The Market
It has been a volatile week for crypto as BTC both touched ATH above $73,000 and experienced a ~10% correction on Friday, dropping below $67,000.
The Perpetual funding rate returned to a much healthier level last week compared to the beginning of March, as increased liquidations squeezed some of the leverage out of the market.
Spot BTC ETF inflow remained strong last week. News came that Cetera, a $160B wealth management platform, has approved four BTC spot ETFs, allowing advisors to allocate to BTC. This points to the trend we mentioned before, indicating that more institutional capital is still on the way. According to Bitwise’s conversations with financial advisors, many RIA platforms are speeding up the spot ETF approval process. The mainstream’s concern over rising US debt levels has been the most appealing pitch for Bitcoin’s value proposition as an alternative storage of value.
On the macro side, February's inflation report has come in slightly above expectations, as energy prices ticked up. The derivatives market has quickly updated its rate forecast from a 3.5% Fed Fund Rate by the end of the year to be closer to the Fed’s dot plot projection. We expect the Fed to hold rate steady in next Wednesday’s FOMC meeting. We also continue to expect volatility in the broad risk market as the economy is dancing the delicate balance between growth vs. inflation.
Reviewing the BTC price trajectory over previous ATH periods, a 20-30% correction is normal even in a bull market. As we witnessed in Q1 2021, when BTC first reached an ATH above $40,000. It has experienced four ~20% corrections on its way to climbing up to the next ATH of $65,000. It is not surprising to see corrections in BTC’s price as it continues its price discovery journey after hitting new ATHs. We think the biggest factor impacting future price movement is the macro environment, as well as whether spot ETF inflows can meet heightened expectations.
After experiencing a brief boom at the end of January this year, the Altcoin Season Index, which tracks the percent of top 50 tokens that outperform BTC in the past 90-day period, has returned to a normal level. This is happening while the BTC dominance ratio is still on the rise. In the 2020-2021 bull market, Altseason kicked in when BTC dominance hit 70%. Currently, the BTC dominance is at a post-FTX high of 53%, indicating we may still have some time to go before the true Altseason starts.
DeFi Update
Ethereum had a successful Dencun upgrade on March 13th. The average data cost, the biggest component of an L2’s fee, has predictably dropped 10X post Dencun. The median gas cost has dropped between 50-99% among the biggest L2s. Vitalik, speaking at an ETH event last week, encouraged builders to take an L2 centric approach to take advantage of the tools available to improve performance and efficiency while building in the Ethereum ecosystem.
Interestingly, after Dencun, the DEX swap cost on OP and Base has dropped to a similar level seen in the Solana ecosystem.
We see super chains such as OP as big beneficiaries of Dencun as more transactions move from Ethereum to L2s.The P/F multiple for OP has trended down to a 1Y low while the active users continue to go up. As investors chase hot narratives such as AI, L2s stand out as a potential value play.
The next major catalyst for the Ethereum ecosystem will occur when EigenLayer mainnet goes live. While the restaking sector has already experienced a big rally on the EigenLayer narrative, SSV has finally caught attention and rallied as much as 55% during the week. SSV offers decentralized validator technology that improves the decentralization of Ethereum and mitigates staking validator’s slashing risk. Lido has recently released Simple DVT on mainnet after extensive period of testing, allowing 0.5% of the total staked amount to use DVT technology. We see SSV’s TVL increased sharply last week to above $600M, while its market cap is only ~$450M.
We believe restaking will be another significant growth driver for SSV as more LRT providers emerge when EigenLayer goes live. SSV enables Distributed Native Restaking, improving validators’ efficiency. SSV is currently offering incentives to validators to adopt DVT technology, with a ~40% boost to the original APY. Restaking providers such as Genesis and PrimeStaked have announced partnership with SSV, adopting the DVT technology in their restaking services. We expect more to follow suit, further boosting SSV’s value proposition.
Top 7d Gainers and Losers
Top 100 MCAP Winners - It’s a meme coin week!
Book of Meme (+1962.25%)
0X Protocol (+115.33%)
Jupiter (+63.77%)
Pyth (+38.99%)
Solana (+26.69%)
Top 100 MCAP Losers
Shiba Inu (-30.13%)
Arweave (-26.17%)
SATS (-24.59%)
Optimism (-24%)
Bitcoin SV (-23.44%)
About Decentral Park
Decentral Park is a founder-led cryptoasset investment firm comprised of team members who’ve honed their skills as technology entrepreneurs, operators, venture capitalists, researchers, and advisors.
Decentral Park applies a principled digital asset investment strategy and partners with founders to enable their token-based decentralized networks to scale globally.
The information above does not constitute an offer to sell digital assets or a solicitation of an offer to buy digital assets. None of the information here is a recommendation to invest in any securities.
