Original title: “Bright spots and shadows in the downtrend| Frontier Lab Crypto Market Weekly

Original author: Frontier Lab

market overview

Overall market overview

This week, the cryptocurrency market is in a rapid downward trend, with the market sentiment index falling from 33% to 11%. The market value of stablecoins basically stopped and continued to grow (USDT reached 142 billion yuan and USDC reached 55.9 billion yuan, with increases and decreases of 0.02% and-0.53% respectively), indicating that with the sharp decline in the market, institutional funds stopped entering and began to leave; The panic in market sentiment mainly stems from the theft of US$1.5 billion in assets from the Bybit Exchange by hackers and Trump’s aggressive tariff policy, which has increased the market’s concerns about inflation, made it less likely that the Federal Reserve will cut interest rates, and increased the market’s concern for the United States. The burden of entering a recession has had a strong impact on market sentiment. The overall market sentiment has plunged into extreme panic, and Altcoin’s performance is generally weaker than the benchmark index.

Next week’s forecast target

Bullish targets: LTC, S, SOSO, BERA

LTC：LTC bucked the trend this week, rising even as the overall market fell. It performed very strongly in the market, mainly because the market raised expectations for its LTC ETF. This week, the spot LTC ETF proposed by Canary Capital has been listed on the Depository Trust and Clearing Company (DTCC) system, and LTC has been approved for betting on Polymarkt to reach 87%. At this stage, the market has high expectations for the approval of LTC Spot ETF0000, so the LTC Spot ETF event will be repeatedly speculated before its formal approval is passed.

S：Sonic has recently begun to enter the Defi industry. Through the high APY of its Defi projects on the chain, Sonic has attracted a large number of users and funds on the chain. In the main liquidity pledge projects on the chain, Beets and Origin, the liquidity pool based on S tokens can reach a maximum of 32.22% and 123% respectively. The average interest rate for users to borrow S tokens in the loan agreement on the Sonic chain is 10.21%. Therefore, users can get a yield of 20%+. In addition, the recent increase in market demand for S tokens due to the popularity of Sonic chain has caused the price of S tokens to rise against the trend, thus making users on the Sonic chain have higher profits. Therefore, in the current downward market, users can still get a risk-free income of 20%+, which will attract a large number of users to participate by borrowing coins, increasing the market demand for S tokens. This promotes the price of S tokens to show a spiral upward trend.

SOSO：SoSoValue projects can continuously adjust their own future development direction according to the trend of the market. SoValue originally built itself into a one-stop investment service platform enhanced by AI technology. It wanted to keep up with the market trend of AI Agents. After the decline of AI Agents, the market began to shift attention and funds back to the Defi project. As a result, SoValue has seized the current trend of attracting users with high APY, and has built itself into a financial service center. Hiding its AI technology in the product but not mainly mentioning it, it focuses on promoting its ability to provide high APY. Recently, the second quarter of mining activity was launched. Users can mine SOSO tokens by holding or pledging SSI encapsulated index tokens. In this way, users ‘pledge rewards and additional airdropped SOSO tokens can reach up to 42% APY, thus attracting more users to participate in mining and further increasing expectations for SOSO tokens.

BERA：The overall market was in a downward trend this week. At first, BERA was also affected by the market and fell. However, the Berachain project quickly adjusted the pledge yield of LSD projects on the chain. Infrated Finance, the main LSD project on the Berachain chain, increased the APY of WBERA to 123%, and the interest rate on lending BERA to its Lending project on the chain reached 23.68%. Users participating in arbitrage can earn 100% risk-free annualized income, thereby quickly curbing the falling market and turning into an increase. The strategy adopted by the Berachain project is roughly the same as that adopted by Sonic. Both of them use high APY to attract users and funds on the chain, thereby realizing the process of: pledge lockdown → liquidity release → DeFi empowerment → token appreciation. Increase market users ‘demand for BERA, the main currency on the chain, thereby achieving the goal of promoting the price increase of BERA tokens.

