Monthly Review
Sep 26, 2023

Monthly Review - March 2023

Monthly Review - March 2023

This Month in Crypto: Executive Summary

March was a month packed with macro headwinds. The systemic contagion risk in the banking sector, instigated by the collapse of the 16th largest lender in the US, sent the crypto market cap in the opposite direction touching $1.2T in market value. Even with the regulatory crackdown on Coinbase and Binance in the US, the total crypto market cap increased by 10.83%. As shown in Figure 1, Bitcoin was the outlier this month, increasing by 20.66%, while Ethereum increased by 9.62%. Metis and Maker suffered the most from last month’s rally, decreasing by 23.15% and 25.76%, respectively.

Figure 1: Price and TVL Development of Major Crypto Sectors in March

Source: 21Shares, Coingecko, DeFi Llama. Data as of  Mar 31, 2023.

Key takeaways from this report:

  • Despite adversary developments, the crypto market stands strong; Nasdaq eyes crypto custody, and Microstrategy has bought over 6K BTC over the past month.
  • ETH withdrawals are about to go live on April 12, Account abstraction is now natively supported on Ethereum, and a new era of scalability solutions led by zkSync and Polygon is taking place.
  • Ticketing giant Ticketmaster allows Avenged Sevenfold, a popular metal band, to offer special access to concert and event tickets for eligible NFT owners.

Spot and Derivatives

Figure 2:  Demand for Bitcoin options increases

Source: Coinglass

Investor appetite for Bitcoin options contracts has increased to levels we haven’t seen since 2021, recording a volume of $14.5B on March 30 alone, with Deribit enjoying the lion's share of ~$12B. This could mean that investors resort to cryptoassets as a hedge against inflation and the default contagion risk going around in the banking sector. In terms of price movements, Bitcoin is yet to break through the major $29.5K resistance level, while $27.5K may be for the moment serving as a support. On the other hand, looking at the daily chart, Ethereum needs a breakout of the $1,850 key level. Otherwise, we would expect a revisit of $1,700.

On-chain Indicators

Figure 3: Ethereum balance on exchanges

Source:  Glassnode

ETH balance on exchanges has reached an all-time low not seen since 2018. In fact, the trend amplified since the beginning of the year on the back of the collapse of FTX as users searched for safer venues to store their ETH. In addition, the move indicates that users have been migrating to non-custodial solutions like liquid-staking derivatives and are also getting ready for withdrawals by taking their ETH off exchanges to stake it as the liquidity constraint concerns should be resolved following April 12.

We at, released our Ethereum Withdrawal Simulator (EWS), to help investors gauge the waiting time to get their ETH back. In addition, we went one step further and built a dashboard so that the community can see the behaviors of all validators on the Ethereum network in real time.

Macro and Regulations

Systemic risk spread worldwide, emphasizing the message the crypto industry has been carrying since 2009, inspired by the Great Financial Crisis. For the first time since 2020, the central banks of the US, Canada, England, Japan, Europe, and Switzerland announced that they would enable USD swap lines from once a week to daily, from March 20 to at least through the end of April. The move was nothing other than a tactic to contain the contagion that spread quickly to Credit Suisse after Silvergate, Silicon Valley, and Signature banks fell under the control of the US government, which added $300B to its balance sheet to make all depositors of the financial crisis whole. The Swiss National Bank brokered a deal between Credit Suisse and UBS, but investors are still worried as selling pressures intensified on Deutsche Bank, the largest bank in Europe’s largest economy.

Figure 4: Stock prices of the collapsed banks and Bitcoin  

Source: TradingView

The price performance between Bitcoin and the stocks of the banks in question shows the distinction between the confidence in the banking system as opposed to Bitcoin.  We are still seeing crypto adoption from icons of traditional finance like Nasdaq, which is eyeing crypto custody and aims to launch by the end of Q2. In its earnings report, Microstrategy disclosed that it had paid off its $205M loan to Silvergate and bought 6,455 BTC over the past month. This ties in with our thesis that Bitcoin could act as a hedge against monetary debacles in the long run, thanks to its scarce and decentralized nature.

Coinbase and Binance are facing legal action in the US. In light of the ongoing crackdown on unregistered securities, Coinbase published a petition for rulemaking that argues that core staking services are software services, not investment contracts. The Securities and Exchange Commission (SEC) issued a Wells Notice to Coinbase. The SEC isn’t interested in the technicalities. In its view, staking and all cryptoassets, excluding Bitcoin, fulfill the four prongs of the 77-year-old Howey Test:

  1. The investment of money
  2. In a common enterprise
  3. With the reasonable expectation of profits
  4. Derived from the managerial efforts of others.

