Introduction:

This month, the attention in the crypto market remains focused on capital flows rather than fundamentals. After the approval of the BTC spot ETF in the U.S. two months ago, there has been a continuous net outflow for four days (with a net outflow of $836 million from March 18 to 21), while the positive inflows from first-tier firms like BlackRock and Fidelity, as well as other funds, offset the outflows from the Grayscale Bitcoin Trust (GBTC), indicating that we are witnessing some capital shifts. At the same time, we see a tug-of-war between profit-taking miners and ETF net inflows, which is driving the continuation of the volatile market.

1. Macroeconomic Perspective

1.1 U.S. Stock Market Rises but Falls Short of Expectations, Yet Breadth May Continue

The rise of the U.S. stock market in Q1 has boosted the confidence of stock investors, but market sentiment has not yet reached the "euphoria" level that typically signals a market top.

According to the latest report from Bank of America, its "Sell-Side Indicator" rose slightly by 22 basis points to 55% in March, the highest level since May 2022. The "Sell-Side Indicator" is a contrarian sentiment indicator that tracks the average recommended allocation of equity by Wall Street sell-side strategy analysts to balanced funds. When this indicator is at or below the average recommendation level, there is a 94% chance that stock market returns will be positive in the following 12 months.

Bank of America's strategist Subramanian noted that the current indicator value suggests that U.S. stocks will rise at least 13% over the next year.

"The rise in U.S. stocks may have boosted confidence, and sentiment improved in March, but it is far from euphoric levels." Bank of America expects that as the Federal Reserve cuts interest rates and cash returns drop to 3% within two years, trillions of dollars in cash in retirement accounts will shift to equities.

Strategist Subramanian also stated that the breadth of the U.S. stock market may continue to expand.

In March, the proportion of stocks outperforming the market rose from 40% the previous month to 60%, the highest level since December last year. The rise in U.S. stocks is no longer solely driven by technology stocks; the market breadth indicators have significantly improved, with cyclical stocks collectively rising. The "Magnificent Seven" in tech saw their gains slow in March, rising only 1.6% on a market-cap-weighted basis, the worst performance since December, while cyclical sectors like energy and finance performed well, rising nearly 12% in Q1.

1.2 BTC Volatility Arrives, Approximately 2 Million BTC at Loss Threshold

Following the net outflow in the first week after the approval of the U.S. BTC spot ETF in January, the BTC spot ETF experienced a continuous net outflow for four days in mid-March, causing the BTC price to drop 15.4% from the new high of $73,100 reached on March 13, falling to $61,200 on March 20. Subsequently, as the ETF turned to net inflows, the BTC price recovered to $70,000 and began to oscillate around this price.

As shown in the chart above, when the market reached the historical peak of $73,200, investors sold on-chain, locking in over $2.6 billion in realized profits. About 40% of this profit retracement can be attributed to long-term holders, including investors withdrawing from the GBTC trust. The remaining $1.56 billion in realized profits was locked in by short-term holders, who capitalized on incoming liquidity and market momentum. The realized profits from both groups have reached levels similar to those during the peak of the 2021 bull market.

As the price fell from the historical peak to the recent low of $61,200, a total of 2 million Bitcoins transitioned from "profit" to "loss" status, followed by a market rebound to $66,500, with approximately 1 million Bitcoins returning to "profit" status. As shown in the chart, we can see:

• About 1 million Bitcoins have a cost basis between $61,200 and $66,500;
• About 1 million Bitcoins have a cost basis between $66,500 and the historical peak of $73,200;

Comparing with past data, BTC prices did not cover costs until 2024 after the end of the bull market in 2022, and miners only began to profit; from the supply side, the bull market may have just begun. With the entry of traditional institutions and an increasing recognition of BTC's value, there is a high probability that BTC will allow miners to achieve long-term stable profits, similar to gold, meaning Bitcoin prices will remain consistently above mining costs.

1.3 After Dencun Upgrade, Base and Solana Compete for Development

The Dencun upgrade was activated on the ETH mainnet on March 13, leading to a surge in on-chain activities across many networks. Following this, the Base network upgraded to use Blobs, reducing transaction fees from $0.31 to $0.0005, and shortly thereafter, Base's TVL surpassed $1.7 billion, with daily transactions rising to 2 million, an increase of 350%.