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

ETH：This week, Bybit was stolen 491,000 ETH. Although the Bybit Exchange has currently made up for the stolen ETH through purchase and redemption, the purchasing power generated by it has not been reflected in the price in the market. This shows that at this stage, market investors still have FUD sentiments towards ETH. After all, they will continue to face selling pressure from hackers in the future. At the same time, after the Bybit theft incident, The investigation report of Bybit Exchange clearly stated that the theft was mainly due to the vulnerability of safe. There were no loopholes in the infrastructure of the exchange, so the market had great doubts about safe technology. Most projects in the Ethereum ecosystem will use safe technology, so this is a potential danger to the future security of most projects in the Ethereum ecosystem. And Ethereum’s Pectra upgrade will be launched on the test network this weekend. According to previous practice, it will be pulled before the technical upgrade of the project. After the favorable implementation, there will be a pullback. This time Ethereum’s Pectra upgrade has not injected too much energy into the currency price of ETH, so there is a high probability that the price of ETH will fall after its implementation.

SOL：This week, SOL followed the broader market and fell sharply, mainly because of the recent retreat of the Meme coin wave. Solana, as the public chain with the highest yield of Meme coin, has also been subject to various FUD voices in the market, causing Solana’s funds on the chain to flee. Its TVL fell from US$12.1 billion to US$7.3 billion, a drop of 39.66%. It can also be seen from the liquidity pledge yield on the Solana chain that has dropped from 10.29% to 7.26%, while the transaction volume on the chain has dropped from US$35.5 billion to US$2.4 billion, a drop of 93.23%. It can be seen that Solana’s chain ecosystem is close to collapse. Moreover, SOL will welcome the unlocking of 11.2 million SOL on March 1. All the tokens unlocked this time are in the hands of institutions, so shipments may continue to form selling pressure, which will aggravate market investors ‘panic about SOL.

ADA：This week, the TVL on the Cardano chain experienced a large-scale decline, down 26.88% this week. The TVL dropped to US$308 million, down 56.06% from its peak of US$701 million. The TVLs of all ecological projects in the chain have experienced a decline of more than 10%. It can be seen that funds on the chain are rapidly flowing out of the Cardano ecosystem, which also proves that market users have FUD sentiments towards the Cardano ecosystem at this stage. The trading volume of DEX on its chain 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 has participated in lending, resulting in the borrowing rate being much lower than that of other public chain tokens. So if funds continue to flow out of the Cardano chain, then ADA is expected to continue to fall next week.

AI：Sleepless AI is an AI-based Gamefi project. The AI occupied by Sleepless AI and the Gamefi track have retreated the most 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, and there is almost no new capital. It is generally believed that the valuation of AI projects is high at this stage, and the AI track projects have been in the trend of a significant correction. In addition, AI will unlock 17.27 million pieces next week, accounting for 1.73% of the current circulation. The unlocking ratio is large and the track has been sluggish recently, so it is expected that there will be a decline in a short period of time after unlocking the tokens.

TKO：Tokocrypto is the largest cryptocurrency exchange in Southeast Asia. Due to the recent theft of Bybit, it has had a bad impact on various centralized exchanges, causing the performance of tokens on various exchanges to be unsatisfactory. In addition, TKO is about to unlock 100 million coins, with a ratio of 2.02% to current circulation. Its unlocking ratio is large and is expected to decline after unlocking.

RUNE：THORChain is a decentralized cross-chain AMM trading agreement. This week, it experienced a sharp rise against the trend from Monday to Wednesday. The main reason was that hackers who stole Bybit continued to transfer the stolen ETH to THORChain and conduct money laundering transactions in THORChain. As a result, THORChain’s transaction volume and handling fees increased significantly, causing it to not follow the trend of the market. After the market exposed that hackers used THORChain to launder money, Pluto, the developer of THORChain, announced his resignation and is expected to continue to fall next week as transaction volume declines and the market’s suspected FUD of money laundering.

Market sentiment index analysis

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

Hot track

Sonic

·Hot status quo

In recent weeks, the TVL of Sonic’s chain has maintained a rapid growth trend, and the TVL of most chains in the chain is in a downward trend this week. Sonic is the only one that has managed to maintain a 10% growth rate in chains with TVL exceeding US$50 million. The growth rate this week reached 10.32%, and the TVL on the chain increased to US$683 million. It can be seen that its ecosystem on the chain can be in a state of continuous inflow of funds even in an extremely panicked downmarket. Moreover, Sonic’s token S has also risen by 7.63% this week. Although the increase is not high, it can be achieved in the market. The rise in the event of a collapse also shows the market’s recognition of it.