On the other hand, the Commodity Futures Trading Commission (CFTC), filed a lawsuit against Binance and its CEO, Changpeng Zhao (CZ), for routinely violating several provisions of the Commodity Exchange Act. According to the complaint, Binance isn’t registered “with the CFTC in any capacity and has disregarded federal laws essential to the integrity and vitality of the U.S. financial markets, including laws that require the implementation of controls designed to prevent and detect money laundering and terrorism financing.” The CFTC joined the SEC, Department of Justice, and IRS, in their long standing investigations into Binance.

This recent regulatory overreach brings the US a few steps back as countries like the UAE and Switzerland leap toward crypto adoption. There is so much more that we can look forward to next month, as the European Parliament is set for the final say on Europe’s renowned legislation Markets in Crypto Assets (MiCA) on April 18. MiCA is widely celebrated by both the crypto industry and regulators for its power to protect investors from meltdowns like FTX back in November.

Crypto Infrastructure

Figure 5: Performance of Major Layer 1s in Q1

Source: 21Shares, DeFi Llama


After rejecting the ATOM 2.0 vision in late 2022, Cosmos community rallied to give green light to one of the most eagerly anticipated features, Replicated Security (RS). Originally called Interchain Security, RS enables the central Cosmos Hub to provide security assurances to all consumer chains hoping to become part of the broader Cosmos ecosystem. Traditionally, projects were expected to handle security by bootstrapping their validator set. After the update, newer projects can enjoy higher security guarantees as the main Cosmos validator set will validate other Cosmos-based networks This upgrade is crucial for Cosmos as it ensures equal footing with its biggest competitor, Polkadot, who pioneered the shared security model.


Polygon and Eclipse collaborated to release a scalability solution focused on the Solana network. Known as Sealevel Virtual Machine (SVM), the solution will come as an optimistic-rollup on top of Polygon allowing developers to leverage Solana's high transaction throughput environment. The compatibility will help in either recreating some of the primitives on the Polygon sidechain or driving protocols to go multichain, without having to rebuild the codebase from the ground up. The Polygon ecosystem has been rapidly growing through inking significant partnerships and onboarding many web2 conglomerates on-chain. Thus, the newfound synergy with Solana could reverse the exodus of developers who abandoned the blockchain after the FTX debacle. Further, Polygon’s zkEVM mainnet beta went live on the 27th, while zkSync Era opened to the general public after being restricted to developers only over the past month. Consensys also launched its zkEVM public testnet called Linea. Please refer to our web3 magazine for a deeper understanding on why zkEVM is the holy grail of scalability for the Ethereum ecosystem.

Figure 6: Performance of Major Layer 2s in Q1

Source: Source: 21shares, Artemis, Coingecko, Cryptoslam, DeFi Llama, Dune Analytics (@oplabspbc)

Arbitrum launched its governance token, ARB, on March 23rd, which will be utilized for steering the development of the Arbitrum One and Nova networks. Like Optimism, gas fees for settling transactions on the mainnet layer will continue to be paid in ETH. The upgrade also introduced Orbit, a platform enabling developers to build Arbitrum-based rollups on top of the network. This move resembles Optimism’s vision of becoming a super chain via their decision to launch OpStack, the platform on which Coinbase recently publicized it’ll build its upcoming ETH scalability solution called Base. That said, Arbitrum leads the scalability race, possessing over 50% of the L2 market share, owing to the fact that it had developed its fraud-proof system at a time when its biggest competitor is still lagging behind. It is worth noting that the combined daily activity of L2 has been consistently surpassing Ethereum, as shown below. That said, Arbitrum faced scrutiny over the weekend over its AIP1 governance proposal which saw the foundation sell 10M ARB tokens into fiat in order to cover expenditures for the team, before the proposal was ratified. They were also denounced for proposing to sidestep the community and issue special grants as a way to address ‘voters’ fatigue’, which backfired as ARB’s only role is for the community to govern the network. The foundation has since backtracked, and promised to break down the controversial proposal into smaller parts to help the community understand it better, while the rest of the 750M tokens at stake will be subject to a series of votes on how to use them as a way of inserting more transparency and accountability into the governance process.

Figure 7: Ethereum Mainnet Transactions  

Source: L2Beat

Smart-contract Platforms

Ethereum, after running multiple dress rehearsals over the last several months to replicate the processing of withdrawals on ETH testnets, users will finally be able to withdraw their locked assets from the beacon chain on April 12. The ETH core development team has confirmed that the Shapella upgrade will materialize on epoch 194,048, introducing changes to the execution (Shanghai) and consensus layer (Capella). For a deeper dive into how the withdrawal process is expected to play out, check out our ETH simulator here.

