Grayscale March Review: Market Resilience in a Wartime Environment

Source: Grayscale Research, compiled by: Jinse Finance

Key takeaways

• In March, crypto asset valuations remained resilient, delivering a small gain even as most other major assets fell, except for crude oil. Although we believe current prices are still an attractive entry point for long-term investors, the recovery in valuations still depends on some easing of geopolitical uncertainty.

• In mid-month, the U.S. Securities and Exchange Commission (SEC) clarified how multiple long-pending U.S. securities laws apply to crypto assets. Meanwhile, the prospects for the 《CLARITY Act》 remain unclear, and parties are still debating the issues related to stablecoin yields.

• The best-performing assets in March were Hyperliquid (benefiting from rising volume in commodity futures trading) and Bittensor (driven by major technical breakthroughs in the decentralized AI space).

The Iran conflict nearly overshadowed all other market developments in March. For the global economy, its most important impact has been a significant oil-price shock: spot oil prices are currently up by about $46 per barrel (a 63% increase), and because traders expect the supply disruption to last longer, forward futures prices are also rising in tandem. Inflation concerns triggered by this have pushed rate-expectations in major economies higher. Broad equity indexes, U.S. Treasuries, and precious metals all fell across the board.

Despite market turbulence, crypto assets still managed to log a modest increase (see Chart 1). We believe the resilience shown by the crypto market is, to some extent, rooted in the fact that market risk has been significantly released over the past few months. Even though overall market volatility intensified in March, crypto spot ETPs still recorded modest net inflows of capital, and open interest in perpetual contracts also rose slightly. Bitcoin in particular received a boost from Strategy, which bought roughly 44,400 bitcoins (worth about $3.1 billion) thanks to strong demand for its STRC preferred share product.

Chart 1: Crypto currencies saw a modest rise in March

The crypto market may also benefit from increased regulatory clarity, including the SEC’s latest interpretive guidance on how federal securities laws apply to crypto assets. This joint statement, developed together with the U.S. Commodity Futures Trading Commission (CFTC), addresses a range of long-pending issues that have troubled crypto industry entrepreneurs (and their legal counsel). The guidance mainly includes three specific points:

• A framework for classifying crypto assets. The SEC divides crypto assets into five categories (see Chart 2).

• Digital securities are securities (which is self-evident).

• Stablecoins may be deemed securities (if they do not meet the requirements of the 《GENIUS Act》 and have security-like attributes).

• All other crypto assets are not securities.

• Distinguishing definitions of tokens. Most tokens are not securities, but even non-security tokens may constitute an “investment contract,” which would require registration with the SEC. Here, the SEC applies the classic Howey test standard: if investors can reasonably expect profits from the issuer’s business activities, the issuer’s related conduct may be considered the issuance of a security.

• Regulatory definitions for mining, staking, wrapped assets, and airdrops. In general, these activities are not considered securities trading.

So what does this mean in practice? Blockchain provides a new avenue for fundraising, but potential issuers want to ensure they fully comply with existing laws. This entirely new joint guidance reduces uncertainty and is expected to stimulate new investment activity. For crypto investors, the direct implications are:

Reduced tail risk from regulation;

A likely increase in new token issuances, which may make on-chain activity more active.

This rise in activity may ultimately provide value support for the underlying public chains and their native assets (such as ETH, SOL, SUI, BNB, AVAX).

Chart 2: The SEC clarifies that most digital assets are not securities

Meanwhile, the prospects for the 《CLARITY Act》 in the U.S. Senate remain unclear; Polymarket’s prediction contract shows the probability of passage at roughly 50%. Stablecoin rewards have become the center of debate—most likely because this model threatens revenue for some banks (see Chart 3).

On March 20, senators announced they had reached a principle-level agreement to advance the bill for approval by the Senate Banking Committee. On March 24, a new framework was released: it would prohibit paying yield on stablecoins held purely passively, but would allow limited activity-based rewards linked to payments or use of the platform. The proposal aims to ease banks’ concerns about deposit outflows while leaving room for innovation.

In response, industry participants have already begun submitting counterproposals jointly, seeking a more flexible regulatory approach for yield rewards. Negotiations are still ongoing, with the goal of completing committee clause revisions in April, and passage as early as May.

Chart 3: Competition over payment revenue may be affected by the 《CLARITY Act》

Hyperliquid and Bittensor stand out

During March, the crypto financial sector performed best, led by Hyperliquid. The platform’s growth was mainly driven by HIP-3 (see Chart 4), which supports all-day trading of traditional assets such as equities and commodities—an advantage that is especially notable in volatile market environments where traditional exchanges would still close.

In addition, TradeXYZ (the HIP-3 deployer) partnered with S&P Dow Jones Indices to launch the first officially authorized S&P 500 index perpetual contract on the Hyperliquid platform, further deepening integration with traditional financial markets.

Finally, as market interest in prediction markets continues to heat up, the much-anticipated HIP-4 upgrade has also gained momentum.

Chart 4: March’s high-liquidity HIP-3 open interest keeps setting new all-time highs

At the same time, AI-related narratives continue to gain traction. Bittensor became a standout beneficiary of this theme’s tailwinds, with the TAO token up 71% in March, as investors increasingly focus on the convergence of blockchain and artificial intelligence technologies.

On March 10, a Bittensor subnet announced the training of a large language model (LLM) with 72 billion parameters using a permissionless node network, demonstrating that decentralized infrastructure has the potential to support large-scale AI research and development.

Later that month, in an interview with Nvidia CEO Jensen Huang on the All-In podcast, Bittensor was mentioned, sparking widespread market attention.

Taken together, these developments highlight Bittensor’s unique positioning at the intersection of two major structural trends: artificial intelligence and decentralization.

Chart 5: Crypto sector returns show significant dispersion

Waiting for the fog to clear

Ongoing military conflicts in the Middle East continue to cast a shadow over the outlook for crypto assets. Before the war, the global economy performed strongly, even showing signs of accelerating growth, and central banks around the world also tend to begin cutting interest rates. If this round of conflict ends quickly and oil prices pull back, the market may reprice toward a macro environment that is favorable for risk assets. Conversely, if oil prices keep rising, it could weigh on economic growth and delay market recovery. At present, we believe that before geopolitical risks become clear, many investors will still choose to wait and see.

Despite many uncertainties, we believe this remains a good opportunity for long-term crypto investors to build positions. Since the outbreak of the conflict, asset valuations have stayed resilient, suggesting the market may have already formed a more solid bottom. In addition, the core long-term trend driving blockchain adoption—especially the ever-increasing penetration of stablecoins and tokenized assets—has not changed. For token prices to rebound sharply, macro uncertainty may need to fade further. But looking back, such phases are often later confirmed to be highly attractive entry points.