Weekly Digest: March 2025 | Week 2

Highlights

• Bitcoin (BTC) dropped 14%, settling at $80,600, while Ethereum (ETH) fell 20%, pushing the ETH/BTC ratio to 0.025, its lowest since December 2020.

• U.S. government clarified its Strategic Bitcoin Reserve strategy, confirming no new purchases, only utilizing confiscated assets.

• Spot Bitcoin ETFs saw $738 million in outflows, marking the fourth consecutive week of negative flows.

• Bybit hack update: $280M of the stolen $1.5B laundered, with 77% of funds still traceable.

• Ethereum lending protocols saw $457M in liquidations, with Aave and Compound bearing 90% of the impact.

• Coinbase revives security token ambitions, planning potential tokenization of its COIN stock on its Base Layer 2 network.

Market Overview

The second week of March saw significant turbulence across crypto markets, with Bitcoin and Ethereum experiencing sharp declines. The crypto sector continues to face macroeconomic headwinds, regulatory developments, and strategic institutional moves that shape the broader financial landscape.

Bitcoin and Ethereum Market Performance

Bitcoin (BTC) fell 14% last week, settling at $80,600. This downward move was driven by weakening economic data and rising geopolitical tensions. The ETH/BTC ratio also dropped to 0.025, its lowest level since December 2020, reinforcing the continued underperformance of Ethereum relative to Bitcoin.

Ethereum (ETH) saw even sharper declines, plunging 20%, leading broader market contraction. This downturn was reflected in declining lending protocol total value locked (TVL), decreasing active loans, and other core performance metrics, highlighting a risk-off sentiment in the market. In February 2025, Ethereum markets recorded $457 million in liquidations, driven by sharp price corrections.

Bitcoin’s Volatility and the U.S. Government’s Crypto Strategy

Bitcoin experienced significant price swings last week, briefly recovering to $93,000 amid speculation regarding Donald Trump’s crypto summit and potential government Bitcoin reserves. However, market sentiment soured after official clarification that the government would not purchase additional Bitcoin for its reserves, leading to renewed downward pressure.

An official White House statement detailed plans for a Strategic Bitcoin Reserve, which will be capitalized using Bitcoin forfeited through criminal or civil asset seizures rather than new purchases. Additionally, a U.S. Digital Asset Stockpile will be established, consisting of non-Bitcoin digital assets seized in legal actions, with no further acquisitions planned.

U.S. Government Crypto Holdings

The U.S. government’s crypto holdings remain substantial, led by $16.32 billion in Bitcoin. Additional holdings include:

• Ethereum (ETH): $128 million

• USDC: $20 million

• USDT: $14 million

• BNB: $13 million

• BUSD: $12 million

Spot Bitcoin ETF Market Trends

Spot Bitcoin ETFs saw $738 million in outflows last week, marking the fourth consecutive week of net outflows. While trading volumes remained relatively stable, overall sentiment appears cautious. Year-to-date, spot Bitcoin ETFs have recorded $1.3 billion in net inflows, largely due to $5.3 billion in inflows in January. However, since then, outflows have dominated market activity.

Ethereum ETFs also experienced $93 million in outflows, with BlackRock’s ETHE, Fidelity’s FETH, and Grayscale’s ETHA and ETH accounting for over 95% of trading volume. Despite the persistent decline in investor sentiment, Ethereum ETF trading remains a major driver of institutional exposure to the asset.

Bybit Hack and Its Market Impact

The Bybit hack continues to unfold, with the exchange’s CEO revealing that $280 million of the $1.5 billion stolen has been laundered and is no longer traceable. Hackers converted roughly $1 billion worth of stolen ETH to Bitcoin, distributing it across 6,954 wallets, each holding an average of 1.71 BTC, making recovery efforts challenging.

• 77% of stolen funds remain traceable

• 20% have disappeared into privacy-enhancing tools

• 3% have been successfully frozen

Lending Market Insights

The Ethereum lending market experienced significant liquidations, with $457 million wiped out in February 2025. Aave and Compound accounted for 90% of total liquidations, with Aave alone recording $300 million in forced liquidations.

TVL across lending protocols has declined, reflecting reduced speculative activity:

• Aave’s TVL: Down from $40 billion (December) to $31 billion

• Aave’s fee revenue: Dropped from $65 million (December ATH) to $40 million

• Total active loans: Decreased from $22 billion to $16 billion

Interest rates also softened as risk-on behavior declined:

• USDC Supply APY: Down from 15%+ (December) to 3.5%

• USDT Supply APY: Down to 3.5%

• Borrow APY: Dropped to 6.5%

The Aave DAO is responding to these market shifts with a proposal for a weekly $1 million AAVE buyback program, designed to enhance token value and reward long-term holders. Adjustments may be made after six months, depending on performance.

Coinbase’s Security Token Revival

Coinbase announced plans to reengage with the SEC’s new task force to advance security tokens, reviving ambitions first explored during its 2020 IPO. This move aligns with expectations for Coinbase to tokenize its own stock (COIN) on Base, its Layer 2 network.

Tokenized stocks allow for:

• Fractional ownership

• 24/7 trading availability

• DeFi integration

• Global accessibility

The State of Tokenized Stocks

Tokenized securities have seen mixed success, but interest remains, particularly from platforms like BackedFi, which offers ERC-20 tokens representing stocks and ETFs under Swiss DLT Act compliance. The market for tokenized stocks includes:

• iShares Core S&P 500 ETF – $8.27M market cap

• Coinbase Global Inc. (COIN) – $4.63M market cap

• NVIDIA Corp – $1.57M market cap

• Tesla Inc. (TSLA) – $0.41M market cap

• SPDR S&P 500 ETF Trust – $0.11M market cap

Nasdaq recently announced plans to implement 24x5 trading by Q2 2026, signaling a shift towards more flexible trading hours in traditional finance—mirroring crypto markets’ 24/7 trading model.

Closing Thoughts

The past week has been marked by heightened volatility, regulatory moves, and significant shifts in market sentiment. Bitcoin and Ethereum continue to face selling pressure, while institutional crypto activity remains dynamic. The Bybit hack, spot ETF outflows, and lending market contractions underscore broader market cooling.

However, as Coinbase revives its tokenization strategy and Aave explores new incentives for DeFi participants, the long-term innovation in crypto markets continues to evolve. FinchTrade remains at the forefront of these developments, providing deep liquidity and expert insights to navigate these turbulent times.

Stay tuned for next week’s FinchTrade Weekly Digest for more in-depth market updates.

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