Meanwhile, Security researchers at the annual ETH Denver event announced ERC 4337, known as Account Abstraction (AA), is finally available as a smart-contract solution on top of ETH mainnet. To recap, AA offers friendly features such as 2FA authentication, gasless transactions, or even periodic payments, which allows for a user-intuitive interface analogous to modern FinTech interfaces. Although existing apps like Argent and Safe wallet have already adopted AA, introducing the feature on the main layer is crucial to allow native support for the technology.


Pocket Network inked a new partnership with Google Cloud and 66 Degrees. The collaboration should see the middleware node RPC provider consolidate its cloud presence on Google’s platform, reducing operational expenses while allowing Pocket’s infrastructure to scale even further. Comparably, Tencent cloud announced support for Avalanche one-click node deployment shortly after the company signed an MOU with another node provider, Ankr protocol.

Although the move should accelerate the adoption of decentralized node providers by offering superior latency and connectivity powered by an enterprise-centric platform, it does increase the risk of a single point of failure. Despite the increase in the number of nodes and the diversification of their geographic distribution, operators would ultimately use a centralized cloud platform for bandwidth distribution that is prone to censorship. Giving up control of operations could also expose the privacy of node operators and users. Thus, despite how encouraging it is to see growing symbiosis between Web2 and 3 systems, the industry mustn’t lose sight of the crucial north stars like decentralization of the infrastructure, which keeps the underlying blockchain grid together.  

To prepare for the activation of ETH withdrawals on April 12, Metamask revealed that it’d enable solo staking via collaborating with four staking providers for its institutional version of the wallet. This a vital move for the ecosystem as ETH has one of the lowest staking ratios (~15%) amongst its peer POS networks due to the liquidity constraints that will be addressed with the Shanghai upgrade. In addition, the solution streamlines the complexity of staking by facilitating a one-stop shop for managing, trading, and earning yield on ETH, allowing users to participate widely in the validation of the network.  

Figure 8: ETH staking ratio

Source: 21shares Research on Dune Analytics

Decentralized Finance

Figure 9: Performance of Top 10 DeFi Protocols in Q1

Source: 21Shares, DeFi Llama

Figure 10: Performance of Major Stablecoins in Q1

Source: 21Shares, DeFi Llama

USDC Depeg: Three out of the six banks holding USDC reserves collapsed during the second week of March. These included a voluntary wind down from Silvergate, and a takeover of Signature bank and Silicon Valley Bank (SVB) from US financial regulators amid insolvency fears. As Circle disclosed that SVB holds 8% of USDC cash reserves, the USDC stablecoin depegged over the following weekend, reaching an all-time low of 87 cents. US regulators stepped in to protect all depositors of SVB and Signature Bank, and other potentially-affected banks. For a deeper breakdown on the ramifications of the de-peg, check out our special report on USDC that goes into detail about what we’re expecting moving forward.

Spillover of USDC Depeg: MakerDAO implemented circuit breakers for its peg-stability-module (PSM) to deactivate troubled stablecoins from being used as collateral during turbulent times. Additionally, the governance vote that ended on March 16th approved Maker to allocate $750 million towards US Treasury bonds to diversify DAI reserves and earn an expected ~4.5% in annualized yield. This move is essential for Maker's growth as more than half of its earnings are now generated from RWA investments. Allocating into US treasuries is safer as government bonds are backed by the full faith and credit of the US government, providing greater security than dealing with potentially unstable banks. This should set crypto-based treasuries in a safer position during macro headwinds triggered by the current US banking crisis. We expect this trend to continue as high-interest rates are incentivizing more projects to take advantage of RWA investments.

Figure 11: MakerDAO’s Revenue by category

Source: SebVentures on Dune Analytics

Lido Finance, the largest staking provider by AUM, expects mainnet withdrawals on its platform to go live by mid-May. Although Ethereum is scheduled to implement withdrawals on mainnet by the 12th of April per the last developers' call, Lido only wants to rush the deployment of withdrawals once it has fully audited and battle-tested the new array of smart contracts that will activate the function. Comparatively, Rocket pool is scheduled to release its Atlas upgrade in early April in a bid to ensure competitiveness with Lido’s low barrier to entry by reducing the requirement to run their pools with 8 instead of 16 ETH and help attract a larger user base.

Figure 12: Lido versus RocketPool MarketShare of ETH staking

Source: 21shares Research on Dune Analytics

Uniswap expanded its operations to two additional smart-contract networks. Uniswap v3 went live on BNB, making use of the wormhole bridge solution during mid-March which was timely since Pancake swap V3 is expected to be deployed live on BNB during the first week of April. The absence of Uniswap would have left a gap for Pancake Swap to continue dominating the alternative L1, which has a current monopoly of 48% . With this expansion, Uniswap will capture a more significant market share and generate more revenue for the blue-chip protocol. At the same time, its capital efficiency can significantly improve liquidity conditions across the network. Uniswap is now also deployed on Avalanche using the LayerZero cross-chain messaging protocol.

