Cryptocurrency Research Monthly Report (2024.02): ETF Drives BTC Up, Meme Sector Frenzy

Author: MIIX Capital

Introduction:

ETFs drove and dominated the market in February, with market performance centered around BTC and ETH, while intermittent sector rotations further propelled a comprehensive rise in tokens. Accompanied by the UNI proposal, the long-dormant DEFI sector also saw a full rebound; the MEME coin sector began to exhibit a new round of wealth creation effects; and the BTC Staking ecosystem quietly emerged amid the token surge and market frenzy.

1. Macroeconomic Perspective

1.1 Expected US Rate Cut in June, Market Attitude Optimistic

The US Department of Labor reported a significant increase in non-farm payrolls in January, reaching 353,000, the largest monthly increase since January 2023, far exceeding the estimated 185,000 and the previous value of 216,000. This strong employment market performance raised market concerns about potential inflation, which was subsequently validated by the consumer price index (CPI) year-on-year growth data released on February 13, showing a 3.1% increase in January CPI, surpassing the market expectation of 2.9%.

FedWatch

From FedWatch data, it can be seen that despite some previous expectations of a rate cut, the latest data and analysis indicate that the market generally expects the Federal Reserve (Fed) to begin cutting rates only in June.

Additionally, Goldman Sachs has adjusted its expectations, no longer anticipating a rate cut in May, but instead forecasting four rate cuts this year, down from the previous expectation of five. This adjustment reflects a reassessment of the market regarding the sustained growth of the US economy and inflationary pressures.

From the market performance perspective, despite a certain level of inflation in the US economy, it has not suppressed the rise of stocks and crypto assets, and the market remains optimistic about future economic developments and monetary policy adjustments, expecting the Federal Reserve to find an appropriate balance between controlling inflation and promoting economic growth.

1.2 BTC Rise Mainly Driven by ETFs and MicroStrategy

BTC prices surged, rising continuously from the $43,000 level at midnight on February 8 to nearly $64,000, an increase of 32%.

Coinglass Bitcoin ETF Overview

From the perspective of ETF inflows, the rise coincided with the inflow of ETF funds, demonstrating the significant impact of ETFs on Bitcoin prices. As of the 29th, the total managed scale of 11 ETFs reached $42.238 billion, accounting for 3.81% of Bitcoin's total market capitalization, a figure that exceeds the amount of Bitcoin held by Binance exchange wallet addresses.

Dropstab's MicroStrategy Bitcoin Holdings Market Value Position

Moreover, MicroStrategy is also a major source of capital inflow into the BTC market. On the 26th, MicroStrategy founder Michael Saylor stated on his social media platform that MicroStrategy purchased 3,000 Bitcoins between February 15 and 25, with an average purchase price of $51,813. As of now, MicroStrategy holds a total of 193,000 Bitcoins, with an asset scale reaching a peak of $11.9 billion.

1.3 ETH Spot ETF Becomes Next Market Focus

Glassnode Global Digital Asset Market Year-To-Date (YTD) Market Cap Performance

The approval of the BTC spot ETF has injected tremendous confidence into the market, making the timing of the ETH spot ETF launch one of the current market focuses. Meanwhile, ETH's price increase has begun to lead and surpass BTC, shifting market attention to ETH. The most important date currently is May 23 (the date the SEC will make a final decision on VanEck's ETH spot ETF). If the ETH spot ETF is also approved, it would represent another great victory for the crypto market, allowing more traditional investors to participate in the ETH market through this traditional investment tool, bringing new funds into the crypto market.

On a macro level, despite facing the challenge of rising inflation, the market performance in February remained unaffected, continuously reaching new highs under the strong push of ETF funds. Currently, the market is more focused on the delay of the rate cut timing rather than the possibility of continued rate hikes. As the selling pressure from grayscale investments gradually diminishes, we will continue to monitor the inflow of market funds and observe whether BTC can continue to create new historical highs.

2. Industry Data

2.1 Market Cap & Ranking Data

Both BTC and ETH saw nearly a 50% increase over the past 30 days, primarily due to actual ETF fund inflows and expectations surrounding the ETH ETF. However, for ETH, the hype surrounding the Dencun upgrade on March 13 has not yet shown a significant market reaction. The market currently predicts that the ETH spot ETF approval will occur before May 23.

Among the top 100 tokens by market cap, the highest gainers in February were WIF (+462.5%), PEPE (+413.6%), and FLOKI (+313.8%), with significant performance concentrated in the last week of February, showing clear signs of sector rotation. The current upward trend is focused on the MEME coin sector, which differs significantly from past cycles, especially during bull markets.

Note: It is advised that investors remain cautious when the sector rotates to MEME coins, as historically, MEME coins are usually the last sector to rotate, indicating that this round of increases may be nearing a phase of conclusion.

