KuCoin’s Latest Market Insight: Total Financing Scale Remained Strong At $1bn Level, With Sustained Growth in Stablecoins

2024/05/13 10:00:00

In April 2024, the cryptocurrency market navigated a series of shifts and challenges. Uncertainty around Federal Reserve interest rate cuts led to a cooling of market sentiment. Bitcoin experienced a decline, influencing a general market retreat. The AUM of the US Bitcoin spot ETFs, after reaching an early-month peak, and the open interest in BTC futures and options on exchanges, both saw reductions. This adjustment caused the fear and greed index to stabilize at neutral levels, reflecting a balanced market sentiment.

The stablecoin sector continued to expand, with USDT and USDC issuances increasing, indicating persistent capital inflows. Public chains and Layer2 solutions like ETH Layer2 saw slight growth in TVL measured in Ethereum, though USD values dipped due to overall market conditions. The period was marked by robust activity within certain ecosystems, notable integrations, and new project launches, underscoring ongoing innovation and adaptation in the sector. Despite a month-to-month reduction in the number of crypto investment and financing projects, the year-on-year growth in total financing volume highlights recovering confidence among leading investment institutions in the crypto landscape.

Market Reacts to Fed's Rate Cut Delays and Bitcoin Correction

Expectations for Federal Reserve rate cuts have been repeatedly pushed back, influencing a broader market reassessment and cooling off the initially hot sentiment. Bitcoin's failure to reach its pre-March highs led to a notable market correction, with a significant decline in the AUM of US Bitcoin spot ETFs and a decrease in the open interest in crypto contracts. This cooling trend is corroborated by a rapid shift in market sentiment from exuberance to neutrality in mid-April, impacted by various macroeconomic factors and diminishing market leverage.

Bitcoin Halving and Regulatory Developments in Hong Kong

Despite the Bitcoin halving and Hong Kong's rapid approval of Bitcoin and Ethereum spot ETFs, these events did not catalyze a significant price surge across the cryptocurrency market. Institutional investors focus on spot ETFs, while different investor groups engage with specific segments like memecoins or high-profile projects.

Stablecoin Growth Amid Bitcoin Volatility

April witnessed a notable increase in major stablecoins despite fluctuations in Bitcoin's price. USDT's issuance surged by $6.058 billion, USDC's by $868 million, and PYUSD saw a recovery with a $129 million increase. This growth indicates a continuous influx of funds into the crypto market via stablecoins, particularly USDT, despite net outflows from Bitcoin spot ETFs. USDe also peaked mid-month at $2.39 billion but experienced a slight pullback as Bitcoin prices declined, stabilizing around $2.34 billion by month's end.

FDUSD Issuance Bolstered by Binance Launchpool

FDUSD rebounded strongly in April, hitting new highs mid-month, significantly influenced by the Binance Launchpool events. The issuance spikes correlated with the start and end of events like SAGA, OMNI, and RENZO, which saw FDUSD's participation exceeding $3 billion, a stark increase from the $1-2 billion involved in previous months.

Layer2 TVL Dynamics

In April, the Ethereum Layer2 Total Value Locked (TVL) measured in ETH saw a minor increase to 12.76 million, despite a decline in TVL measured in USD by 13.66% due to a market downturn. This reflected a shift in market dynamics, where the ETH to BTC exchange rate continued to drop, affecting the overall valuation of assets locked in Layer2 solutions.

Base and Other Layer2 Protocols' Performance

Base's ecosystem notably defied the broader market trends with a significant increase in TVL, largely driven by airdrop expectations and robust Restaking protocol deployments. In contrast, other Layer2 platforms saw declines. This divergence highlights varying investment focuses within the Ethereum Layer2 space, with Base maintaining high market activity and continuing growth in its DApp ecosystem.

Impact on Public Chains and Layer2 Innovations

Despite the quiet market, where several public chains like Avalanche and Solana saw over 10% declines in TVL, the attention on Ethereum Layer2 solutions like Base remained high. Additionally, the BTC Layer2 Merlin experienced an uptick in DApps deployment, supported by innovative projects like Solv Protocol, which established new avenues for PoS staking and introduced revenue-generating mechanisms based on neutral trading strategies. This highlights the resilience and innovative progress within specific segments of the blockchain ecosystem.

The Expanding of TON's Ecosystem and Future Prospects

During the Token2049 Dubai event, Telegram founder Pavel Durov shared his vision for integrating the 900 million monthly active users of Telegram into the cryptocurrency world through the TON ecosystem. The new integration of Tether (USDT) into TON is set to happen, enabling instant and free transactions directly through Telegram. This move is anticipated to enhance the utility of the TON blockchain and foster a vibrant DeFi ecosystem.

Impact of Runes Protocol Launch on BRC20 Market

The launch of Runes Protocol in mid-April significantly influenced the BRC20 segment of the Bitcoin market, drawing attention and capital away from Bitcoin NFT Meme Coins like PUPS. The excitement around the Ordinals market cooled down as funds and focus shifted towards Runes. Industry observers noted that for Bitcoin's ecosystem and related narratives to remain vibrant and impactful in the upcoming bull market, a continued effort to attract new investment is needed.

Dynamic Shifts in TVL Following Merlin Chain Token Issuance

Merlin Chain experienced a notable shift in its total value locked (TVL) dynamics following the issuance of its native token, MERLIN, in mid-April. Although the overall TVL on the chain saw a decline by the end of the month, there was a concurrent rise in the TVL across Merlin's DeFi protocols. This increase was primarily fueled by the integration of the Solv Protocol's SOLVBTC into several top Dapps, suggesting a strategic redistribution of resources within the ecosystem.

Crypto Investment Resurgence in April 2024

April 2024 saw a decrease in the number of disclosed crypto market investment and financing projects compared to March, but there was growth in both the total financing scale and the quantity of projects year-over-year. A total of 163 projects were disclosed with a financing scale of $1.024 billion, down 6.3% from March but up from the previous year, reflecting a resurgence in confidence among primary investment institutions.

Downtrend of Financing Stages and Valuations

April marked a significant decrease in Series A and strategic round financings, leading to an overall downturn in project valuations. The proportion of A-stage financing dropped from 14.96% to 10.19%, with strategic financing also decreasing. There was a notable reduction in projects with a financing scale of $10 million to $100 million, indicating cooling valuations.

Public Chain Financing Ecosystem Dynamics

The public chain financing ecosystem saw significant movements, with Linea making the most substantial rise in rankings, followed by Base. The top three ecosystems with the most projects were ETH, BTC, and Polygon, predominantly featuring Ethereum Layer 2 groups, highlighting their growing influence in the sector.

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