Bright spots and dark shadows in the downward trend | Frontier Lab Crypto Market Weekly Report

Market Overview

Overall market overview

This week, the cryptocurrency market is in a rapid decline, and the market sentiment index has dropped from 33% to 11%. The market value of stablecoins has basically stopped growing (USDT reached 142 billion, USDC reached 55.9 billion, with an increase and decrease of 0.02% and -0.53% respectively), indicating that as the market fell sharply, institutional funds stopped entering the market and began to leave the market; the panic in market sentiment mainly stems from the theft of $1.5 billion in assets from the Bybit exchange by hackers and Trump's radical tariff policy, which has increased the market's concerns about inflation, made the Federal Reserve less likely to cut interest rates, and increased the market's concerns about the United States entering a recession, which had a strong impact on market sentiment. The overall market sentiment fell into extreme panic, and Altcoin performance was generally weaker than the benchmark index.

Next week's forecast

Bullish targets: LTC, S, SOSO, BERA

LTC: LTC rose against the trend this week, rising when the overall market fell. It performed very strongly in the market, mainly because the market's expectations for the approval of its LTC ETF have been raised. This week, the spot LTC ETF proposed by Canary Capital has been listed on the Depository Trust and Clearing Corporation (DTCC) system, and LTC's approved bets on Polymarkt have reached 87%. At this stage, the market has high expectations for the approval of the LTC spot ETF0000, so before it is officially approved, the LTC spot ETF event will continue to be hyped repeatedly.

S: Sonic has recently begun to enter the Defi industry. Through the high APY of its on-chain Defi projects, Sonic has attracted a large number of on-chain users and funds. In its main on-chain liquidity staking projects Beets and Origin, the APY of the liquidity pool based on S tokens can reach up to 32.22% and 123% respectively. In the lending agreement on the Sonic chain, the average interest rate for users to borrow S tokens is 10.21%, so users can obtain a yield of 20%+. In addition, the recent popularity of S tokens on the Sonic chain has caused an increase in market demand for S tokens, causing the price of S tokens to rise against the trend, thereby making the income of users on the Sonic chain higher. Therefore, in the current downtrend, users can still obtain 20%+ risk-free returns, which will attract a large number of users to participate in the way of borrowing coins, increase the market demand for S tokens, and thus drive the price of S tokens to present a spiral upward trend.

SOSO: The SoSoValue project can constantly adjust its future development direction according to the market trend. SoSoValue originally built itself into a one-stop investment service platform enhanced by AI technology, wanting to keep up with the market trend of AI Agent. After the decline of AI Agent, the market began to shift its attention and funds back to Defi projects. As a result, SoSoValue seized the current trend of high APY to attract users and built itself into a financial service center. It hid its AI technology in the product but did not mention it mainly. Instead, it focused on promoting its ability to provide high APY. Recently, it launched the second season mining activity. Users can mine SOSO tokens by holding or staking SSI packaged index tokens. In this way, the user's staking rewards plus the additional airdropped SOSO tokens can reach up to 42% APY, thereby attracting more users to participate in mining and further increasing expectations for the rise of SOSO tokens.

BERA: The overall market was in a downtrend this week. BERA was also affected by the market and fell at the beginning. However, the Berachain project quickly adjusted the pledge yield of the LSD project on the chain. Infrared Finance, the main LSD project on the Berachain chain, has achieved the highest APY of WBERA at 123%. The interest rate of lending BERA in its on-chain Lending project has reached 23.68%, allowing users participating in arbitrage to earn 100% risk-free annualized returns, thus quickly curbing the downtrend and turning it to an uptrend. The strategy adopted by the Berachain project is roughly the same as that of Sonic. Both use high APY to attract users and funds on the chain to enter, thereby realizing the process of: pledge lock-up → liquidity release → DeFi empowerment → token appreciation, and increase the market user demand for the main currency BERA on the chain through high APY, thereby achieving the purpose of promoting the price increase of BERA tokens.

Bearish targets: ETH, SOL, ADA, AI, TKO, RUNE

ETH: 491,000 ETH were stolen from Bybit this week. Although Bybit Exchange has fully compensated the stolen ETH through purchases and redemptions, the purchasing power generated by it has not been reflected in the price in the market, indicating that investors in the market still have FUD sentiment towards ETH at this stage. After all, it will continue to face selling pressure from hackers. At the same time, after the Bybit theft incident, Bybit Exchange's investigation report clearly stated that the theft was mainly due to a loophole in safe. There was no loophole in the exchange's infrastructure, so the market had great doubts about safe technology, and most projects in the Ethereum ecosystem will use safe technology, so this is a potential danger to the security of most projects in the Ethereum ecosystem in the future. In addition, Ethereum's Pectra upgrade will be launched on the test network this weekend. According to previous practices, it will be pulled up before the project's technical upgrade, and there will be a retracement after the good news is implemented. This Ethereum Pectra upgrade did not inject too much energy into the ETH price, so it is likely that the ETH price will fall after it is implemented.

