Market Panic Spreading, Which Assets Are Still Holding Strong?

Original Title: "Highlights and Shadows in a Downtrend | Frontier Lab Cryptocurrency Market Weekly Report"

Original Author: Frontier Lab

Market Overview

Overall Market Situation

This week, the cryptocurrency market has been in a rapid downtrend, with the market sentiment index dropping from 33% to 11%. The market capitalization of stablecoins has essentially ceased continuous growth (USDT reaching 142 billion, USDC reaching 55.9 billion, with changes of 0.02% and -0.53% respectively), indicating that as the market experienced a significant decline, institutional funds have stopped entering, leading to signs of exiting. Market sentiment saw panic mainly due to the Bybit exchange being hacked for $1.5 billion in assets and Trump's aggressive tariff policy, intensifying market concerns about inflation. This has reduced the likelihood of a Fed rate cut, heightened market fears of a U.S. economic recession, and had a strong impact on market sentiment, plunging it into extreme fear. Altcoins have generally underperformed the benchmark index.

Next Week Forecast Targets

Bullish Targets: LTC, S, SOSO, BERA

LTC: LTC rose against the trend this week, showing strength in the market as a whole declined. This strong performance was mainly due to market expectations for its LTC ETF approval. This week, the spot LTC ETF proposed by Canary Capital has been listed in the Depository Trust & Clearing Corporation (DTCC) system, and LTC has received 87% approval for staking on Polymarkt. The market currently has high expectations for the approval of the LTC spot ETF, so there will be continuous hype around the LTC spot ETF event until its formal approval.

S: Sonic has recently entered the DeFi industry, attracting a large number of on-chain users and funds through its on-chain DeFi project with high APY. In its on-chain primary liquidity staking projects, Beets and Origin, the APY for liquidity pools based on the S token can reach up to 32.22% and 123% respectively. The average interest rate for users borrowing the S token in Sonic's on-chain lending protocol is 10.21%, allowing users to achieve a yield of over 20%. Additionally, the recent surge in demand for the S token due to the popularity of Sonic's on-chain activities has driven up the price of the S token against the trend. This increase in price has further boosted the earnings of Sonic's on-chain users. Therefore, in the current bear market, users can still gain over 20% in risk-free returns, attracting a large number of users to participate through borrowing, increasing the market demand for the S token and driving its price into a spiral uptrend.

SOSO: The SoSoValue project team is able to continuously adjust its future development direction according to the market trend. Originally, SoSoValue positioned itself as an AI-technology-enhanced all-in-one investment service platform, aiming to keep up with the market trend of AI Agents. After the decline of AI Agents, market attention and funding shifted back to Defi projects. As a result, SoSoValue seized the current trend of high APY to attract users and transformed itself into a financial service center. While still leveraging its AI technology within the product, the focus of promotion shifted to highlighting the high APY it could provide. Recently, the project launched its second season of mining activities, allowing users to mine the SOSO token by holding or staking the SSI packaged index token. Through this initiative, users can earn staking rewards along with additional airdropped SOSO tokens, with APY reaching up to 42%. This move attracted more users to participate in mining, further increasing the bullish sentiment towards the SOSO token.

BERA: The overall market was in a downtrend this week. Initially, BERA was also affected by the market and experienced a decline. However, the Berachain project team quickly adjusted the on-chain APY of the LSD project. In Berachain's main LSD project, Infrared Finance, the APY of WBERA was increased to a maximum of 123%, and the borrowing rate of BERA in the on-chain lending project reached 23.68%. This adjustment allowed arbitrage participants to earn a 100% risk-free annualized return, swiftly reversing the downtrend to an uptrend. The strategy employed by the Berachain project team was similar to Sonic's, focusing on attracting on-chain users and funds through high APY to facilitate staking, liquidity provision, DeFi empowerment, and token appreciation. By offering high APY, the project aimed to increase the demand for the on-chain primary coin BERA in the market, thereby promoting an increase in the BERA token price.

Bearish Targets: ETH, SOL, ADA, AI, TKO, RUNE

ETH: Bybit was hacked this week, resulting in the theft of 491,000 ETH. Although Bybit has already fully recovered the stolen ETH through purchase and redemption, the buying pressure generated has not been reflected in the market price. This indicates that market investors still hold FUD sentiments towards ETH, as they anticipate continued selling pressure from the hacker. Furthermore, the investigation report on the Bybit hack explicitly stated that the main reason for the theft was a vulnerability in the platform's safe system, rather than a flaw in the exchange's infrastructure. This raised significant doubts in the market regarding safe technology, which is commonly used by most projects in the Ethereum ecosystem. Therefore, this poses a potential risk to the security of most projects in the Ethereum ecosystem. Additionally, Ethereum's Pectra upgrade is scheduled to go live on the testnet this weekend. Historically, price pumps occur before technical upgrades, followed by retracements post-implementation. Given that the Pectra upgrade has not injected much bullish momentum into ETH's price, a probable scenario after its implementation is a price decline for ETH.

