KuCoin Research Report Highlights Crypto Market Surge in May with AUM for BTC ETF Rebounded to $60 Bn Mark

2024/06/13 10:00:00

In May 2024, the cryptocurrency market saw robust activities and pivotal advancements, particularly in regulatory spheres and market dynamics. The approval of a Spot Ethereum ETF notably uplifted market confidence, setting a positive tone for the month, followed by the rebound of BTC ETF’s AUM to $60 Bn. The stablecoin sector also showed mixed performance, where traditional fiat-collateralized stablecoins like USDC and FDUSD experienced a drop in issuance, in contrast to USDe, which reached new issuance heights. This pattern reflects a broader evolution within the stablecoin market. Additionally, while public chains and Layer2 solutions like Base and Linea exhibited significant inflows, the overall investment in the crypto market saw a slight decline from the previous month but maintained a positive trajectory on a year-over-year basis, underscoring the enduring interest and potential for growth within the sector.

Market Sentiment Rebounds with Ethereum Spot ETF Approval, AUM for BTC ETF Rebounded to $60 Bn

In mid-May 2024, global economic data and events reignited optimism regarding potential US monetary policy. This renewed confidence, coupled with a robust earnings report from NVIDIA, bolstered interest in technology stocks and the AI sector. The broader crypto market also saw a rebound, significantly driven by the unexpected approval of a critical Ethereum Spot ETF document. Although the ETF has not yet seen capital inflows, the news positively impacted market sentiment, boosting confidence in Ethereum and its ecosystem.

The market, which had been subdued, experienced a notable shift in sentiment. The total assets under management (AUM) for Bitcoin spot ETFs rebounded to the $60 billion mark, reflecting renewed investor interest. Additionally, BTC contract open interest surged, returning to high levels seen earlier in the year, while BTC options open interest saw a cautious rise. Looking ahead, June promises to be eventful with the upcoming FOMC meeting and potential impacts on market liquidity as the Federal Reserve adjusts its securities holdings strategy.

Trending in Crypto: Surge in Attention Assets

The cryptocurrency market is increasingly favoring attention assets such as character and celebrity meme tokens, driven by their potential for untapped growth. This trend reflects a shift away from projects with high initial valuations that limit retail price discovery and wealth generation. Notcoin exemplifies this shift, leading to significant increases in its price and trading volume.

Mixed Performance in Fiat-Collateralized Stablecoin Issuance

In May 2024, the overall issuance of fiat-collateralized stablecoins decreased by $840 million, driven mainly by declines in USDC and FDUSD. According to SosoValue and Glassnode data, while USDT and PYUSD showed upward trends, USDC, DAI, and TUSD saw reductions. PYUSD notably increased by 21.7% and announced its issuance on Solana, potentially impacting Solana's ecosystem. USDe's issuance surged to $2.978 billion, surpassing FDUSD and becoming the fourth-largest stablecoin.FDUSD issuance dropped from 4.25 billion on April 30 to 2.92 billion on May 31, 2024, marking a 31.29% decline. This significant reduction contrasts with the stability of USDT and USDC, which are more frequently used for trading and payments.

Drop in ETH Layer2 Activity Despite Market Recovery

Despite a 21% monthly price increase in ETH, the Layer2 TVL denominated in ETH fell by 4.4%, indicating stagnant activity levels within the Layer2 ecosystem. However, the USD-denominated TVL rose by over 20% as the overall market recovered. The surge in ETH prices did not translate to increased funds in the ETH Layer2 ecosystem, which saw a slight decline to 12.38 million ETH. Conversely, the USD-denominated TVL reached approximately $47.81 billion due to the market recovery.

Growth in Base and Linea Amid Layer2 Sector Pessimism

Amid a pessimistic outlook for the ETH Layer2 sector, Base and Linea bucked the trend with significant growth. While the narrative of high-performance blockchains and low on-chain fees lost appeal, meme coins and Restaking gained traction. Base's ecosystem showed increased activity, with native tokens capturing major attention. Linea saw significant capital inflows driven by meme coins and Restaking narratives, with FOXY and Renzo protocol leading the ecosystem.