Among the top 100 tokens by market cap, only Monero saw a decline of 14.2% in February (StarkNet launched less than 30 days ago), primarily due to Binance's announcement on February 6 that it would delist XMR, Aragon, Multichain, Vai, and other tokens on February 20. Binance stated that "these tokens do not meet the expected standards."

About WIF (dogwifhat)

dogwifhat is a MEME coin on the Solana chain, which began planning in April 2023 and had been trading sideways around $0.15 for about three months. As of March 2, 2024, its market cap has reached $1.2 billion, making it a dark horse that suddenly emerged in this MEME market, and its entire website design is also very interesting. (This token has not yet been listed on Binance.)

About PEPE

PEPE is a MEME coin launched in April 2023 and was the largest gainer in that round, reaching a peak of $0.00000372 on May 6, 2023. BTC also reached its recent peak shortly thereafter, followed by an overall pullback, sliding down to October 20, 2023. It recently restarted on February 5, 2024, reaching a historical high of $0.00000444, with a market cap of $1.863 billion.

About FLOKI

FLOKI was first listed in the summer of 2021, following reports that Tesla's founder bought a Shiba Inu and named it Floki. As a concept coin related to Musk's pet, FLOKI skyrocketed, and Musk often shares pictures of his pet on X. In the past month, it has also increased more than threefold.

2.2 Stablecoin Inflows and Outflows

The number of stablecoins continued to grow in February, and the slope indicates that this growth may be accelerating, with the total amount of stablecoins reaching $141.2 billion. The fastest-growing stablecoin this month was FDUSD, consistent with January (up 32.65% this month, up 20.41% in January). At this rate, FDUSD is expected to surpass DAI within a quarter, becoming the third-largest stablecoin.

FDUSD is issued by FD121 Limited, a subsidiary of the Hong Kong custodian company First Digital Limited, and is a stablecoin pegged to the US dollar at a 1:1 ratio. The rapid growth of FDUSD is believed to be due to its listing on Binance, replacing BUSD's position.

From the perspective of public chains: stablecoins on Ethereum amount to approximately $73.7 billion, accounting for 52.2% of all public chain stablecoin reserves. Other than Ethereum and Tron, which are the two major stablecoin public chains, other public chains have seen minimal growth.

2.3 On-Chain TVL Rankings

U-based

DefiLlama** Data: ** The on-chain TVL has accelerated with the rise in ETH prices.

Due to the significant rise in ETH prices and the Fee Switch proposal from Uniswap, the overall performance of the DeFi sector has been impressive, with the most notable EigenLayer project seeing its TVL surpass $10 billion, with a monthly increase of over 360%, exceeding the previous second-place AAVE.

Defillama data: Among the 131 projects with a TVL above $100 million (up from 96 in January), the largest increase was Bedrock. As the LRT market and Restaking narrative gradually heat up, the rigid demand for Pendle is also becoming apparent, especially for future institutions, which may find Pendle a good tool for hedging risks.

By DeFi category, the highest TVL ranking remains the LSD sector, at approximately $53.3 billion; Restaking projects based on LSD projects total about $10 billion; and LRT projects based on Restaking total about $5 billion.

https://defillama.com/chains

By chain category, Bitcoin's TVL rose by 694%, reaching $2.43 billion, while Ethereum's TVL increased by 52.3%.

The significant increase in Bitcoin ecosystem TVL benefits from its Layer 2 narrative, with many projects beginning to support BTC staking and receiving funding from numerous top VCs. This trend is expected to continue and manifest in the cyclical market.

2.4 BTC/ETH Mining Pool Data

BTC Hashrate Continues to Rise Steadily!

https://explorer.btc.com/zh-CN/btc/insights-pools

Bitcoin's mining pool data growth is shown in the above chart, with the total network hashrate now reaching 575.08 EH/s. Foundry USA, AntPool, and F2Pool rank as the top three in hashrate, with the mining pool's hashrate continuing to maintain a steady upward trend, increasing by 7.2% compared to last month. Currently, there are 7,044 blocks remaining until the halving, with an estimated halving date of April 19, 2024, two days earlier than the previously assessed date of April 21.

ETH Staking Volume Continues to Rise!

https://beaconcha.in/charts/staked_ether

The amount of ETH staked continues to rise, currently accounting for 26% of the total, with a staking volume of 1.82 million this month. The Restaking market is still ongoing.

Additionally, the ETH mainnet gas fees have significantly increased with the market, with a net burn of 46,839 ETH in February. The high gas situation is expected to persist until June due to the Dencun upgrade and ETH ETF, with the total amount of Ether expected to drop below 120 million.

