Weekly Digest: March 2025 | Week 3

Highlights

• Bitcoin rebounded to $82,000 after hitting a yearly low of $76,000, driven by encouraging CPI data despite ongoing trade war uncertainties.

• Perpetual futures trading continues shifting to decentralized venues, with the DEX to CEX volume ratio rising to 7.4%, led by Hyperliquid.

• Solana's community rejected SIMD-0228, maintaining the fixed 4.6% inflation rate, while approving SIMD-0123 to distribute priority fees from validators to stakers.

Market Update

Bitcoin faced a volatile week, reaching a yearly low of $76,000 before rebounding to $82,000, marking a 2% weekly gain. Spot Bitcoin ETFs continued to struggle, registering $920 million in outflows for the fifth consecutive week, while Ethereum ETFs saw $140 million in outflows.

The latest CPI data provided some relief, with February inflation rising 0.2%, bringing the annual rate to 2.8%, slightly below the 2.9% consensus estimate. Core CPI also increased 0.2% month-over-month, with a 3.1% annual rate, reinforcing hopes of an earlier Federal Reserve rate cut. However, concerns persist as trade tensions could fuel inflation, complicating the Fed’s decision-making process. Current market forecasts assign a 1% probability of a rate cut at the next FOMC meeting, but expectations for 75 basis points of cuts by the end of 2025 remain strong at 75%.

Institutional Bitcoin Accumulation and Stablecoin Growth

Strategy (formerly MicroStrategy) announced plans to raise up to $21 billion via sales of its 8% Series A perpetual preferred stock (STRK). This move aligns with the company’s broader “21/21 plan”, targeting a $42 billion capital raise dedicated to Bitcoin acquisitions. Currently, Strategy holds 499,096 BTC, valued at over $41 billion, with an average purchase price of $66,357 per BTC.

The stablecoin market cap surged to $235 billion, marking a 61% YoY growth. USDT and USDC dominate, with $143 billion and $58 billion in circulation, respectively. USDC’s supply saw a significant 66% increase post-U.S. elections, whereas USDT’s slower 18% growth reflects regulatory challenges in the EU, where Coinbase and Binance delisted USDT due to MiCA compliance issues.

Derivatives Market Insights

The derivatives market is experiencing a sharp decline in leverage appetite:

• Bitcoin and Ethereum funding rates on exchanges dropped from 20% APR in December to single digits.

• The annualized basis on Binance between spot and perpetual futures plunged from 14% to 0.64%, indicating reduced trader demand for leveraged positions.

• Total open interest (OI) across centralized exchanges collapsed 47%, falling to $48 billion since early December.

• Binance remains dominant, holding $19.5 billion OI, but Hyperliquid's share surged from 1% to 15%, reaching $2.8 billion OI.

The shift towards decentralized perpetual futures trading continues, with the DEX-to-CEX volume ratio hitting an all-time high of 7.4%.

Options Market Trends:

• Traders are showing a strong downside bias towards Ethereum, as reflected in ETH/BTC skew weakness across all expirations until June.

• The Deribit Implied Volatility Index (DVOL) shows ETH’s implied volatility is at the 77th percentile, compared to BTC’s 38th percentile, indicating greater downside risk in ETH vs. BTC.

Solana Network Update

Solana’s governance was a major focal point last week:

• The community rejected SIMD-0228, which proposed a dynamic inflation model based on staking participation.

• Despite 61% approval, the proposal failed to reach the required 66.67% quorum.

• The fixed 4.6% inflation rate remains, avoiding potential concerns over network security risks, institutional reluctance, and DeFi protocol dependency.

In contrast, the community approved SIMD-0123, enabling automatic distribution of priority fees from validators to stakers through a verifiable commission-based model.

Network Activity Decline:

• Solana’s weekly fees fell to $6.6 million, the lowest since September 2024.

• Jito validator tip revenue dropped from $57 million to $12 million.

• The 7-day moving average of active addresses declined 53% since January’s peak.

Memecoin Market Struggles

• Pump.fun’s token launches dropped 63% since January.

• The graduation rate (tokens reaching a $69,000 market cap) hit a record low of 0.7%.

• Daily trading volumes for graduated tokens plunged 77% to $243 million.

• The GMCI MEME index has fallen over 70%, while the GMSOL MEME index dropped 82%, far outpacing broader crypto market declines.

Closing Thoughts

The crypto market remains at a crossroads, balancing macro uncertainty and shifting market structures:

• Bitcoin’s price recovery hinges on clearer macroeconomic catalysts.

• Institutional demand is driving Bitcoin accumulation, with stablecoin supply expanding.

• Derivatives traders are becoming more risk-averse, favoring downside hedging in Ethereum.

• Decentralized trading infrastructure is gaining ground, with DEX market share at record highs.

• Solana’s ecosystem faces major tests, with governance debates and declining network activity shaping its future.

FinchTrade remains at the forefront of these developments, providing deep liquidity and expert insights to help navigate these shifting market dynamics. Stay tuned for next week’s FinchTrade Weekly Digest for more in-depth analysis.

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