Market Overview

Overall Market Situation

This week, the cryptocurrency market is in a rapid decline, with the market sentiment index dropping from 33% to 11%. The market capitalization of stablecoins has basically stopped its continuous growth (USDT reached 142 billion, USDC reached 55.9 billion, with changes of 0.02% and -0.53% respectively), indicating that as the market experiences a sharp decline, institutional funds have stopped entering and are beginning to exit. The panic in market sentiment mainly stems from the hacking of $1.5 billion in assets from the Bybit exchange and Trump's aggressive tariff policies, which have intensified concerns about inflation, making the possibility of the Federal Reserve cutting interest rates smaller and exacerbating fears of the U.S. entering an economic recession. This has had a strong impact on market sentiment, plunging overall sentiment into extreme panic, with Altcoins generally underperforming the benchmark index.

Predictions for Next Week

• Bullish Targets: LTC, S, SOSO, BERA

LTC: This week, LTC rose against the trend, showing strength in a generally declining market, mainly due to increased expectations for its LTC ETF approval. This week, the spot LTC ETF proposed by Canary Capital has been listed on the custody trust and settlement company (DTCC) system, and LTC's betting approval on Polymarkt has reached 87%. Currently, the market has high expectations for the approval of the LTC spot ETF, so there will be continuous speculation on the LTC spot ETF event until its official approval.

S: Sonic has recently begun to venture into the DeFi industry, attracting a large number of on-chain users and funds through its high APY on its on-chain DeFi projects. In its main liquidity staking projects, Beets and Origin, the liquidity pool APY based on the S token can reach up to 32.22% and 123% respectively. The average borrowing rate for users borrowing S tokens in Sonic's lending protocol is 10.21%, allowing users to achieve a yield of over 20%. Additionally, the recent popularity of the Sonic chain has increased market demand for the S token, causing its price to rise against the trend, thus providing higher returns for Sonic chain users. Therefore, in the current declining market, the ability for users to still achieve over 20% risk-free returns will attract a large number of users to participate through borrowing, increasing market demand for the S token and driving its price to spiral upwards.

SOSO: The SoSoValue project can continuously adjust its future development direction based on market trends. Originally, SoSoValue aimed to establish itself as a one-stop investment service platform enhanced by AI technology, wanting to keep up with the market trend of AI Agents. After the decline of AI Agents, attention and funds have shifted back to DeFi projects, allowing SoSoValue to seize the current trend of attracting users with high APY. It has rebranded itself as a wealth management service center, hiding its AI technology within the product but not primarily mentioning it, instead focusing on promoting its ability to provide high APY. Recently, it launched a second season of mining activities, where users holding or staking SSI packaged index tokens can mine SOSO tokens, allowing users' staking rewards combined with additional airdropped SOSO tokens to reach a maximum of 42% APY, thus attracting more users to participate in mining and further increasing bullish expectations for SOSO tokens.

BERA: This week, the overall market is in a downtrend. Initially, BERA was also affected by the market and experienced a decline, but the Berachain project quickly adjusted the staking yield of its on-chain LSD projects. The main LSD project on Berachain, Infrared Finance, has raised the APY of WBERA to a maximum of 123%, and the borrowing rate for BERA in its lending project has reached 23.68%, allowing arbitrage users to earn 100% risk-free annualized returns, quickly curbing the downtrend and turning it into an uptrend. The strategy adopted by the Berachain project is similar to Sonic's, both attracting on-chain users and funds with high APY, thus achieving: staking lock-up → liquidity release → DeFi empowerment → token appreciation, using high APY to increase market demand for the main token BERA, thereby promoting the price increase of BERA tokens.

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

ETH: This week, 491,000 ETH were stolen from Bybit. Although Bybit has fully compensated for the stolen ETH through purchases and exchanges, the purchasing power generated has not reflected in the market price, indicating that investors still have FUD sentiment towards ETH. After all, it will continue to face selling pressure from hackers. Furthermore, the investigation report from Bybit clearly stated that the theft was mainly due to a vulnerability in the safe, and the exchange's infrastructure did not have any vulnerabilities, leading to significant doubts about safe technology. Since most projects in the Ethereum ecosystem use safe technology, this poses a potential risk to the security of many projects in the Ethereum ecosystem in the future. Additionally, Ethereum's Pectra upgrade will go live on the testnet this weekend. According to previous practices, there will usually be a pump before the project's technical upgrade, followed by a pullback after the positive news is realized. This time, the Pectra upgrade has not injected much energy into ETH's price, so it is likely that ETH's price will decline after its implementation.

SOL: This week, SOL experienced a significant decline following the market trend, mainly due to the recent retreat of the Meme coin wave. As Solana is the public chain with the highest returns from Meme coins, it has also been affected by various FUD voices in the market, causing on-chain funds to start fleeing, with its TVL dropping from $12.1 billion to $7.3 billion, a decrease of 39.66%. Additionally, the on-chain liquidity staking yield has fallen from 10.29% to 7.26%, and the on-chain trading volume has dropped from $35.5 billion to $2.4 billion, a decrease of 93.23%. It is evident that Solana's on-chain ecosystem is nearing collapse. Moreover, on March 1, 11.2 million SOL will be unlocked, and these tokens are held by institutions, which may lead to continued selling pressure, exacerbating market investors' panic towards SOL.

ADA: This week, Cardano's on-chain TVL experienced a significant decline, dropping 26.88% to $308 million, down 56.06% from its peak of $701 million. All on-chain projects in its ecosystem have seen a decline of over 10% in TVL, indicating a rapid outflow of funds from the Cardano ecosystem, which proves that market users currently have FUD sentiment towards the Cardano ecosystem. The trading volume of its on-chain DEX has decreased by over 68%, and the current borrowing rate for ADA tokens is 3.29%, indicating that almost no one is participating in borrowing within its ecosystem, leading to borrowing rates far below those of other public chain tokens. Therefore, if funds continue to flow out of the Cardano chain, it is expected that ADA will continue to decline next week.

