The crypto market performed well in a week filled with regulatory actions from the US and Hong Kong, exciting developments for blockchain-scaling solutions, and the anticipated token airdrop of the NFT marketplace Blur. Bitcoin and Ethereum traded up 13.85% and 12.99% week-over-week, respectively, while Solana outperformed the majors with a 25.99% return. On the scaling front, Polygon traded up 23.53% as it set March 27 as the target date for the launch of its Ethereum-compatible upgrade (zkEVM). Finally, Lido stood out in the DeFi sector with a 22.69% price increase. The staking platform will benefit from the Shanghai upgrade, expected around mid-March, as it will enable staked ETH withdrawals on Ethereum. Last week, Ethereum core developers agreed on February 28 as the target date for a new withdrawal-testing phase dubbed the Sepolia testnet.

Figure 1: Weekly TVL and Price Performance of Major Crypto Categories

Source: 21Shares, CoinGecko, DeFi Llama. Data as of February 20 (close price).

Key takeaways:

• The SEC sues Do Kwon and Terraform Labs nine months after the collapse of UST, while Hong Kong is planning to lift the ban on retail crypto trading.

• Polygon to deploy zkEVM rollup on March 27, zkSync opens up mainnet deployment for pre-registered applications.

• Siemens issues a 60M Euro-dominated public bond on Polygon, Centrifuge proposing to back Aave’s GHO with RWAs.

• NFT marketplace Blur airdropped its token BLUR, and OpenSea responded by temporarily moving to a zero-fee scheme to retain users.

Spot and Derivatives Markets

Figure 2 – BTC Funding Rates

Source: lookintobitcoin.com

If we look at the derivatives market, BTC funding rates for perpetual futures have been consistently positive for over a month since January 15, indicating that many investors are positioned to the upside (see Figure 2). The fact that we are seeing positive funding rates with Bitcoin up ~50% year-to-date also suggests an increase in risk appetite.

On-chain Indicators

Figure 3: USDC, BUSD, and USDT Market Capitalization

Source: Glassnode

The crackdown on BUSD instigated by the New York regulator (NYDFS) has instantaneously shown its impact on the stablecoin market. The Binance-branded, yet Paxos-issued, stablecoin has fallen off a cliff as roughly 3 billion tokens were redeemed since February 13. Although USDT, depicted in the green line, has steadily increased in market cap since the beginning of the year, the recent clampdown has injected life into Tether. The rise could also be supported by the stablecoin issuer’s update last week, reporting that an excess reserve of 81% of cash and cash equivalents are now backing USDT.

Next Week’s Calendar

Source: 21Shares, TradingView

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Research Newsletter

Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com

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The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.