SOL: This week, SOL experienced a significant drop following the overall market trend. This was mainly due to the recent retreat of the Meme coin craze. Solana, as the public chain with the highest Meme coin returns, also faced various FUD (Fear, Uncertainty, Doubt) voices in the market. This led to an outflow of funds from Solana's chain, with its Total Value Locked (TVL) dropping from $12.1 billion to $7.3 billion, a decrease of 39.66%. The on-chain liquidity staking yield on Solana also decreased from 10.29% to 7.26%. Additionally, on-chain transaction volume decreased from $35.5 billion to $2.4 billion, plunging by 93.23%. These indicators suggest that Solana's on-chain ecosystem is on the brink of collapse. Moreover, on March 1st, 11.2 million SOL tokens will be unlocked, with these tokens predominantly held by institutions. This unlocking may lead to continued selling pressure, exacerbating market investors' fear and panic regarding SOL.

ADA: This week, Cardano's on-chain TVL experienced a significant decline, dropping by 26.88% to $3.08 billion. This marks a 56.06% decrease from its peak of $7.01 billion. The TVL of all ecosystem projects on its chain also saw declines of over 10%, indicating a rapid outflow of funds from the Cardano ecosystem. This trend reflects the current market sentiment of FUD towards the Cardano ecosystem. Trading volume on its on-chain DEX has decreased by over 68%, and the ADA token's borrowing rate is currently at 3.29%. These numbers suggest that very few participants are engaging in borrowing and lending activities in the Cardano ecosystem, leading to borrowing rates significantly lower than those of other public chain tokens. Therefore, if outflows from the Cardano on-chain funds continue, it is expected that ADA will continue to decline next week.

AI: Sleepless AI is an AI-based GameFi project. Among all AI and GameFi projects, Sleepless AI experienced the deepest retracement during this downturn. This is because investors in the market have lost interest in the Play-to-Earn model of GameFi, resulting in a gradual decrease in users and minimal new capital inflow. There is a widespread belief that AI projects are currently overvalued, leading to a significant pullback trend in the AI track. Additionally, AI is set to unlock 17.27 million tokens next week, accounting for 1.73% of the current circulating supply. With a large unlocking percentage and the recent downturn in this track, it is expected that a downturn will occur shortly after the token unlocking.

TKO: Tokocrypto is the largest cryptocurrency exchange in Southeast Asia. Due to the recent Bybit hack incident, various centralized exchanges have been negatively impacted, causing the tokens of various exchanges to underperform. Additionally, TKO is about to unlock 100 million tokens, which accounts for 2.02% of the current circulating supply. The high unlock percentage is expected to lead to a price decline after the unlock.

RUNE: THORChain is a decentralized cross-chain AMM trading protocol. This week, it experienced a significant counter-trend surge from Monday to Wednesday. This surge was mainly caused by the hacker who stole from Bybit continually transferring ETH into THORChain to conduct money laundering transactions. As a result, THORChain saw a substantial increase in trading volume and fees. Despite not following the overall market trend, the exposure of the hacker's use of THORChain for money laundering led to THORChain's developer, Pluto, announcing resignation. It is expected that next week, the price will continue to fall due to reduced transaction volume and market FUD regarding its alleged money laundering activities.

Market Sentiment Index Analysis

The market sentiment index decreased from 33% last week to 11%, placing it close to the extreme fear zone overall.

Hot Track

Sonic

· Current Status

In recent weeks, Sonic's chain TVL has maintained a rapid growth trend. This week, while the TVL of most other chains on the network experienced a downward trend, Sonic was the only chain with a TVL exceeding $50 million to maintain a 10% growth rate. The TVL on the chain increased to $683 million, demonstrating that its on-chain ecosystem can continue to attract funds even in a severely bearish market. Sonic's token, S, also saw a 7.63% increase this week. Although the rise is not significant, achieving an increase while the overall market is collapsing indicates market recognition.

· Reasons for Hot Trend

Recently, Sonic has shifted its project focus from GameFi to DeFi on-chain, using high APY to attract on-chain users. In its main liquidity projects on the chain, users can receive up to 123% APY, while the borrowing and lending side offers around 10% interest rates, enabling users to achieve over 100% APY arbitrage opportunity. In the current bearish market, APY over 100% is highly attractive to on-chain users, prompting them to participate in arbitrage through buying or borrowing, increasing the demand for token S and leading to its outperformance compared to most other tokens.

