Grayscale March Review: Market Resilience in a Wartime Environment

Source: Grayscale Research; Compiled by: Jinse Finance

Key takeaways

• In March, the valuation of crypto assets remained firm, posting a small increase despite declines across most other major asset classes, except for crude oil. Although we believe current prices still offer an attractive entry point for long-term investors, the rebound in valuations still depends on easing geopolitical uncertainty.

• Mid-month, the U.S. Securities and Exchange Commission (SEC) clarified how several longstanding, unresolved U.S. securities laws apply to crypto assets. At the same time, the outlook for the CLARITY Act remains unclear, and parties continue to debate issues related to stablecoin yield.

• The top-performing products in March were Hyperliquid (benefiting from higher volumes 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 shock to oil prices: spot oil prices are currently up by about $46 per barrel (a 63% increase), and forward futures prices have risen in tandem as traders expect supply disruptions to last longer. Inflation concerns sparked by this move have pushed up interest-rate expectations in major economies. Broad-based equity indexes, U.S. Treasuries, and precious metals all fell across the board.

Despite market turmoil, crypto assets still managed to record a small gain (see Figure 1). We believe the resilience shown by the crypto market is, to some extent, due to a substantial release of market risk over the past few months. Even as overall market volatility increased in March, crypto spot ETPs still saw modest net inflows, and perpetual contract open interest also edged higher. Bitcoin was particularly boosted by Strategy: the company, driven by strong demand for its STRC preferred share product, bought about 44,400 Bitcoins (worth approximately $3.1 billion).

Figure 1: Crypto currencies posted a small gain in March

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

• A framework for classifying crypto assets. The SEC divides crypto assets into five categories (see Figure 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 attributes similar to securities).

• All other crypto assets are not securities.

• Distinctions in how tokens are defined. Most tokens are not securities, but even non-securities tokens may form an “investment contract,” which would require registration with the SEC. Here, the SEC follows the classic Howey Test standard: if investors can reasonably expect profits based on the issuer’s operational actions, the issuer’s related conduct could be deemed a securities offering.

• 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 offers a new way to raise financing, but potential issuers want to ensure they are fully compliant with existing laws. This brand-new joint guidance reduces uncertainty and could, in turn, stimulate new investment activity. For investors in crypto assets, the direct impact is:

Lower tail risk on regulation;

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

This increased activity may ultimately provide value support for underlying Layer-1 chains and their native assets (such as ETH, SOL, SUI, BNB, and AVAX).

Figure 2: SEC clarification—most digital assets are not securities

Meanwhile, the outlook for the CLARITY Act in the U.S. Senate remains unclear; Polymarket prediction contracts show a passage probability of around 50%. Stablecoin rewards have become the core of the debate—likely because this model threatens the revenue of some banks (see Figure 3).

On March 20, senators announced a principled agreement to move the bill forward for approval in the Senate Banking Committee. On March 24, a new framework was released: it would prohibit paying yield on purely passive holdings of stablecoins, but allow limited “activity-based” rewards tied to payment use or platform usage. The proposal aims to ease banks’ concerns about deposit outflows while leaving room for innovation.

In response, industry participants have already begun jointly putting forward counterproposals, seeking a more flexible regulatory approach for yield incentives. Negotiations are still ongoing, with the goal of completing committee clause revisions in April and the earliest possible passage of the bill in May.

Figure 3: CLARITY Act may affect competitive dynamics in payment revenues

Hyperliquid and Bittensor stand out

During March, the financial crypto sector performed best, with Hyperliquid leading the way. The platform’s growth was mainly driven by HIP-3 (see Figure 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 be closed.

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 the integration with traditional financial markets.

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

Figure 4: March’s high-liquidity HIP-3 open interest continued to hit record highs

At the same time, AI-related narratives continued to gain traction. Bittensor became a notable beneficiary of this theme’s upside: the TAO token rose 71% in March, as investors increasingly focused on the convergence of blockchain and AI technologies.

On March 10, a Bittensor subnet announced it trained a 72-billion-parameter large language model (LLM) using a permissionless node network, indicating that decentralized infrastructure has the potential to support large-scale AI R&D.

That same month, during an interview with Nvidia CEO Jensen Huang on the All-In podcast, Bittensor was mentioned, drawing broad market attention.

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

Figure 5: Crypto sector returns show pronounced dispersion

Waiting for the fog to clear

Ongoing military conflict in the Middle East continues to cast a shadow over the outlook for crypto assets. Before the war, the global economy was performing strongly and even accelerating, and central banks in various countries were also inclined to start cutting interest rates. If this round of conflict ends quickly and oil prices pull back, the market may reprice the macro environment favorably. Conversely, if oil prices keep rising, it could weigh on economic growth and delay market recovery. At present, we judge that until geopolitical risks become clearer, many investors will still choose to wait and watch.

Despite many uncertainties, we believe it is still an opportune time for long-term crypto investors to build positions. Since the outbreak of the conflict, asset valuations have remained firm, suggesting the market may have already constructed a more solid base. In addition, the core long-term trend driving blockchain applications—especially the steadily increasing adoption of stablecoins and tokenized assets—has not changed. For token prices to rebound significantly, it may require further dissipation of macro uncertainty. But looking back, these phases are often later proven to be extremely attractive entry opportunities.