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, managing a small gain even as most other major assets fell, aside from crude oil. Although we believe current prices still offer an attractive entry opportunity for long-term investors, the rebound in valuations will still require some easing of geopolitical uncertainty.

• In mid-month, the U.S. Securities and Exchange Commission (SEC) clarified how multiple long-pending provisions of U.S. securities law apply to crypto assets. At the same time, the outlook for the CLARITY Act remains unclear, and parties are still deeply debating issues related to stablecoin yields.

• The best-performing assets in March were Hyperliquid (benefiting from rising commodity futures trading volume) 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 step as traders expect supply disruptions to last longer. Inflation concerns stemming from this have lifted interest-rate expectations for major economies. Broad-based stock indexes, U.S. Treasuries, and precious metals all fell across the board.

Despite market turbulence, crypto assets still managed only a modest gain (see Figure 1). We believe the resilience shown by the crypto market is, to some extent, rooted in the market risk having been substantially released over the past few months. Even as overall market volatility increased in March, crypto spot ETPs still recorded a small net inflow of capital, and open interest in perpetual contracts also rose slightly. Bitcoin in particular received a boost from Strategy, which bought about 44,400 bitcoins (worth roughly $3.1 billion) on the strength of strong demand for its STRC preferred-share product.

Figure 1: Crypto currencies saw a modest rise in March

The crypto market may also benefit from improved regulatory clarity, including the latest interpretive guidance issued by the U.S. Securities and Exchange Commission (SEC) on how federal securities laws apply to crypto assets. This joint statement, developed with the U.S. Commodity Futures Trading Commission (CFTC), addresses a range of long-pending issues that have troubled crypto industry founders (and their legal counsel). The guidance mainly contains three specific areas:

• A classification framework for crypto assets. The SEC divides crypto assets into five major categories (see Figure 2).

• Digital securities are securities—this is self-evident.

• Stablecoins may be determined to be 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 the definition of tokens. Most tokens are not securities, but even non-securities tokens may constitute an “investment contract,” and therefore require registration with the SEC. In this regard, the SEC continues to apply the classic Howey Test standard: if investors can reasonably expect profits based on the issuer’s business activities, the relevant issuance conduct may be deemed a securities offering.

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

So what does this mean in practical terms? Blockchain offers 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 activities. For crypto asset investors, the direct impact lies in:

Lower tail risk from regulation;

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

Ultimately, this increase in activity may provide value support for underlying public chains and their native assets (such as ETH, SOL, SUI, BNB, 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’s prediction contracts show the probability of passage is about 50%. Stablecoin rewards have become the core of the debate—most likely because this model threatens the revenue of some banks (see Figure 3).

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

In response, industry participants have begun submitting counterproposals in a bid to take a more flexible regulatory approach to yield incentives. Negotiations are still ongoing, with the goal of completing revisions to the committee provisions in April, and earliest possible passage of the bill in May.

Figure 3: Competition that may be affected on payment revenue by the CLARITY Act

Hyperliquid and Bittensor stand out

In March, the financial crypto sector performed best, with Hyperliquid leading the way. The platform’s growth is mainly driven by HIP-3 (see Figure 4). It supports all-weather trading for traditional assets such as equities and commodities—an advantage that is particularly notable in volatile market environments where traditional exchanges 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 futures contract on the Hyperliquid platform, further deepening integration with traditional financial markets.

Finally, as market interest in prediction markets continues to heat up, the highly anticipated HIP-4 upgrade has also received a push forward.

Figure 4: In March, the high-liquidity HIP-3 open interest continued to hit record highs

At the same time, AI-related narratives are continuing to gain momentum. Bittensor has become a notable beneficiary of this theme’s tailwind, with the TAO token up 71% in March as investors increasingly focus on the convergence of blockchain and AI technologies.

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

That same month, in an interview with All-In Podcast of NVIDIA CEO Jensen Huang, Bittensor was mentioned, triggering broad market attention.

Together, these developments highlight Bittensor’s unique positioning at the intersection of the two major structural trends: 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 had been performing strongly, even accelerating in growth, and central banks in various countries also tend to begin cutting interest rates. If this round of conflict ends quickly and oil prices fall, the market could reprice toward a more favorable macro environment. Conversely, if oil prices keep rising, it may drag down economic growth and delay market recovery. At present, we judge that before geopolitical risk becomes clear, many investors will still choose to wait and see.

Despite the many uncertainties, we believe the current period still offers a good opportunity for long-term crypto investors to build positions. Since the outbreak of the conflict, asset valuations have remained firm, suggesting that the market may have already formed a more solid base. In addition, the core megatrend driving blockchain applications—especially the growing adoption of stablecoins and tokenized assets—has not changed. A sharp rebound in token prices may require further easing of macro uncertainty. But looking back, such phases are often confirmed to be highly attractive entry opportunities.