Amid the frenzy of Meme coins, not only did Solana's activity significantly rebound, but Base also leveraged the substantial reduction in network fees to compete for development alongside Solana, with the FOMO sentiment surrounding Meme coins almost dominating the market in March.

From the performance of transaction fees on Base, during low congestion periods, the median transaction fees for these networks remained below $0.01; however, during congestion periods, transaction fees on Base surged to levels seen before Dencun, causing some underpriced transactions to remain pending until market fees returned to their target execution rates, resulting in higher median transaction costs during congestion.

In contrast, Solana has maintained low median fees due to its lack of pricing based on computational units (i.e., fees are not directly related to resource consumption) and the absence of an effective priority fee mechanism. However, this approach incentivizes users to send spam transactions to increase the likelihood of transaction inclusion, leading to a significant number of dropped and failed transactions on Solana.

For Solana and Base, their scalability roadmaps still have a long way to go, and they face different trade-offs in their chosen paths:

• The Base team is considering directly increasing the target capacity of its chain in the short term, with the next major bottleneck focusing on optimizing execution, particularly in managing state growth. However, addressing the long-term state growth issue may take time, which could lead to sustained price surges during congestion periods;
• Solana Labs plans to release the v1.18 client version in mid-April, aiming to resolve some of their existing issues through an upgraded scheduler mechanism; and the Solana Foundation has been promoting a more optimized architecture, including implementing priority fees, optimizing the use of computational units, and other mechanisms to enhance overall network performance against Sybil attacks;

2. Industry Data

2.1 Market Cap & Ranking Data

In this month's broad market rally, the market caps of the top 10 tokens have all increased to varying degrees, with Solana briefly surpassing BNB to rank 4th, while overall rankings have not changed significantly. Over the past 30 days, DOGE surged by 116%, ranking first, followed by SOL at 67.9% and BNB at 46.6%, with BTC ranking fourth at 24.9%.

The massive gains of DOGE and SOL primarily stem from the Meme coin frenzy in March, with explosive rallies in PEPE, BOME, WIF, DOGE, and FLOKI, while SOL has become the cornerstone of the Meme ecosystem, driving the price and market cap of SOL upward. Currently, both Base Chain and BNB Chain are empowering and promoting the activity and development of Meme coins, and it is expected that the Meme trend will continue into April.

Among the top 100 tokens by market cap, the tokens with the highest gains in March were dogwifhat (+480.3%), FLOKI (+412.8%), and FLOKI (+256.0%). Their growth trends were distributed throughout the month, and combined with the hot trend of the Meme ecosystem on Base Chain, this high-growth Meme trend is likely to continue into April. Additionally, the AI sector and the BTC ecosystem have recently gained significant attention, and are expected to perform well in April.

2.2 Stablecoin Inflows and Outflows

The trend of stablecoin inflows in March showed positive performance, with the total amount of stablecoins exceeding $150 billion. From the slope of the growth, this increase may still be accelerating, and it is expected that with the continued strength of this cycle, this growth rate will continue and reach its peak within the next 3 to 6 months.

The fastest-growing stablecoin this month was USDe, which increased by 156%; followed by USDC, which rose by 17.79%; while FDUSD, which had the highest growth in the previous two months, actually decreased by 11.01%. Although there are many doubts about USDe in the industry, its rapid growth seems to indicate that the role of algorithmic stablecoins will become increasingly important in this cycle.

USDe is issued by Ethena, and as of March 30, its supply has surpassed 1.5 billion, with the contract positions opened by the protocol accounting for 15% of global ETH contract positions. Ethena's growth lead Seraphim tweeted that the next step is to include BTC as collateral, aiming to expand USDe's issuance scale to over $5 billion by September.

In terms of USD inflows, it follows the overall trend of stablecoin growth, with the highest single-day net inflow being $1.34 billion on March 25. Although there were occasional short-term net outflows, the amounts and frequencies of net outflows were far lower than net inflows. Additionally, from the news perspective, the buying power of U.S. institutions in the market remains very strong, which will undoubtedly continue to drive the increase in USD inflows.

