Bitcoin posted its worst quarterly performance since 2018 in Q1 2026, declining roughly 22% to end around $66,700 as the Iran conflict, tariffs, and a hawkish Federal Reserve pressured risk assets. Despite this, it outperformed traditional assets like gold and equities immediately following the war outbreak. Analysts point to Fed policy and geopolitical resolution as key catalysts for the coming quarter, with U.S. spot Bitcoin ETFs showing resilience and institutional engagement continuing amid uncertainty.
Bitcoin closed the first quarter of 2026 with its worst performance since early 2018, shedding nearly a quarter of its value. The cryptocurrency fell from around $95,000 in February to roughly $66,700, a decline of about 22% year-to-date according to a report from institutional trading firm Talos citing data from Coin Metrics.
The asset remains pinned in a $66,000-$70,000 range with whale transfers at multi-year lows. Institutions and retail investors are unwilling to commit capital until they see regulatory clarity or a shift in geopolitical conditions, according to a Wintermute research note.
Despite its bruising quarter, Bitcoin held up better than equities and gold after the February 28 outbreak of the Iran war. It fell just 1.5% compared to significant drops in gold and major stock indices over the same period, per data from Talos.
Bitcoin’s performance appears more of a “macro-driven reset than a structural shift,” Samar Sen, head of international markets at Talos, stated. “Crypto, alongside other risk assets, came under pressure following the escalation of the Iran conflict, alongside tariffs and tighter policy expectations,” he added.
U.S. spot Bitcoin ETFs hold roughly $100 billion and saw net inflows resume in March. Liquidity across order books has also recovered from late-2025 lows, allowing markets to absorb larger moves.
U.S. monetary policy could prove the most important variable for Bitcoin’s near-term trajectory, according to Zeus Research analyst Dominick John. A Fed pause or easing would release liquidity, while continued hawkishness could tighten it.
A resolution to the Middle East conflict could provide a “critical catalyst” for the next quarter. The Fed’s stance on rate cuts serves as “the definitive watershed for either a powerful rebound or a further breakdown,” stated Ryan Yoon, senior analyst at Tiger Research.
On prediction market Myriad, users put just a 5% chance on the Fed cutting rates by more than 25bps in the first half of the year. The chances of a U.S./Iran ceasefire before June also fell sharply this week.
A “growing regional divergence” in markets like Iran could also shape Bitcoin’s trajectory. “Bitcoin usage has historically increased during periods of economic pressure and is likely to rise again if the conflict persists,” said Markus Levin, co-founder of XYO.