SOL: This week, SOL followed the market and fell sharply, mainly because of the recent retreat of the Meme coin wave. Solana, as the public chain with the highest Meme coin revenue, was also affected by various FUD voices in the market, causing Solana's on-chain funds to flee. Its TVL fell from $12.1 billion to $7.3 billion, a drop of 39.66%. It can be seen from the liquidity pledge yield on the Solana chain that it has dropped from 10.29% to 7.26%. At the same time, the on-chain transaction volume dropped from $35.5 billion to $2.4 billion, a drop of 93.23%. It can be seen that Solana's on-chain ecology is close to collapse. In addition, SOL will usher in the unlocking of 11.2 million SOL on March 1. The unlocked tokens are all in the hands of institutions, so there may be continuous shipments to form selling pressure, which has exacerbated the panic of market investors about SOL.

ADA: This week, the TVL on the Cardano chain has seen a large-scale decline, down 26.88% this week, and the TVL has dropped to $308 million, down 56.06% from its peak of $701 million. In addition, the TVL of all ecological projects on its chain has fallen by more than 10%. It can be seen that the funds on the chain are rapidly flowing out of the Cardano ecosystem, which also proves that market users have a FUD sentiment towards the Cardano ecosystem at this stage. The transaction volume of its on-chain DEX has dropped by more than 68%, and the current borrowing rate of ADA tokens is 3.29%. It can be seen that almost no one in its ecosystem participates in lending, resulting in a borrowing rate far lower than that of other public chain tokens. So if the funds on the Cardano chain continue to flow out, then it is expected that ADA will continue to fall next week.

AI: Sleepless AI is an AI-based Gamefi project. The AI and Gamefi tracks occupied by Sleepless AI have experienced the largest retracement in this decline, because investors in the market have lost interest in Gamefi's Play to earn model, the number of users has gradually decreased, there is almost no new capital inflow, and it is generally believed that the valuation of AI projects is relatively high at this stage. Projects in the AI track have been in a trend of substantial correction. In addition, AI will unlock 17.27 million tokens next week, accounting for 1.73% of the existing circulation. The unlocking ratio is relatively large, and the track is not prosperous recently, so it is expected that there will be a decline in a short period of time after the tokens are unlocked.

TKO: Tokocrypto is the largest cryptocurrency exchange in Southeast Asia. The recent Bybit theft has had a negative impact on various centralized exchanges, causing the token performance of each exchange to be unsatisfactory. In addition, TKO is about to unlock 100 million tokens, which is 2.02% of the current circulation. The unlocking ratio is relatively large, and it is expected to fall after the unlocking.

RUNE: THORChain is a decentralized cross-chain AMM trading protocol. This week, it experienced a sharp rise against the trend from Monday to Wednesday, mainly because the hackers who stole Bybit continued to transfer the stolen ETH to THORChain and conduct money laundering transactions in THORChain, which caused THORChain's transaction volume and handling fees to rise sharply, causing it to not follow the counter-trend rise of the broader market. After the market exposed that hackers used THORChain for money laundering, THORChain's developer Pluto announced his resignation. It is expected that next week, the price of the currency will continue to fall as the transaction volume decreases and the market's FUD about its suspected money laundering behavior.

Market Sentiment Index Analysis

The market sentiment index dropped from 33% last week to 11%, and is generally close to the extreme panic range.

Hot Tracks

Sonic

Hot status

In recent weeks, the TVL of Sonic chain has maintained a high growth trend, and the TVL of most chains on the chain is in a downward trend this week. Sonic is the only chain that has maintained a 10% growth rate among chains with a TVL of more than 50 million US dollars. The growth rate this week reached 10.32%, and the TVL on the chain increased to 683 million US dollars. It can be seen that its on-chain ecology can be in a state of continuous capital inflow even in an extremely panic-stricken falling market, and Sonic's token S also rose by 7.63% this week. Although the increase is not high, it can be achieved when the market is in a collapse, which also shows the market's recognition of it.

Hot reasons

Sonic has recently begun to shift the focus of its projects from Gamefi to Defi, and has adopted a high APY strategy to attract on-chain users. It can provide users with up to 123% APY in its main on-chain liquidity projects, and provide users with a lending rate of about 10% on the lending side, so that on-chain users can have an arbitrage APY of up to 100%+. In the current falling market, an APY of more than 100% is very attractive to on-chain users, which has prompted on-chain users to choose to purchase or borrow coins to participate in arbitrage, increasing the demand for Token S among on-chain users, making Token S perform better than most tokens.