2.3 On-chain TVL Rankings

Overall, the on-chain TVL experienced significant fluctuations in March, with a noticeable downward trend in the third week of the month, followed by a gradual recovery and continued slow growth. This trend is almost consistent with the overall market trend, and it is expected that with a brief pullback and significant fluctuations before the halving, the on-chain TVL will also change accordingly, but the growth trend in terms of coin-based metrics will continue.

The most notable project this month is etherr.fi, which, along with the airdrop claim of its token ETHFI and its launch on major CEXs, saw its TVL grow by 74.59%, leading other projects in the top 10 TVL rankings, far exceeding EigenLayer's 24.99%.

According to DeFiLlama data: As of March 29, the TVL of the ETH liquidity re-staking protocol reached $7.678 billion, with EigenLayer ranking first with over $12 billion in TVL; followed by ether.fi with a TVL exceeding $3 billion; and Renzo with a TVL exceeding $1.6 billion.

Among the 142 projects currently with a TVL above $100 million (up from only 31 last month), the project with the highest TVL growth this month is Hyperlock Finance. Hyperlock is a yield-enhancing and meta-governance protocol aimed at deepening the liquidity of Thruster, allowing traders and DAOs to earn additional yield on Hyperlock, making it easier for Blast ecosystem projects to obtain liquidity. It is expected that as the Blast ecosystem expands, Hyperlock will aggregate and empower its ecosystem, with its TVL likely to continue to grow significantly in the next three months.

About Blast, Thruster, and Hyperlock

Blast is an EVM-compatible optimistic rollup with native yield, where users' balances automatically compound and earn additional Blast rewards;

Thruster is Blast's native DEX, designed to leverage Blast's native yield, customized liquidity solutions, and a more streamlined UI/UX;

Hyperlock is a protocol based on Thruster, optimized for yield and governance for Blast, providing higher rewards for Thruster LPs and THRUST stakers;

In terms of DeFi categories, the total TVL in the top 10 ranked sectors this month is still led by LSD at $51.44 billion, although it has decreased from last month ($53.3 billion). Considering the overall market price changes, the total amount is still on the rise.

Additionally, in other sectors, except for CDP which decreased by about $1 billion, all others saw varying degrees of growth, especially in Lending, Bridge, and Dexes sectors, which also indirectly indicate that on-chain activity is becoming increasingly high, and market heat is gradually rising.

In terms of chain categories, Base's TVL growth was the most impressive in March, reaching 116%; followed by Bitcoin's TVL rising by 77.6% (with last month's growth at 694%), and Solana's continued high growth at 55.3% (with last month's growth at 40.33%).

The high growth of Base and the sustained increase of Solana are primarily due to the market's FOMO sentiment towards MemeCoins and the resulting explosive rallies. Recently, BSC has also started to empower MemeCoins following Base, and it is expected that the TVL will continue to grow this month, still influenced by the MemeCoin trend.

2.4 Mining Pool Data

BTC:

Currently, the total POW hash rate across the network has reached 596.81 EH/s, an increase of about 3.78% from last month (575.08 EH/s). The top three mining pools remain Foundry USA, AntPool, and F2Pool, with no changes, but Foundry USA has shown the most stable growth.

The overall trend of mining pool hash rates continues to rise steadily, indicating that more funds and hash power are gradually being added, with more people willing to consider mining as an investment option in the industry.

The total hash rate for BTC mining pools is 14.440 EH/s, an increase of about 3.6 EH/s from the end of last month. This is clearly due to some miners increasing their hash power equipment in advance to secure profits as the halving approaches, which has also caused instability and a decline in the block generation luck value this month (currently at 30-day luck value of 93.64%). Additionally, there are 2,217 blocks remaining until the fourth BTC block reward halving, which is expected to occur on April 21, 2024.

Although there has been a significant increase in hash power, the average production cost of BTC this month remains at $50,000, peaking at $65,000. After the halving, as production decreases, the average cost is likely to exceed $100,000, which will inevitably lead to a continued rise in BTC prices and market cap.

