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A look back at March

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Bitcoin hits all-time high as crypto rally continued

The crypto universe is headed for a great March, boosted by general investor optimism. Not only did leading stock market indices such as Nasdaq and the S&P 500, reach all-time highs (ATH) during the month, the billions of dollars flowing into the nine new spot Bitcoin exchange traded funds (ETFs), rate cut expectations later this year, as well as Bitcoin’s upcoming halving end-April also supported the crypto sphere.

In the US, a prosecutor wants the founder of the bankrupt FTX exchange, Sam Bankman-Fried, to spend the next decades in jail for his high-stake risk taking and gambling with the assets of clients. Roughly $8 billion in client assets are missing. In the UK, a judge ruled that Craig Wright is not Satoshi Nakamoto, the founder of Bitcoin.

The monthly cryptocurrency exchange volumes had risen to $2.2 trillion by March 27 – the highest volume since November 2021 when Bitcoin last reached an ATH. Binance remains the largest crypto exchange with a 46 percent market share.

Bitcoin heads for seventh consecutive monthly gain, now the 9th largest asset globally

The price of Bitcoin reached an ATH at $73,628 on March 14, with Google’s search rankings confirming an increasing interest for Bitcoin, being ahead of searches for the pop stars Taylor Swift and Beyoncé. Its market cap overtook that of Meta Platforms, the owner of Facebook, in March. Bitcoin is now the ninth-largest asset, neck and neck with that of silver at $1.37 trillion. 

The price of Bitcoin has notably been driven by the massive inflow of funds into the nine spot Bitcoin ETFs approved by the Securities and Exchange Commission (SEC) in mid-January. These ETFs have attracted institutional investors, with BlackRock’s ETF now managing more than $17 billion of assets and Fidelity’s $10 billion as of March 26. The Grayscale Bitcoin Trust (GBTC), transformed into a spot Bitcoin ETF in January, has suffered massive outflows, as its 1.5 percent fee is far above the 0.25 percent charged by its competitors. Grayscale thus plans a Bitcoin Mini Trust ­– a budget version – in an attempt to recoup assets and lobbies for the approval of options on these spot Bitcoin ETFs.

By March 26, assets under management in these ten Bitcoin ETFs totaled roughly $57.7 billion. JMP Securities expects that inflows into the ten approved spot Bitcoin ETFs could reach $220 billion by 2026. These inflows could push the price of Bitcoin up to $280,000. Standard Chartered forecasts that the price of Bitcoin could skyrocket to $150,000 later this year and to $250,000 by next year.

The massive demand for Bitcoin triggered by these inflows have pushed up the price of Bitcoin by 36 percent over the past month, and a whopping 65 percent since the beginning of the year. At the time of writing, Bitcoin traded 5 percent below its ATH. 

Conservative banks, asset managers forced to embrace Bitcoin

Merrill Lynch and Wells Fargo are among the banks that have bowed to client demand for spot Bitcoin ETFs. BlackRock, the world’s largest asset manager, now considers exposure to Bitcoin in its Strategic Income Opportunities Fund, a fund that to date has followed a flexible (conservative) bond strategy. Even Japan’s government pension fund, the world’s largest, and the state of Arizona consider including Bitcoin into their pension funds.

MicroStrategy raised $1.4 billion in March to buy more Bitcoin

MicroStrategy raised $1.4 billion in two separate bond issues during the month, to buy additional Bitcoin and for general corporate purposes. The company now holds 214,246 Bitcoins. The company’s unrealized capital gain thus totals $7.5 billion at today’s Bitcoin price. MicroStrategy now owns more than 1 percent of all Bitcoins that will ever be mined. It is the listed company holding most Bitcoins.

Approval of Ether spot ETF judged less unlikely

Experts are increasingly worried that the eight spot Ethereum ETF applications that the SEC currently examines will be rejected in May. Bloomberg has cut its approval prediction to 25 percent. The SEC’s dislike of crypto as a concept, political pressure and the regulator’s limited contact with the applying asset managers are viewed as red flags.

News that the SEC demands that companies disclose their dealings with the Ethereum Foundation since its shift to a proof-of-stake model in September 2022 is also viewed as problematic. It could signal that the regulator attempts to classify Ether as a security, contrary to Bitcoin that is regarded as a commodity.

Grayscale Investments’ Chief Legal Officer, Craig Salm, remains upbeat: “Investors want and deserve access to #Ethereum in the form of a spot Ethereum ETF and we believe the case is just as strong as it was for spot #Bitcoin ETF.” This statement is contradicted by a BlackRock executive who said the asset manager’s clients show little interest for Ether and other altcoin products.

On a positive note, the Dencun upgrade on Ethereum’s mainnet was successfully deployed in March. It slashes transaction costs (gas fees) for layer 2 (L2) networks and optimizes data storage. Another upgrade, known as Electra, is now being considered. The price of Ether percent over 15 percent the past month. 

Binance’s user funds grow, despite legal issues in Nigeria, the Philippines…

Binance now holds more than $100 billions of user funds in custody. The world’s largest crypto exchange has recorded net inflows exceeding $3 billion since late November when it pleaded guilty to tax evasion and other charges and agreed to pay a $4.3 billion fine in the US.