Strong Performance in ETH-Based Blockchains and BTC Ecosystem's Merlin

With Ethereum's price rebound, ETH-based blockchains like Arbitrum and Base demonstrated strong USD-denominated TVL performance. The ETH price recovery led to increased activity in meme assets related to the U.S. presidential election on Ethereum. Meanwhile, in the BTC ecosystem, Merlin's TVL increased by over 100% in the past month, driven by Solv Funds' Bitcoin-wide base yield dividend protocol. However, Merlin's native token lacked significant volume and price increases due to limited practical applications and positive stimuli.

LayerZero's Intense Sybil Screening Measures Stir Crypto Community

In early May 2024, LayerZero Labs launched a 14-day Self-Report Sybil Activity program, incentivizing users to self-report or report each other for Sybil activities in exchange for rewards. This initiative, offering 15% of the expected allocation to self-reporters, intensified anti-Sybil efforts, leading to widespread mutual reporting driven by economic incentives. Dramatic scenarios unfolded, including farming studio employees resigning to report internal accounts and large airdrop addresses being exposed.

Notcoin's Popularity Boosts TON Ecosystem

Notcoin, a mini-game on the TON blockchain, has rapidly gained popularity with impressive trading volumes and a growing user base, reaching 6 million daily active users and a market cap of $2.2 billion within three months. Its success underscores the potential of the "Tap to Earn" model, leveraging Web3's openness and integrating with Telegram to reduce customer acquisition costs and expand its user community. Additionally, Catizen, another TON ecosystem game, has also seen explosive growth with over 6 million users and 8.1 million transactions, further enhancing the TON ecosystem's activity and liquidity.

Runes Lead BTC Transactions Amid Weak BRC20 Performance

In May 2024, the Bitcoin derivative asset market saw a shift in focus towards RUNES and BTC Layer2, BTC staking/Restaking, and shared security sectors, while BRC20 Ordinals struggled to maintain significant traffic and growth. The rise of new technologies and narratives by developers is challenging the dominance of Ordinals/BRC20 in the BTC native asset space, necessitating more innovation to regain market recognition.

DOG (Runes) Emerges Strong, Challenging ORDI's Market Position

The DOG asset within the Runes ecosystem saw its market capitalization surge, approaching $800 million by month's end, driven by positive market trends. Meanwhile, ORDI experienced volatility but managed to climb back to a $1 billion market capitalization on May 31 2024, maintaining a lead over DOG. Despite ORDI's recovery, the overall user, developer, and traffic momentum continued to shift from Ordinals/BRC20 towards the rapidly growing RUNES ecosystem.

Dynamic Trends in Crypto Investments

In the past month, the cryptocurrency market disclosed 156 investment and financing projects, totaling $1.02 billion. While this represents a slight decrease from April 2024, it marks an increase compared to the same period last year, with over 50% of projects securing financing between $1 million and $10 million.

Shifts in Investment Focus with Strategic Round Financing Rising

In May 2024, the proportion of Series A investments in the cryptocurrency market decreased from 10% to 7.77%, while strategic round financing projects increased from 15.73% to 18.45%, indicating a growing inclination for projects to exit through public listings. The proportion of seed round investments remained largely unchanged.

EVM-Based Blockchains Lead Financing Popularity

Ethereum, EVM-compatible chains, and Layer 2 solutions dominated the public blockchain ecosystems with the highest number of projects. Among non-EVM chains, Solana held its place in the top five, Fantom entered the top ten, and TON's ranking improved, highlighting their rising prominence in the market.

Türkiye Plans New Cryptocurrency Regulation Law

Türkiye is preparing to submit a new law to regulate cryptocurrency assets, aligning with international regulatory standards while also initiating taxation on cryptocurrency transactions. This move aims to reduce the risks associated with cryptocurrency trading. The Capital Markets Board will impose robust regulations on the licensing and operation of cryptocurrency trading platforms. This initiative has received strong support from Mehmet Şimşek, the Minister of Finance of Türkiye.

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KuCoin Research is a leading provider of research and analysis in the cryptocurrency industry. With a team of experienced analysts and researchers, KuCoin Research aims to deliver high-quality insights and reports to empower investors and industry professionals.

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