Figure 13: Share of DEX Volume

Source: The Block, The Graph, Coingecko

In addition, Uniswap established a committee to conduct due diligence on eight bridges and three bridge-agnostic solutions. This is a pivotal step to accelerate the decision-making process when choosing the right bridge to branch out the protocol's reach. The decision was also made to address the chaos that ensued during the last governance vote on deciding which bridge solution to deploy on the BNB chain.

Aave held a governance discussion to determine the validity of deploying on Polygon’s upcoming zkEVM network. Although the protocol has been live on Polygon zkEVM testnet since mid-2022, Aave hopes to launch an MVP as soon as Polygon’s mainnet goes live to have a strategic first-mover advantage while offering a limited implementation of the protocol. To that end, Aave’s revenue has been steadily increasing over the past five months, so it is reassuring that the protocol continues to expand to more chains to amplify its presence across the smart-contract ecosystem and cultivate profits. In addition, the contagion events of the last weeks have prompted users to embrace the on-chain protocols over CEXs, as seen by the surge in fees and protocol earnings shown below. That said, it’s encouraging to see DeFi blue-chip protocols racing to expand to Polygon as the network will rely on critical service providers to power up its financial industry.

Figure 14: Aave Monthly Revenue (share of interest + liquidation fees) vs Earnings (revenue - token incentives)

Source: TokenTerminal

National Australia Bank completed its first cross-border transaction. The bank leveraged the Ethereum blockchain to build smart contracts for seven different global currencies as part of its pilot to test a multicurrency cross-border settlement execution strategy. The experiment's success traced on Etherscan highlighted the benefits of tokenization when assessing the reduced costs for processing international transactions and providing full transparency and audibility. NAB's move echoes that of the Monetary Authority of Singapore, where they piloted a foreign exchange transaction swapping between tokenized deposits of the Japanese Yen and the Singaporean dollar.  

DyDx revealed it’ll finally launch its protocol on Cosmos mainnet in September. The DEX launched a private testnet instance on March 29, while targeting to deploy a public testnet in July of this year. This is a monumental step as it reinforces our thesis that certain applications will migrate to becoming their own app-chain to cater for their respective needs and technical requirements. You can check our State of Crypto magazine for a deeper breakdown on why we believe this trend will continue in the following years. However, in the case of DyDx, the DEX wants to fully decentralize its platform as a way to address the regulatory issues as Starknet still relies on a centralized sequencer. In addition, the move was meant to address the scalability issues of the Ethereum ecosystem as evidenced below by the excessive gas fees paid on L2 proofs.  

Figure 15: DyDx Daily Ethereum gas used on L2 proofs

Source: DyDx Analytics on Dune

Metaverse and NFTs

Figure 16: Performance of Major NFTs Marketplaces in Q1

Source: 21Shares, Dune Analytics

Dimming the hype on the metaverse: March hasn’t been great for the metaverse industry, especially in Disney, shutting down its metaverse division and laying off 50 employees as part of staff cuts that promise to reduce headcount by around 7,000 across the company over the next two months. Mark Zuckerberg also seemed to prioritize AI and dump his metaverse ambitions. As the latter proved to have a long sales cycle, given its massive world of untapped use cases, NFTs seem like a closer milestone, with quicker returns on investment.

Token-gating as a use case of NFTs shines brighter: Ticketing giant Ticketmaster partnered with popular metal band Avenged Sevenfold, which already has its own Deathbats Club NFT collection, to grant NFT-holders access to token-gated features. For instance, owners of the 10,000 Deathbats Club Ethereum-based NFTs were offered early access to buy tickets to the band’s upcoming New York and Los Angeles arena shows in June. Token-gated features can include more than discounted tickets. Audius, a new music streaming service designed to cater for all musicians, announced that it is giving its users access to tracks on the condition that they hold an NFT collectible based on Ethereum or Solana.

Bitcoin’s network accommodates NFT inscriptions: On March 16, DeGods announced 500 NFTs minted with Bitcoin. According to the Ordinals Theory, a count of 500  one-hundred-millionth of a Bitcoin will carry ​​individual identities allowing them to be tracked, transferred, and imbued with meaning – in this case, an avatar. The flight to Bitcoin seen over the past month, coupled with NFT inscriptions on the network, have all contributed to Bitcoin’s resistance and showcasing the scalability of the network.

Next Month’s Calendar

Source: 21Shares, Forex Factory, CoinMarketCap

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