Year-to-date, Bitcoin long-term holder supply is down by about 5%, suggesting some profit-taking by long-term holders as Bitcoin hits new ATH prices. But this figure is still small compared with the roughly 14% decline in late 2020 and the roughly 25% decline in 2017-2018.
The circulation of stable coins
Stablecoins are digital currencies pegged to stable assets such as the U.S. dollar and play a vital role in the cryptocurrency ecosystem. They are designed to provide a stable medium of exchange and serve as the primary trading pair for trading on most centralized and decentralized exchanges.
Increased stablecoin liquidity means more funds are available for transactions, whether buying or selling cryptocurrencies. As shown by the growing stablecoin reserves on exchanges, the influx of stablecoin capital often drives bull market momentum.
Bitcoin’s rise often precedes that of altcoins
Typically, Bitcoin’s gains precede those of altcoins. Investors, encouraged by Bitcoin profits, may venture into riskier cryptocurrencies in search of greater returns. This dynamic was observable during the 2021-2022 bull run, during which Bitcoin’s gains quickly gave rise to sharp increases in altcoin valuations.
Bitcoin has finally reached a new ATH, but other altcoins still have some way to go before they reach their previous ATHs. Looking back at the constituents of the CoinDesk 20 Index, a benchmark for large-cap digital assets, 16 of them are still down more than 50% from their last ATH price. This suggests we may have some time before the AltSeason fully begins.
Ethereum Spot ETF
Ethereum is facing some headwinds as the May Ethereum spot ETF decision date approaches. The SEC has launched a new investigation into the Ethereum Foundation, a move widely suspected to be an attempt to delay or reject the Ethereum spot ETF application. The key question is whether Ethereum is defined as a security. This question applies not only to Ethereum, but also to other digital assets besides Bitcoin, as well as the exchanges and custodians that support them. We believe that regulation is the ultimate barrier to mainstream adoption of cryptocurrencies. Given that this is an election year where change is possible, we do not expect a clear answer in the short term.
Total value locked in DeFi has more than doubled since 2023
This is evidenced by the total value locked (TVL) in decentralized finance (DeFi) applications. TVL aggregates the total value of assets deposited across various DeFi protocols and serves as another metric for assessing ecosystem liquidity. Increased TVL not only means greater liquidity within DeFi platforms, but also indicates growing user engagement with the ecosystem. Increased liquidity is critical to the vitality of DeFi, helping to facilitate smoother transactions and broader financial activity. Looking back at underlying on-chain activity, it’s worth noting that decentralized application TVL has more than doubled since the beginning of 2023, when TVL was around $40 billion, to around $100 billion in mid-March 2024.
The Rise of Solana
While both Bitcoin and Ethereum face setbacks, Solana is on the rise again, with its DEX trading volume surpassing Ethereum for the second time since December last year.
Solana may be experiencing a mini DeFi and NFT summer, fueled by the meme craze. There are about $5.6B of meme tokens on Solana, two of which (WIF and BONK) have a market cap of over $18B.
BOME, the third largest meme coin on Solana, reached a market value of $1 billion within 48 hours of its launch, second only to SHIB’s fundraising speed in May 2021. In addition to DEX trading volume and users, SPL token issuance also reached ATH, which was mainly driven by meme coins issued on Solana.
On the positive side — with Ethereum’s decentralized L2 ecosystem, Solana has become the chain of choice for DeFi capital, offering a low-cost, fast, and easy-to-manage first choice.
We see the rise of the Solana memecoin as an affirmation of two things:
1. Risk appetite in the cryptocurrency sector is returning, and greedy capital may boost the market;
2. Solana has become the chain of choice in this cycle as more activity drives more users and more adoption. SOL and JUP may perform similarly to Ethereum and UNI in the DeFi summer, which achieved 5-10x returns in the first half of 2021;
On the negative side — we should be concerned about the rapid rise of Memecoin and Solana’s potentially fraudulent fundraising, with Solana founder Anatoly publicly pleading with the community to stop the memecoin presale.
"Solana's high performance on the first layer has become a double-edged sword in attracting both real users and speculators into the ecosystem."
Memes have provided Solana with good PR as its Google search trends have reached all-time highs compared to past search history. However, it has not yet reached the levels Ethereum saw during the last bull cycle. The Solana ecosystem may be copied, but there is reason to be hopeful as more leading Solana dApps are expected to airdrop this year including leading NFT marketplace Tensor, leading lending protocol MarqinFi, and leading derivatives protocol Drift.
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《The pullback is over, Bitcoin will move to a higher level! 》
Note: All content represents the author's personal views only, is not investment advice, and should not be construed in any way as tax, accounting, legal, business, financial or regulatory advice. Before making any investment decision, you should seek independent legal and financial advice, including advice on tax consequences.
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