· Future Outlook

The recent popularity of the Sonic ecosystem can be attributed to the LSD project within the Sonic ecosystem, which increased the annual percentage yield (APY), attracting more on-chain users to participate in arbitrage activities. Therefore, we can see that a quick development path for an ecosystem is to achieve efficient driving of its economic flywheel, with the project focusing on the DeFi track to empower assets efficiently. In order to empower assets around DeFi, emphasis needs to be placed on asset collateralization and liquidity, allowing assets to generate compound returns in DEX, lending, and asset management. The on-chain ecosystem's economic flywheel must be formed through staking + liquidity + DeFi empowerment + user growth in a positive feedback loop. The core driving force lies in the dual-wheel drive of on-chain native token staking and liquidity release, enabling the generation of compound returns in scenarios such as DEX, lending, and asset management, achieving "staking as productivity." Once on-chain users are attracted by high APY to the on-chain ecosystem, it is necessary to establish a positive cycle of staking lockup → liquidity release → DeFi empowerment → token appreciation → user retention → re-staking → developer aggregation. Otherwise, if new users' funds entering the ecosystem are insufficient to cover the selling pressure from arbitrage, the token price will decline, leading to a reduction in project yields and causing arbitrageurs to exit. This would be a significant blow to an ecosystem, so we need to continue monitoring the APY of Sonic's on-chain DeFi projects to assess if the Sonic chain still has development momentum through on-chain APY.

However, it is important to note that although Sonic's TVL was the fastest-growing among all chains with over $1 billion TVL this week, its TVL did not consistently rise this week but experienced a peak and retreat phenomenon.

Berachain

· Current Status

This week, the entire market was in a rapid downturn trend, and the top ten projects by TVL were all in a declining state except for Berachain. Although Berachain's TVL only increased by 4.66% this week, maintaining positive growth in the current environment is already commendable. The TVL reached $3.194 billion, ranking sixth in TVL among all public chains, surpassing the Base chain. The price of its token, BERA, also saw an increase this week, with a rise of 7.26%, placing it in a strong position among Altcoins.

· Reasons for Popularity

This week, the TVL of the top DEX, Lending, and LSD projects in the Berachain ecosystem showed a slowing growth rate compared to the previous weeks. Additionally, there was a decrease in Berachain's TVL in the first half of the week. However, the situation reversed when the primary LSD project on Berachain, Infrared Finance, offered the highest WBERA APY of 121%, and the emerging LSD project, Stride, achieved an APY of 190.12%. Simultaneously, the borrowing rate for BERA in Berachain's lending projects was 23.68%, allowing arbitrageurs to earn a risk-free 100% annual percentage yield. This quickly halted the downward trend and shifted it towards an upward movement.

· Future Outlook

Berachain remained vibrant this week mainly due to the increased APY of its on-chain DeFi projects, maintaining a high level of attractiveness to on-chain users. This led to a substantial inflow of funds into Berachain. Berachain's development path is somewhat similar to Sonic, so it faces similar challenges. Currently, Berachain has achieved a process of staking lockups → liquidity release → DeFi empowerment → token value appreciation. However, it has not seen outstanding on-chain projects in the process of user retention → re-staking → developer aggregation. Therefore, while the high-yield model has enabled rapid development of the on-chain ecosystem in the short term and promoted a swift rise in the project's token, BERA, it will inevitably face increasing selling pressure in the future. When the capital from new users is insufficient to offset the sell pressure from arbitrage, the BERA token price will decline. Subsequently, the returns of various projects will decrease, causing arbitrageurs to exit. Therefore, in the future, more attention should be paid to whether new stellar projects emerge in the Berachain on-chain projects and whether the interest rates for on-chain LSD projects significantly decline.

Market Theme Overview

Data Source: SoSoValue

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

· Sociafi Track: In the Sociafi track, TON and CHZ account for a significant portion, totaling 95.17%. Their respective weekly declines were: -4.86% and -4.79%. Although both are in a downward trend, they still outperformed other Altcoins, resulting in the best performance of the entire Sociafi track index.

· PayFi Track: In the PayFi track, XRP, LTC, and XLM account for a significant portion, totaling 94.62%. Their weekly declines were: -19.23%, -1.21%, and -16.96%, respectively, making the PayFi track the worst performer.

Next Week's Crypto Major Events Preview

Monday (March 3rd): U.S. February ISM Manufacturing PMI

Wednesday (March 5th): U.S. February ADP Employment Change; Pectra Network upgrade plan launches on the Ethereum testnet

Friday (March 7th): U.S. February Seasonally Adjusted Nonfarm Payrolls; U.S. February Unemployment Rate

Summary

This week, the cryptocurrency market experienced a significant decline, with the market sentiment index plummeting sharply, reflecting investors' widespread concerns. However, some projects such as LTC, Sonic, SoSoValue, and Berachain attracted users through high APY strategies. In the long run, market stability and the emergence of new projects will be key factors. It is advisable for investors to closely monitor market dynamics and exercise caution.

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