ETH:

The supply trend of ETH has become stable, with no significant fluctuations since June 2022, maintaining around 122 million, indicating that the POS mechanism has played a very positive role in stabilizing the ETH ecosystem, with ETH's market cap closely correlated with its ecological value.

As the largest ecosystem in the industry, ETH only needs to focus on building and expanding its internal ecosystem to facilitate exploration and drive for the entire industry, which is exactly what we are witnessing.

At the same time, the total staked ETH in POS continues to rise. As of March 31, there are 978,052 active validators, with a total of 31,328,059 ETH staked, accounting for 26.80% of the total ETH supply. Among them, 2,306,499 ETH were newly staked in March, with the liquid staking protocol Lido accounting for 30.11% of the total staked amount.

As the number of staked ETH increases, the incentives for validators will increasingly depend on the activity of on-chain transactions, which, together with the POS mechanism, forms a complete regulatory closed loop within the ETH ecosystem. However, Lido's absolute share makes it an urgent issue for the ETH Foundation to address how to become more decentralized, which is recommended to be closely monitored.

3. Market Trends

3.1 BTC Price Growth Weakens

According to TradingView data: BTC's lowest price in March was $59,005, and the highest price was $73,777, with an overall increase of 16.6%. This increase is weaker compared to February's 43.57%, which may be influenced by the decline in net inflows of BTC spot ETFs in March.

From Coinglass data, the net inflow of BTC spot ETFs in March was $4.6368 billion, far lower than the net inflow of $6.03 billion in February. However, throughout March, BTC prices still maintained a relatively stable upward momentum.

Historically, BTC prices are likely to experience a pullback before and after the halving, but we judge that under the stable foundation of Bitcoin spot ETFs, and with the macroeconomic environment and indicators relatively stable, combined with the positive effects of the halving, Bitcoin will likely maintain its upward momentum even if it experiences a pullback.

3.2 The Wave of Restaking Begins to Emerge

The Restaking sector was also a focus in March. With the ether.fi airdrop claim opening, ETHFI was launched on CEX on March 18 at an opening price of $0.2, and on the same day, its price skyrocketed to a peak of $5.3, an increase of over 26 times; although it fluctuated afterward, the overall trend was upward, with a peak price of about $8.6, which is 43 times the opening price.

The rise of ETHFI and its market performance have led to higher expectations for other unreleased Restaking projects, with attention focusing on Renzo. From Defilama data, it can be seen that since March 1, Renzo's TVL has been steadily increasing, growing by about $350 million from March 1 to March 20; thereafter, its upward slope significantly increased, with a TVL growth of about $1.08 billion from March 20 to March 31, more than three times the previous growth rate.

The growth of Renzo's TVL mainly comes from people's high expectations for its token release. If Renzo's performance aligns with or is close to people's expectations after ether.fi, the wave of Restaking will be unstoppable.

3.3 Meme Coins Continue to Drive FOMO Sentiment

The MEME sector continued to perform well in March. Following the wealth effect of DOGE, SHIB, and PEPE in February, Meme tokens such as BOME, MEW, WIF, and BRETT took turns experiencing explosive rallies, allowing FOMO sentiment in the market to accumulate and release continuously.

In the Coingecko TOP 10 gainers list, CAT has begun to lead a new wave of explosive sentiment, while CHEEMS, OMNOM, and DEGEN have started a new relay. This market trend indicates that the overall crypto market remains active, with market funds flowing freely; on the other hand, it also shows that the market needs new stimuli, whether in terms of sentiment or narrative.

Behind the Meme coin trend, there is more activity and empowerment from Solana and Base within their ecosystems. Through the Meme coin trend and community engagement, the Solana and Base ecosystems have become extremely active, providing an outlet for emotional release. Additionally, BSC is also implementing corresponding plans, which may further boost the rise of the Meme sector, but whether this trend will be sustained and for how long remains a question mark. Especially given the significant volatility of Meme coins, determining the right investment timing poses a substantial challenge for individual investors.

