Hi. Eric here. 

“It’s not been pretty.”

James Seyffart, research analyst at Bloomberg Intelligence, used those words to describe Ethereum exchange-traded funds’ performance over the past few months, when he spoke to Mathew Di Salvo this week. 

The words, however, could also be used to describe the overall performance of the cryptocurrency market in the first quarter of 2026. The market’s total value is down over 20% since January 1 to be worth just over $2.4 trillion.

Investors pulled over $1.2 billion out of Bitcoin and Ethereum ETFs in the first three months of 2026, according to data from DefiLlama. That marks the second quarter of outflows in a row.

The mood is grim on social media, where investors and industry insiders trade jokes about the state of the market.

Even so, people keep telling me and the rest of the DL News team that rays of sunshine are piercing through the gloomy overcast. 

Things, they say, could be about to improve. 

For starters, institutional investors are ploughing money into cryptocurrencies, James Butterfill, head of research at asset management firm CoinShares, told me. 

In the past, only hedge funds and family offices with huge risk appetites dared to invest in Bitcoin and altcoins. Now, pension and university superannuation funds are pouring in. 

Butterfill also suggested that Bitcoin will recover over the next few months. His argument is that traders who subscribe to the idea of Bitcoin’s four-year cycle started to take profit in October, which triggered the market drawdown. 

That sell-off is ebbing, Butterfill said. When it stops, that will likely see the price rally, he argued.

Indeed, Bitcoin ETFs have started to see inflows over the past few weeks, which signals that a recovery may be in the cards.

Hope hinges on the notion that there are no more surprises coming out of the White House. 

Any escalation in the war against Iran is likely to see energy prices surge, which will discourage the Federal Reserve from cutting interest rates — or even hiking them. That would result in the price of Bitcoin and other cryptocurrencies being dragged down lower. 

Conversely, if the war comes to an end, then that would prove bullish for digital assets.

“If tensions ease, short-term safe-haven flows will rotate back into traditional risk,” Norman Wooding, CEO and co-founder of SCRYPT, told Mat and I.

It might just be a glimmer of hope, but I’ll take it.

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Post of the Week

Trading platform Drift Protocol said Wednesday that it was experiencing an “active attack” and advised users not to deposit funds into the protocol following news that $285 million had disappeared. The subsequent tweets were vicious.

DL News is an independent news organisation that provides original, in-depth reporting on the largely misunderstood world of cryptocurrency and decentralised finance. From original stories to investigations, our journalism is accurate, honest and responsible.