Market Highlights
April 8, 2024

March 2024 Market Highlights

In March, Bitcoin did really well, going up by 14%, marking the seventh month in a row of gains. It hit a new all-time high of $73,125 on March 13th. People in the U.S. continued to invest a lot in Bitcoin, with $5 billion flowing into Bitcoin ETFs. MicroStrategy, a big company worth $29 billion, bought $1.5 billion worth of Bitcoin through bonds that can be turned into stocks.

Because traditional financial institutions (TradFi) are getting interested in Bitcoin, it's doing better than Ethereum, another popular cryptocurrency. There's some worry about whether the U.S. government might start treating Ethereum as a security instead of a regular asset.

In the world of smart contract platforms, there were some updates in March. NEAR did well, but Arbitrum didn't do as great.

Despite worries about government rules, open-source blockchains saw a lot of action. Lots of people were using them (10 million every day), and the trading volume on decentralized exchanges (DEX) hit $8.5 billion every day. Fees for using these blockchains went up by 70% to $32 million per day. This was helped by people trading DeFi (decentralized finance) stuff and jokingly-valued meme coins, especially on Solana, which went up by 48% in March.

Bitcoin among best performing assets in March 2024

In March 2024, traditional assets also saw positive returns. When considering risk-adjusted performance, Bitcoin ranked high, while Ether's returns were more moderate. The top performers included physical gold, non-US developed market stocks, and energy-related equities. However, segments linked to emerging technologies, such as biotechnology, didn't perform as well compared to the overall market.

One reason for the overall strong performance in markets last month could be signals from major central banks indicating a downward trend in interest rates. Bloomberg surveys suggest that all G10 central banks, except the Bank of Japan, are expected to lower policy rates over the next year. Various developments in March reinforced this expectation. For instance, despite forecasting stronger GDP growth and higher inflation, Fed officials at their March 19-20 meeting indicated their intention to cut rates three times this year. Similarly, the Bank of England saw no support for raising rates for the first time since September 2021, and the Swiss National Bank unexpectedly lowered its policy rate on March 21.

The readiness of major central banks to decrease interest rates amid robust economic growth likely led to an increase in market inflation expectations. For instance, the difference between nominal and inflation-linked US Treasury notes, known as "breakeven inflation," has risen across different maturities this year. The risk of higher inflation may be driving demand for alternative stores of value, such as physical gold and Bitcoin.

Some other interesting things that happened in March:

  • Tether's stablecoin USDT hit a $100 billion market cap.
  • The London Stock Exchange said it would start trading crypto ETNs (Exchange-Traded Notes) backed by real assets.
  • South Africa promised to give licenses to 60 companies dealing in cryptocurrency.
  • Jack Dorsey's company Block started sending out its Bitkey wallets for Bitcoin.
  • Ethereum made its biggest update since a big change called the Merge, and fees for using the Ethereum network went up a lot because of meme coin trading.
  • Investment firm BlackRock started a new fund based on Ethereum that quickly got $200 million in it.
  • Solana's decentralized exchange volume was bigger than Ethereum's because of meme coins and stablecoin trading.
  • Google started showing Ethereum Name Service domains in its search results.
  • The Federal Reserve (the U.S. central bank) didn't change interest rates and said it expects to do so three times before the end of the year.

In March 2024, the combined value of all cryptocurrencies rose by 13% to $2.89 trillion. This increase was driven by a focus on improving the capabilities of smart contract platforms (SCP) and the dominance of meme coins in on-chain activities. Although the total crypto market value in March didn't surpass the all-time high of $3.06 trillion reached in November 2022, new records were set for daily active users (DAUs) at 10 million and daily average decentralized exchange (DEX) volumes at $8.5 billion.

However, these new highs in on-chain activities were partly influenced by price instability. Both Ethereum (ETH) and Bitcoin (BTC) experienced their highest levels of volatility since the collapse of FTX in late 2022. While both BTC and ETH saw increased volatility, ETH's volatility surpassed that of BTC for the first time since September 2023. The rise in daily average SCP fees from $19 million to $32 million month-to-month was also attributed to increased coin swapping activities.