4. Investment and Financing Observation

4.1 Investment and Financing Overview

In March 2024, the crypto market completed a total of $1.16 billion in financing, a month-on-month increase of 52.6%. The data is as follows:

• 180 financing events, a month-on-month increase of 34.32% (134 financing events in February);
• 3 acquisition events, a month-on-month decrease of 50%, indicating a reduction in acquisition activities;
• The average financing amount was $10.0105 million, a month-on-month increase of 38.66%;
• The median financing amount was $5 million, a month-on-month increase of 25%.

Among them, seed round financing events were the most numerous, followed by strategic financing and Series A financing, while other types of financing events saw rapid growth:

• 47 seed rounds (up 23% from last month);
• 30 strategic financing events (up 100% from last month);
• 19 Series A rounds (up 46% from last month);
• 17 other types (up 112% from last month);

Overall, although acquisition events have declined, financing events, average financing amounts, and median financing amounts have all seen significant growth, especially the substantial increase in strategic financing and other types of financing events, indicating a rising bullish sentiment in the market, with hot money flowing into investment and financing, and bullish sentiment and cyclical sentiment still surging.

The five largest financing rounds in March:

Optimism completed a $89 million financing round, valuation undisclosed;

Zama completed a $73 million Series A financing round, valuation undisclosed;

Berachain completed a $69 million Series B financing round, valuation at $1.5 billion;

Figure Markets completed a $60 million Series A financing round, valuation undisclosed;

Eclipse completed a $50 million Series B financing round, valuation undisclosed;

4.2 Analysis of Investment and Financing Institutions

From the perspective of VC institutions: First, Animoca Brands' investment and financing are mainly concentrated in the infrastructure and GameFi sectors, followed by Polychain, Binance Labs, and Coinbase Ventures, which have a relatively high number of investments in infrastructure and DeFi sectors, while other VC firms focus their investments on infrastructure.

This also reflects the current distribution and pattern of industry construction and application, with infrastructure still being the focus of current construction, while GameFi and DeFi are the business focus on the application side.

4.3 Investment and Financing Trend Judgment

From the investment and financing market in March, activities in the crypto field are significantly increasing, both in terms of project numbers and investment amounts, reaching a near one-year high, with investments still concentrated in infrastructure, DeFi, and NFT/GameFi directions.

In April, the currently highest attention sectors include: AI + Crypto, GameFi, modularization, new applications on Solana and Base chains, and Bitcoin Layer 2, which may further stimulate the investment market's enthusiasm under the increasingly active investment and financing trend. Although it may be influenced by various factors such as the global economy, technological innovation, and policy environment, the overall positive trend remains unchanged.

5. Conclusion

The data and market dynamics of March 2024 reveal several important trends:

• Although the rise in U.S. stocks fell short of expectations, the macro outlook is positive, and the crypto market's trend will not be negatively affected;
• With the halving approaching, profit-taking and some miners exiting have led to a volatile market, but the ETF driven by traditional capital and the positive expectations surrounding the halving hedge against significant fluctuations;
• The continuous issuance of stablecoins, with USDe increasing by 156%, suggests that the role of algorithmic stablecoins will become increasingly important;
• The on-chain Restaking ecosystem's TVL has significantly increased, and the explosive rise in ETHFI's price after its launch has greatly enhanced expectations for Restaking;
• The substantial growth in the median financing amount and the investment layout of major institutions reflect the rising market heat and sentiment;

Despite the current market experiencing significant volatility, the market narrative dominated by traditional capital and ETFs remains the primary story. This cycle's Meme coin trend differs significantly from previous cycles, especially with the entry and driving forces of Solana, Base, and BSC following the Dencun upgrade in March, leading to an unusually intense and unique FOMO sentiment during a relatively calm period.

Additionally, technological innovations and related investment enthusiasm in areas such as Restaking, modularization, the BTC ecosystem, and AI continue to grow and stimulate market activity, particularly in the direction of combining traditional finance and RWA, which may have a stronger penetration and impact on the global financial ecosystem. Let us wait and see.

Note: All views expressed above are for reference only and do not constitute investment advice. If there are any objections, please feel free to contact us for corrections.

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