Binance is also accused of tax evasion and price manipulations in Nigeria. The African country’s regulator has demanded that Binance hands over data relating to all Nigerian users. Nigeria has gone as far as detaining two Binance executives, one of which managed to flee in March. Binance’s compliance budget has been raised by 35 percent to $213 million to monitor transactions and the market, the exchanges Chief Technology Officer, Ronit Wad said.

In the US, Binance laid off 200 employees in March, twice as many as originally announced. Meanwhile, the SEC has asked a US court to take further action against Binance’s US operations, as it alleges the crypto exchange does not respond to its key questions.

The world’s largest crypto exchange is also under pressure in the Philippines, where the regulator blocked access to its website and app, alleging Binance “poses a threat to the security of the funds of investing Filipinos.” The price of Binance Coin rose 49 percent over the past month.

Solana’s market cap hits an ATH

Solana’s market cap reached an all-time high in March, profiting from hype for memecoins such as Dogecoin, Shiba Inu and Pepe Coin. Solana’s mainnet is now being used as a Cross-Chain Transfer Protocol (CCTP) to facilitate the transfer of USDC, the second-largest stablecoin. The price of Solana climbed 80 percent over the past month.

SEC wants to slam a $2 billion fine on Ripple

A court case dragging on since the end of 2020, when the SEC charged Ripple Labs for violating securities laws, took new turns during the month when the US regulator asked the  judge to impose $2 billion in fines and penalties.“Rather than faithfully apply the law, the SEC remains bent on wanting to punish and intimidate Ripple - and the industry at large,” the Chief Legal Officer of Ripple, Stuart Alderoty, said. “Gensler’s SEC has become unhinged. This will not, and should not, go unnoticed in an election year, as the SEC singlehandedly thinks it’s above the law, dragging the US further behind other G20 countries,” Chris Larsen, the co-founder and executive chairman of Ripple, added. The price of XRP, the cryptocurrency issued by Ripple, put on 15 percent over the past month.

Avalanche launches Web3 voucher program on Alipay & allocates money for memecoins

 Alipay, a Chinese equivalent to Apple Pay or Venmo, will use Avalanche’s Web3-enabled voucher program in its e-wallets giving users discounts to popular milk tea brands. Separately, the Avalanche Foundation will allocate $1 million to an incentive program called Memecoin Rush to boost the liquidity on the decentralized Avalanche platforms, Trader Joe and Steakhut. The price of Avalanche increased over 49 percent the past month.

Crypto exchanges fined, warned & closed by regulators

Genesis Capital was fined $21 million by the SEC for selling unregistered securities through the crypto asset lending program Gemini Earn, while the crypto exchange Bybit was added to Hong Kong’s suspicious virtual asset trading platforms (VASP) alert list. Bybit is the fourth-largest crypto exchange in terms of trading volumes behind Binance and Coinbase. As for Coinbase, the largest US crypto exchange, it challenged the SEC’s regulatory authority in an appeal filed to a US court.

OKX, the third-largest crypto exchange, obtained an in-principle approval for a major payment institution (MPI) license in Singapore, but will close its Indian operation due to the tougher regulatory situation there by end April.

Stablecoin supply at ATH

The liquidity on the crypto market exceeded all previous all-time highs in March. The market cap of stablecoins is currently $150 billion, dominated by Tether’s USDT with a market cap of $104 billion. Tether signed a memorandum of understanding with the Uzbek   authorities in March.

In Israel, the first stablecoin pegged to the Shekel will be tested within a regulatory sandbox project. As for Cardano, it launched a stablecoin named Mehen (USDM), which is pegged 1:1 to the US dollar and can be transferred on the Cardano blockchain without any additional smart contracts involved.

US includes crypto mining tax & wash sale rule in 2025 budget proposal

The Biden administration, amongst others, wants to scrap the wash sale rule, a fiscal loophole that allows investors to deduct losses when they sell a crypto asset at a loss, in view of repurchasing it shortly thereafter. It also wants to impose a 30 percent digital mining energy excise with a view to reduce mining activity along with its associated environmental impacts and other harms. 

UK, Dubai & Estonia pass new crypto legislation

The UK’s Financial Conduct Authority (FCA) approved the creation of a market segment for crypto asset backed exchange traded notes (cETNs). These will need to be physically backed and listed as of May 28. Meanwhile, Dubai adopted a Digital Assets law, aiming at keeping abreast of the rapid technological developments on the financial markets and in international trade. As for Estonia, it will soon impose both operational and reporting requirements for crypto players on top of existing anti-money laundering requirements.

Extradition saga of founder of Terraform Lab continues

Early March, a Montenegrin court overturned an earlier ruling that would have extradited the founder of Terraform Labs, Do Kwon, to the US rather than to his native South Korea. Two weeks later, the country’s Supreme Court canceled this decision. Kwon remains in Montenegro until a final ruling is announced. Terraform Labs was behind the stablecoin TerraUSD and the cryptocurrency Luna that both collapsed in May 2022, wiping out $40 billion.

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