The key question to ask here is: "What are people doing on-chain?" The data suggests a significant surge in participation in decentralized finance (DeFi). The number of daily active addresses engaged in DeFi activities skyrocketed by 219%, moving from 5.6% to 10.5% of total on-chain activity. Additionally, in terms of fees paid on-chain, DeFi represented 44% of all on-chain activity compared to 34% in October 2023.

Solana emerged as a major player in the trading of meme coins due to its low transaction costs (less than $0.001 per transaction) and rapid transaction confirmations, often occurring in seconds. This exceptional user experience contributed to Solana's share of DEX volumes growing from 3.6 in October 2023 to 25% in March 2024.

Despite hitting a new all-time high, Bitcoin faced a drop of around 13% in the middle of the month as traders reduced leverage and inflows into US-listed spot Bitcoin ETFs slowed down. Throughout the month, net inflows into these ETFs totaled $4.6 billion, a decrease from $6 billion in February. However, despite the decline from the previous month, these inflows remained significantly higher than the network's issuance. In March, these US ETFs bought approximately 2,100 coins per day, while the network issued around 900 coins per day. After the halving event in April, the network issuance is expected to decrease to about 450 coins per day.

However, it's crucial to address potential downsides of the Blob Layer. One major concern is the increase in data, known as data propagation, that Ethereum nodes have to manage across the network. According to Xatu, processing blob transactions has slowed down the Ethereum network, and as more blobs are processed, the network's speed decreases. Currently, the differences are small, around 400 milliseconds, but this could become problematic if it continues to grow. If left unaddressed, Ethereum may need to limit the number of blobs it can handle. While some argue that EIP 7251, which increases the maximum amount of staked ETH from 32 to 2048, could decrease the node count on the Ethereum network, it's uncertain whether this will be effective.

In March, there were significant developments indicating that Ethereum remains active. Blackrock decided to establish a $100 million tokenized fund on Ethereum called "BUIDL," standing for Blackrock USD Institutional Digital Liquidity Fund. The fund will be backed by US Treasuries, cash, and repo agreements. Additionally, there were notable funding raises related to Ethereum decentralization and scaling:

Succinct: Received $55 million in a round led by Paradigm for zk tech to support decentralized provers and other infrastructure for L2s and co-processors.

Espresso Systems: Raised $28 million in a round led by 16z for decentralized sequencer software to scale and decentralize Ethereum L2s.

Eclipse: Secured $50 million in investor funding from Polychain and Hack VC for SVM Layer-2 on Ethereum supporting Solana applications.

These funding raises are noteworthy because they demonstrate continued venture capital interest in investing significant amounts to enhance Ethereum. Despite Ethereum's somewhat lackluster performance in March (+6.77%) compared to high throughput chains, many investors are still allocating capital to improve Ethereum, even at relatively high valuations.

Meanwhile, Base's Jesse Pollack announced plans to scale Base's throughput by 1000 times its current capacity just as memecoin frenzy hit Base. In March, speculation on memecoins caused Base's total value locked (TVL) to double, while its revenue surged by 200%. Additionally, Metis implemented decentralized sequencers through governance, while Prom revealed plans to launch a new zero-knowledge Ethereum Virtual Machine (EVM).

Although some argue that Ethereum is lagging behind due to its lack of scaling at the base layer, hundreds of millions of dollars are being invested to address Ethereum's shortcomings and improve its capabilities. 

March’s Notable Winner

NEAR quietly became the third most popular blockchain in March, largely due to KaiKai, a discount shopping app. Despite most users being unaware, NEAR's user base soared. NEAR's founder's appearance at an NVIDIA conference boosted its profile, and its move into Chain Abstraction also drove up its value.

NEAR aims to simplify blockchain interaction with a user-friendly wallet and cross-chain transactions. "Relayers" allow users to transact across blockchains using NEAR's wallet, covering fees and ensuring reliability. NEAR currently connects to Ethereum, Binance Smart Chain, and Avalanche.

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