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Cryptocurrencies posted strong gains in March, with trading volumes almost doubling to all-time highs as the leading coins headed into uncharted territory, resulting in a shift in market dynamics.
JPMorgan (JPM) said in a research report that cryptocurrency market capitalization rose 19% in March, indicating continued growth, albeit slower than the previous month. Altcoins outperformed traditional assets in terms of market cap growth, but there was double-digit growth across the ecosystem.
The DeFi sector also saw expansion, driven by an increase in total value locked (TVL) on Ethereum Layer 2 solutions following the mid-month Dencun upgrade.
Trading volume in March almost doubled compared to the previous month, matching the first quarter of 2024's performance in the last quarter of 2023. According to TradingView, the average daily volume (ADV) for the entire crypto market increased by 87% month-over-month. Data from CCData highlights even more significant growth, particularly in altcoin volumes, as trading picks up again.
“Total crypto market cap remained above the $2.0 trillion threshold throughout March and even surpassed $2.6 trillion in mid-March before settling at around $2.5 trillion towards the end of the month Ecosystem grew +19% in March,” the report added.
“We saw aggregate volumes increase more significantly in March, as reported by TradingView. The average daily volume of total crypto market cap increased 87% month-over-month in March and +133% year-over-year. In contrast to the slowdown in trading speed in February, trading speed appears to have increased significantly in March.”
The U.S. regulatory landscape continued to take center stage in March with several key updates. Despite the ongoing lack of clear regulatory guidance, this month saw major regulatory actions and court decisions related to the crypto industry, including lawsuits against Coinbase (NASDAQ:) and other major players. The SEC continued its “regulation through enforcement” approach by working with new industry entrants and influencing market dynamics, JPMorgan notes.
The Dencun upgrade was successfully implemented on March 13 to expand the capacity of the Ethereum ecosystem and reduce transaction fees. The upgrade has already resulted in a significant decrease in average transaction fees across various Layer 2 solutions, with TVL increasing across the ecosystem. For example, TVL on Base, Coinbase's Layer 2 chain, rose from $690 million just before the upgrade to over $1.2 billion in early April.
Meanwhile, net inflows into spot Bitcoin ETFs remained net positive in March but slowed to $4.6 billion from $6.1 billion in February, despite Bitcoin hitting a new all-time high of over $73,000 mid-month. dollars reached. This rise in Bitcoin price initially led to increased ETF inflows, but the trend appeared to fade as Bitcoin price began trading sideways after reaching its peak.
JPMorgan highlights that Bitcoin mining profitability improved by an estimated 33% in March. This was due to a 37% month-on-month increase in the average Bitcoin price, outpacing network hashrate growth. However, profitability is expected to decrease in April due to the upcoming halving, which will see the block reward drop from 6.25 to 3.125 Bitcoin.
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