KuCoin Research Monthly Report: Crypto Investment Sees 113 Crypto Projects Funded Amid 28.19% Funding Dip, Spotlight on Early-Stage Tech

Market Dynamics and Sentiment Following ETF Approval and Economic Indicators

The SEC's approval of Bitcoin spot ETFs marked a significant milestone, meeting long-standing market anticipation since BlackRock's application in June 2023. This approval propelled Bitcoin and other cryptocurrencies to their highest levels of the year. However, the initial euphoria was tempered by a market pullback, influenced by profit-taking and a shift from Grayscale's Bitcoin Trust to lower-fee ETFs, alongside a decrease in Fed rate cut expectations after a period of unchanged interest rates signaled a resilient US economy yet still distant from the 2% inflation target. Meanwhile, the cryptocurrency space saw renewed interest in EVM-compatible projects like Solana, Cosmos, and Polkadot, with notable activities such as token airdrops sparking engagement and reinvigorating ecosystems that had quieted down during the bear market. This period reflects a complex interplay of regulatory advancements, market reactions, and evolving investment narratives within the digital asset space.

Surge in Stablecoin Issuance and Market Shifts

January saw a significant uptick in stablecoin issuance, led by USDT reaching a record-breaking $96.1 billion, indicating a robust recovery in the crypto market and increased demand for stablecoins fueled by rising yield rates in both CeFi and DeFi sectors. In contrast, USDC also showed signs of growth, albeit at a slower pace. Concurrently, Binance's decision to exclude TUSD from its LaunchPool events, favoring FDUSD over TUSD and BUSD, signals a strategic shift in stablecoin preferences on the platform. This move has notably impacted TUSD's liquidity and market value, while FDUSD has witnessed a substantial increase in its market share, absorbing a significant portion of the funds previously held in BUSD. These developments highlight the dynamic nature of stablecoin utilization and market positioning within the broader cryptocurrency ecosystem.

Public Chains and Layer2 Updates: Key Developments

In January 2024, Ethereum geared up for its DenCun upgrade, maintaining stable Layer2 TVL amid market shifts following Bitcoin ETF approvals. Manta stood out in the Layer2 arena with significant TVL growth post-token issuance, contrasting with declines in Optimism and zkSync Era. PulseChain led the public chains with a 136% surge in its $PLS token and a 200% TVL increase, while SUI's TVL and token price also saw substantial gains. Solana continued to exhibit high activity, buoyed by new token launches and speculative interest.

Innovations in DeFi and NFT Market Shifts

EigenLayer's introduction of new liquid staking tokens and the removal of LST holding caps highlight DeFi's dynamic growth, with its TVL surpassing $1.7 billion. Concurrently, OpenSea's decline in the NFT market, now overshadowed by Blur's 80% dominance, signals potential industry shifts and consolidation, emphasizing the evolving landscape of digital assets.

Shifts in Bitcoin Inscriptions and Layer2 Expansion

Interest in Bitcoin inscription assets, particularly BRC20 tokens, has waned since their peak in early January, despite significant events like the Bitcoin ETF approval and support announcements from major Web3 wallets. The market's decline indicates a need for more compelling incentives and innovations to rejuvenate interest. Concurrently, the surge in demand for inscriptions is spurring competition among developers in the Bitcoin Layer2 and expansion infrastructure space, with both new and established projects vying to establish dominance in this nascent yet promising segment.

Crypto Investment Shifts to Early-Stage Projects

In January 2024, the crypto investment landscape featured an increase in project numbers to 113 but witnessed a 28.19% reduction in funding, highlighting a shift towards more cautious, early-stage investments, particularly in emerging technologies like ZK, Layer2, and LSD. The EVM and MOVE series, notably SUI, saw renewed interest, aligning with strategic and seed-stage financing trends.

Diverging Global Stances on Cryptocurrency ETFs

The U.S. SEC's approval of 11 physically-backed Bitcoin ETFs marks a significant milestone, potentially drawing billions in new investments and simplifying Bitcoin access for individual investors. Contrastingly, South Korea remains wary, not recognizing the legality of Bitcoin ETFs, while Hong Kong shows enthusiasm, with active efforts to expedite the launch of its first Bitcoin spot ETF, highlighting diverse regulatory stances on cryptocurrency ETFs globally.

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Disclaimer

The information provided in this report is for informational purposes only and should not be considered financial advice. It is important for readers to conduct their own research and consult with a financial advisor before making any investment decisions. The report is prepared based on the best information available at the time of writing, and the accuracy and completeness of the information cannot be guaranteed.