Future Outlook

We can see from the recent hot reasons of Sonic ecology that it is mainly because the LSD project in Sonic ecology has increased the annualized rate of return and attracted more on-chain users to participate in arbitrage activities. So we can see that the path for an ecology to develop rapidly is to achieve efficient driving of its economic flywheel. The project party will focus on the DeFi track to achieve efficient empowerment of assets. Among them, to empower assets around DeFi, it is necessary to focus on asset pledge and liquidity, so that assets can generate compound interest in DEX, lending, and asset management. The economic flywheel of the on-chain ecology must form a positive cycle through: pledge + liquidity + DeFi empowerment + user growth. Its core driving force lies in the dual-wheel drive of the pledge of the on-chain currency and the release of liquidity, so that it can generate compound interest in scenarios such as DEX, lending and asset management, and realize "pledge is productivity". After the on-chain users are attracted to the on-chain ecology by high APY, it must form a positive cycle of: pledge lock → liquidity release → DeFi empowerment → token appreciation → user return → re-pledge → developer gathering. Otherwise, the funds of new users will not be enough to cover the selling pressure of arbitrage, and the price of S tokens will fall. After the S tokens fall, the yield of each project will inevitably fall, causing arbitrageurs to leave. This is a huge blow to an ecosystem, so we need to continue to pay attention to the APY of Defi projects on the Sonic chain. Through the on-chain APY, we can judge whether the Sonic chain still has the power to develop.

However, it should be noted that although Sonic's TVL grew the fastest among all chains with a value of over US$100 million this week, its TVL did not continue to rise this week, but instead rose and fell.

Berachain

status quo

The entire market is in a rapid decline this week. All the top ten TVL projects except Berachain are in a downward trend. Although Berachain's TVL increased by only 4.66% this week, it is not easy to maintain positive growth in the current environment. Its TVL reached 3.194 billion US dollars, ranking sixth among all public chain TVLs, surpassing the Base chain. The price of its token BERA also continued to rise this week, with an increase of 7.26%, which is in a strong position among Altcoins.

Hot reasons

This week, the TVL of the top DEX, Lending, and LSD projects in the Berachain ecosystem slowed down, and Berachain's TVL declined in the first half of the week. Later, the main LSD project Infrared Finance on the Berachain chain achieved an APY of up to 121% for WBERA, and the emerging LSD project Stride achieved an APY of 190.12%. At the same time, the interest rate for lending BERA in the Lending project on the Berachain chain was 23.68%, allowing users participating in arbitrage to earn 100% risk-free annualized returns, thereby quickly curbing the downward trend and turning it to an upward trend.

Future Outlook

Berachain continues to be hot this week mainly because its on-chain Defi project has increased APY, which continues to maintain a relatively high attraction to on-chain users, allowing a large number of on-chain users to invest their funds in Berachain. Berachain's development path is roughly similar to Sonic, so the problems it faces are also the same as Sonic. At this stage, Berachain has realized the process of: staking lock-up → liquidity release → DeFi empowerment → token appreciation, but no outstanding on-chain projects have emerged in the process of user return → re-staking → developer gathering. Therefore, although Berachain's high-interest rate model can enable the on-chain ecology to achieve rapid development in the short term and promote the rapid rise of the project token BERA, it will inevitably face increasing selling pressure in the future. When the funds of new users are not enough to cover the arbitrage selling pressure, the price of BERA tokens will fall, and after the BERA tokens fall, the yields of various projects will inevitably fall, causing arbitrageurs to leave. Therefore, in the future, we should pay more attention to whether there are new star projects on the Berachain chain, and whether the interest rate given to users by the on-chain LSD project will drop significantly.

Overall overview of market themes

 Data source: SoSoValue

Based on weekly returns, the Sociafi track performed the best, while the PayFi track performed the worst.

• Socialfi track: TON and CHZ account for a large proportion in the Socialfi track, accounting for a total of 95.17%, and the declines this week were -4.86% and -4.79% respectively. Although both are in a downward trend, they are still better than the performance of other Altcoins, resulting in the best index performance of the entire Socialfi track.

• PayFi track: XRP, LTC, and XLM account for a large proportion in the PayFi track, with a total share of 94.62%. This week, their declines were -19.23%, -1.21%, and -16.96%, respectively, making the PayFi track the worst performer.

Crypto Events Next Week

• Monday (March 3) US February ISM Manufacturing PMI

• Wednesday (March 5) US February ADP employment figures; Pectra network upgrade plan launched on Ethereum testnet

• Friday (March 7) U.S. February seasonally adjusted non-farm payrolls; U.S. February unemployment rate

Summarize

The cryptocurrency market experienced a significant decline this week, and the market sentiment index dropped sharply, showing the general concerns of investors. Despite this, some projects such as LTC, Sonic, SoSoValue and Berachain attracted users through high APY strategies, but in the long run, the stability of the market and the emergence of new projects will be key factors. Investors are advised to pay close attention to market dynamics and operate with caution.