3. Market Trends

3.1 Comprehensive Rebound in the DeFi Sector

https://www.coingecko.com/en/categories/decentralized-finance-defi

In February, the prices of DeFi project tokens saw significant increases. Coingecko data shows that the market cap of DeFi category tokens increased by 31% over the past 30 days. Among them, Uniswap rose by 100%. This was primarily due to the Uniswap Foundation's fee switch proposal, which rekindled market interest in the DEFI sector, leading to a substantial rise in the overall prices of DEFI category tokens.

3.2 MEME Sector Rotation Upward

The recent market rise has sequentially experienced rotations through mainstream coins, AI, DePIN, GameFi, DeFi, and MEME sectors. In February, Dogecoin, Shib, PEPE, and other MEME coins all rose over 300%, showing significant wealth creation effects. However, the MEME coin market is highly volatile, and recent market-making activities for SHIB have been primarily focused on selling, so investors should remain cautious.

3.3 BTC Staking Ecosystem Begins to Emerge

https://x.com/MerlinLayer2/status/1763783422529695862?s=20

Using BTC staking as an underlying asset, leveraging BTC market cap consensus, and introducing BTC ecosystem narratives and airdrop expectations have rapidly absorbed BTC to increase TVL, becoming a highly anticipated business model. Currently, the TVL of Merlin Chain has reached $3 billion, with BTC accounting for 53% and ORDI accounting for 33%. Consequently, many BTC Layer 2 projects have gained attention, such as Babylon, which received investment from Binance, aiming to secure the Cosmos ecosystem by re-staking BTC. The broad prospects of the BTC staking sector are increasingly recognized, and continuous attention is advised.

4. Investment and Financing Trends

In February 2024, the crypto market completed a total amount of $700 million, slightly up from the previous period's $695 million, an increase of 0.67%. The public data is as follows:

• 134 financing events, a year-on-year increase of 55.81% (118 projects in January 2024);
• 6 acquisition events, a year-on-year increase of 20%, indicating an increase in acquisition activities;
• The average financing amount was $7.2193 million, a year-on-year decrease of 10.74%;
• The median financing amount was $4 million, a year-on-year increase of 19.4%.

Although the average financing amount has decreased, the number of financing events, acquisition events, and median financing amounts have all increased, indicating a rise in market activity and investor confidence.

The five largest financing rounds in February were:

- EigenLayer completed a $100 million financing round, valuation undisclosed;

- Flare Network completed a $35 million financing round, valuation undisclosed;

- Ether.Fi completed a $27 million financing round, valuation undisclosed;

- Avail completed a $27 million seed round financing, valuation undisclosed;

- MetaStreet completed a $25 million financing round, valuation undisclosed;

Additionally, financing events revealed: 38 seed rounds (up 40% year-on-year), 15 strategic financings (down 21% year-on-year), 13 pre-seed rounds (up 30% year-on-year), and 8 other types (no change), with seed rounds being the most frequent, followed by strategic financings and pre-seed rounds, while other types of financing events were less common.

From the VC perspective, Animoca Brands has been active in investments in infrastructure, NFTs, and GameFi, while Binance Labs and Multicoin Capital have made the most investments in the DeFi sector, with other VC firms focusing on infrastructure.

Investment activities in the crypto space increased in February, with both the number of projects and investment amounts rising, reaching a near one-year high, with investments still concentrated in infrastructure and DeFi. This trend may positively impact market sentiment in March, attracting more investors into the market.

As March progresses, the development trends of cryptocurrency and blockchain investment activities may be influenced by various factors, including global economic conditions, technological innovations, and policy environments. If no significant adverse events or policies arise, and market sentiment remains positive with ongoing technological advancements, investment activities in March are expected to continue on an upward trend. However, market volatility and policy changes remain key risk factors, and investors should remain vigilant and continuously monitor to make timely and accurate investment decisions.

5. Conclusion

The market trends and dynamics of February 2024 have revealed several important trends:

• The market reacts significantly to macroeconomic data and policy expectations, especially following the release of employment growth and inflation data;
• The production market has shown strong momentum, particularly with BTC and ETH prices rising significantly this month under the influence of ETFs;
• Continuous issuance of stablecoins, ongoing growth in on-chain TVL, and stable increases in mining pool data all demonstrate investors' optimistic expectations for the future;
• The increase in total financing amounts indirectly indicates a rise in market activity and investor confidence;

Despite facing uncertainties in the macroeconomic environment and regulatory challenges, investments in technological innovation and infrastructure construction continue to grow, indicating the long-term potential and development space of the crypto market. Investors and market participants should continuously monitor macroeconomic indicators, technological innovations, and changes in the policy environment to make informed decisions in an ever-changing market. We look forward to the crypto market in April continuing to showcase its unique innovative capabilities and its penetration and impact on the global financial ecosystem.