairman, which the market interpreted as a possible more hawkish stance (interest rate hikes/tightening of liquidity) in future monetary policy.
Changes in market conditions
A distinct characteristic emerged throughout the quarter: the market entered a period of sideways consolidation.
Even in the event of geopolitical conflicts (such as the Iraq War), there were no dramatic fluctuations.
Note: The panic selling has subsided, but funds have not yet returned.
Trading activity declined in tandem
- Average daily trading volume fell to approximately $117.8 billion.
- Down 27% month-on-month
This means:
The market is not only falling, but it's also becoming "increasingly quiet."
II. Stablecoins: A "Liquidity Anchor" in a Bear Market
In a context of a significant overall market contraction, stablecoins exhibit entirely different characteristics:
- The total size has remained basically at US$309.9 billion.
- Only a slight increase of about 0.5%.
The implications of this are crucial: stablecoins are becoming "docks" for funds in the market, rather than risky assets.
Structural changes: Funds are being redistributed
1) Tether experiences its first supply contraction
- A decrease of approximately 1.6%.
- Market share remains as high as 59%.
This is the first significant decline since 2022.
Note: Some funds are being withdrawn from the crypto ecosystem.
2) USD Coin continues to grow
- Growth of approximately 2.4%
This indicates that more compliant and transparent stablecoins are gaining popularity.
3) Rapid expansion of new players
USDS, USD1, and other currencies saw growth of over 30%.
nature:
The competition in stablecoins has entered a phase driven by both product and ecosystem.
III. Macro Asset Comparison: Crypto Assets Significantly Lose Momentum
The most noteworthy aspect of this quarter is not within the crypto, but rather across asset classes:
Commodities surge
- Crude oil rose 76.9%.
- Gold rose 8.1%.
reason:
- The US-Iran conflict has caused a supply shock.
- Global risk aversion intensifies
Crypto assets have significantly lagged behind.
- Bitcoin fell 22%
- The Nasdaq fell by approximately 7.1%.
- The S&P 500 fell by approximately 4.8%.
The conclusion is very clear:
In a risk-averse environment, crypto assets are not considered "safe-haven assets".
at the same time:
The US dollar index (DXY) rose slightly.
illustrate:
Funds are flowing back into "traditional safe assets," rather than into cryptocurrencies.
IV. Exchanges: Overall Activity Declines
Centralized Exchanges (CEXs)
- Total transaction volume: $2.7 trillion
- Month-on-month decrease: 39.1%
Key phenomena:
- January remained at a high level
- It continued to decline afterwards.
- It fell to a near two-year low in March.
Exchange Landscape
- Binance remains in first place (37%).
- MEXC Second (10%)
- HTX saw the largest drop.
nature:
There are no winners in a bear market, only those who "fall less" and those who "fall more".
Decentralized Exchanges (DEXs)
Solana continues to lead
Market share: 30.6%
Despite a decrease in trading volume, it still ranks first.
Changes in the competitive landscape
BNB Smart Chain: Second
Ethereum: Third, but overtook Solana in March.
trend:
Competition among leading blockchains is intensifying, rather than a one-sided domination.
New blockchains are starting to come into view.
Monad enters the top ten
illustrate:
Even in a bear market, the competition for infrastructure continues.
Fifth, the most interesting change: On-chain "oil trading" begins.
Hyperliquid
A crucial but easily overlooked trend is that commodity transactions are starting to be conducted on the blockchain.
Data performance
- Commodity perpetual contracts account for approximately 30% of total open interest.
- Crude oil trading demand explodes
- Daily trading volume even exceeded that of Bitcoin at one point.
The underlying mechanism
HIP-3 proposal allows anyone to issue contracts by pledging funds, including: stocks, gold, and crude oil.
This means the crypto market is becoming a "24-hour global exchange".
VI. The Real Core Conclusion
1) The market has entered "defensive mode".
Funds flowing to stablecoins
Investors reduce trading
Declining risk appetite
2) Crypto loses its "independent market data".
No longer rising independently
Clearly affected by macroeconomic factors
nature:
Crypto has become part of the global financial system.
3) Changes in transaction behavior
Speculation decreased
Increased practical needs (such as commodity transactions)
4) A new narrative is taking shape
Past: NFT, meme, AI
Currently: Stablecoins, RWA, on-chain commodity transactions
Summarize
In the first quarter of 2026, the crypto market did not rebound. Instead, it officially entered a "structural bear market" due to the combined effects of macroeconomic pressures and geopolitical conflicts.
Funds are withdrawing from high-risk assets and shifting towards stablecoins and mappings to real-world assets; trading activity continues to decline, while on-chain infrastructure is quietly evolving.
This is not just a cyclical downturn, but more like a key turning point for the crypto industry as it transitions from a "speculative market" to a "financial infrastructure".
