Tide in, tide out: There couldn’t be a more appropriate description for crypto’s month of March. Whereas dampening sentiment loomed over for three weeks, the crypto complex found its footing and ended the month on a bullish note again. Where do we go from here?
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Market participants went into March with muted expectations, internalizing the overhang of persistent negative price seasonality seen in previous years. Fund inflows seemed to corroborate that trend, with ETP-related inflows at their lowest since October 2020. The obvious elephant in the room is the persistent discounts to net asset value (NAV) that Grayscale Bitcoin Trust (GBTC) has been trading at, which disincentivizes the type of “black hole” phenomena GBTC exhibited last year. Nonetheless, inflows into Grayscale’s offshore competitors remain healthy at $500 million month-to-date. As BTC traded below $52k towards the end of the month, Asian buyers were also seen stepping up with the Kimchi premium spiking concurrently. Overall the market remains well bid on the spot front, heading into what appears to be an extremely favorable April seasonality.
BSC continues to pull its weight in pushing DeFi total value locked (TVL) to new highs, with protocols PancakeSwap and Ellipsis jointly contributing $3 billion in TVL growth. This growth hasn’t come without growing pains, with rug pulls outnumbering those on Ethereum ten-fold. From a chain-agnostic perspective, this TVL growth — alongside growing cross-chain solutions coming online and a deeper institutional understanding of the DeFi space — is a net positive for the entire sector. Of note is also the abnormal outperformance of the shitcoin sector in March. Could that be a precursor for a second DeFi summer?
The March price action in perp swap funding and futures basis levels was also highly representative of the market’s sentiment toward spot BTC, with the extreme funding levels coming down throughout mid-March and spiking thereafter on positive news headlines. While the positive term structure maintains a supportive environment for spot prices, on the watch is the spike in non-USDT stablecoin market cap — signifying an influx of non-crypto native money set to take advantage of the “easy” yields that crypto offers.
The record 6 billion OI going into March options expiry, and the accompanying max pain narrative, saw prices exhibiting the same pattern observed during the January and February option expiries. Spot prices were suppressed just before the month-end expiry and rebounded right after, straight into the month’s end.
In line with funding, options IV data is pricing in bullishness, with OTM call-put skew back to earlier bullish levels, signifying heightened bullish expectations into April.