·Reasons for popularity

Sonic has recently begun to shift the focus of its projects from Gamefi to Defi, adopting a strategy of high APY on the chain to attract users on the chain. In the main liquidity projects on the chain, it can provide users with up to 123% APY. In the borrower, users can provide a borrowing interest rate of about 10%, so that users on the chain can have an arbitrage APY of up to 100%+. In the current declining market conditions, More than 100% of APY is very attractive to users on the chain, which encourages users on the chain to choose to buy or borrow coins to participate in arbitrage, increasing the demand for tokens S among users on the chain, making the token S perform better.

We can see from the reasons for the recent popularity of the Sonic ecosystem, mainly because the LSD project in the Sonic ecosystem has increased the annualized rate of return and attracted more on-chain users to participate in arbitrage activities. Therefore, we can see that one path for the ecosystem to develop rapidly is to achieve efficient driving of its economic flywheel. The project party will focus on the DeFi track to achieve efficient asset empowerment. Among them, to empower assets around DeFi, we need 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 ecosystem must form a positive cycle through: pledge + liquidity +DeFi empowerment + user growth. Its core driving force lies in the two-wheel drive of pledge of local currency and release of liquidity on the chain, allowing it to generate compound interest in scenarios such as DEX, lending and asset management, realizing “pledge is productivity.” After users on the chain are attracted into the chain ecosystem by high APY, they must form: pledge lockdown → liquidity release → DeFi empowerment → token appreciation → user return → re-pledge → developer gathering. Otherwise, the price of the S token will drop when the funds of new users are insufficient to cover the selling pressure of arbitrage. After the S token drops, the yield of each project will inevitably decrease, resulting in the arbitrageurs leaving the market. This will have a huge impact on an ecosystem, so we need to continue to pay attention to the APY of the Defi project on the Sonic chain. Through the APY on the chain, we can determine whether the Sonic chain still has the motivation to develop.

However, it should be noted that although Sonic’s TVL was the fastest growing among all chains exceeding US$100 million this week, its TVL has not been rising all the time this week, but has been rising and falling back.

Berachain

·Current situation

This week, the entire market is in a rapid downward trend. All the top ten TVL projects except Berachain are in a downward trend. Although Berachain’s TVL increase this week is only 4.66%, it can still maintain positive growth in the current environment. It is not easy. TVL reached US$3.194 billion, ranking sixth among all public chain TVLs, surpassing Base Chain. The price of its token BERA also maintained its rise this week, with an increase of 7.26%, placing it in a strong position among Altcoin.

·Reasons for popularity

This week, the TVL of the top DEX, Lending, and LSD projects in the Berachain ecosystem all slowed down this week, and Berachain’s TVL dropped in the first half of the week. Later, due to the main LSD project in the Berachain chain, Infrased Finance, increased the APY of WBERA to 121%, and the emerging LSD project Stride increased the APY to 190.12%. At the same time, the interest rate for lending BERA in the Lending project on the Berachain chain is 23.68%, allowing users participating in arbitrage to earn 100% risk-free annualized income, thus quickly curbing the decline and turning into an increase.

Berachain’s continued popularity this week is mainly because its online Defi project has increased APY, which continues to maintain a relatively high appeal to online users, allowing a large number of online users to invest their funds in Berachain. Berachain’s development path is roughly similar to Sonic’s, so it faces the same problems as Sonic. At this stage, Berachain has implemented the process of: pledge locking → liquidity release → DeFi empowerment → token appreciation, but no outstanding on-chain projects have appeared in the process of user return → re-pledge → developer gathering. Therefore, although Berachain’s high interest rate model can enable rapid development of the chain ecosystem 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 new users ‘funds are insufficient to cover the selling pressure of arbitrage, the price of BERA token will drop. After the BERA token drops, the yield of each project will inevitably decrease, resulting in the arbitrageurs leaving the market. Therefore, in the future, we should pay more attention to whether new star projects appear in Berachain’s chain projects, and whether the interest rates given to users by LSD projects on the chain have dropped significantly.

Overall overview of market themes

Data source: SoSoValue

In terms of weekly returns, Sociafi track performed best, while PayFi track performed worst.

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

· PayFi Track:XRP, LTC, and XLM account for the largest proportion in PayFi track, accounting for a total of 94.62%. This week, their declines were: -19.23%,-1.21%, and-16.96% respectively, making PayFi track the worst performing.

Next week’s Crypto event forecast

Monday (March 3) US February ISM Manufacturing PMI

Wednesday (March 5) US February ADP employment;Pectra network upgrade plan launched on the Ethereum Test Network

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

summary

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

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