AI: Sleepless AI is an AI-based Gamefi project, and the AI and Gamefi sectors occupied by Sleepless AI have experienced the deepest pullback in this decline. Investors in the market have lost interest in the Play-to-Earn model of Gamefi, leading to a gradual decrease in users and almost no new funds entering. There is a general belief that the current valuation of AI projects is high, and projects in the AI sector have been in a significant downtrend. Additionally, AI will unlock 17.27 million tokens next week, accounting for 1.73% of the current circulating supply. Given the large unlocking ratio and the recent poor performance of this sector, it is expected that there will be a decline shortly after the token unlock.

TKO: Tokocrypto is the largest cryptocurrency exchange in Southeast Asia. Due to the recent Bybit hacking incident, various centralized exchanges have been negatively impacted, leading to unsatisfactory performance of tokens across exchanges. Additionally, TKO is about to unlock 10 million tokens, which accounts for 2.02% of the current circulating supply. Given the large unlocking ratio, a decline is expected after the unlock.

RUNE: THORChain is a decentralized cross-chain AMM trading protocol. This week, it experienced a significant counter-trend rise from Monday to Wednesday, mainly because the hackers who stole from Bybit continuously transferred the stolen ETH to THORChain for money laundering transactions. This led to a significant increase in THORChain's trading volume and fees, causing it to rise against the market trend. After the market exposed that hackers were using THORChain for money laundering, THORChain developer Pluto announced his resignation. It is expected that next week, with the decrease in trading volume and market FUD regarding its alleged money laundering activities, the price will continue to decline.

Market Sentiment Index Analysis

The market sentiment index has dropped from 33% last week to 11%, indicating that it is approaching the extreme panic zone.

Hot Sectors

Sonic

• Current Status

In recent weeks, Sonic's chain TVL has maintained a rapid growth trend, and this week, most chains have been in a downward trend, while Sonic is the only chain that has maintained a 10% growth rate with a TVL exceeding $50 million. This week, the growth rate reached 10.32%, with on-chain TVL increasing to $683 million, indicating that its on-chain ecosystem can still experience continuous capital inflow even in an extremely panicked downtrend. Additionally, Sonic's token S has risen by 7.63% this week. Although the increase is not high, the ability to rise in a collapsing market shows market recognition.

• Reasons

Recently, Sonic has shifted its project focus from Gamefi to DeFi, adopting a strategy of high APY to attract on-chain users. In its main liquidity projects, it can provide users with an APY of up to 123%, while offering around 10% borrowing rates to users. This allows on-chain users to achieve over 100% arbitrage APY. In the current declining market, an APY exceeding 100% is very attractive to on-chain users, prompting them to choose to participate in arbitrage through purchasing or borrowing tokens, increasing the demand for token S and resulting in better performance compared to most tokens.

• Future Outlook

We can see from the recent popularity of the Sonic ecosystem that it is mainly due to the increase in annualized yields of the LSD projects within the Sonic ecosystem, attracting more on-chain users to participate in arbitrage activities. Therefore, we can conclude that a path for an ecosystem to develop rapidly is to achieve efficient driving of its economic flywheel, with the project team focusing on the DeFi sector to enable efficient asset utilization. Asset empowerment around DeFi requires focusing on asset staking and liquidity, allowing assets to generate compound returns in DEX, lending, and asset management. The economic flywheel of the on-chain ecosystem must form a positive cycle through: staking + liquidity + DeFi empowerment + user growth. The core driving force lies in the dual drive of staking and liquidity release of the on-chain native token, allowing it to generate compound returns in scenarios such as DEX, lending, and asset management, realizing "staking is productivity." Once on-chain users are attracted to the ecosystem by high APY, a positive cycle must be formed: staking lock-up → liquidity release → DeFi empowerment → token appreciation → user return → re-staking → developer aggregation. Otherwise, if the funds of new users entering the market are insufficient to cover the selling pressure from arbitrage, the price of the S token will decline. When the S token price declines, the yields of various projects will inevitably decrease, leading to the exit of arbitrageurs. This would be a significant blow to an ecosystem, so we need to continuously monitor the APY of Sonic's on-chain DeFi projects. By observing the on-chain APY, we can determine whether the Sonic chain still has the momentum for development.

However, it is important to note that although Sonic's TVL was the fastest-growing among chains with over $100 million this week, its TVL did not continuously rise but experienced a spike followed by a pullback.

Berachain

• Current Status

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

• Reasons

This week, the growth rate of the top DEX, lending, and LSD projects in the Berachain ecosystem has slowed down, and Berachain's TVL experienced a decline in the first half of the week. However, due to the main LSD project on Berachain, Infrared Finance, raising the APY of WBERA to a maximum of 121%, and the emerging LSD project Stride achieving an APY of 190.12%, along with a borrowing rate of 23.68% for lending projects on Berachain, users participating in arbitrage can earn 100% risk-free annualized returns, quickly curbing the downtrend and turning it into an uptrend.

• Future Outlook

Berachain's continued popularity this week is mainly due to its on-chain DeFi projects increasing APY, maintaining a relatively high attraction for on-chain users, leading a large number of on-chain users to invest funds into Berachain. The development path of Berachain is roughly similar to that of Sonic, so the issues it faces are also similar. Currently, Berachain has achieved the process of: staking lock-up → liquidity release → DeFi empowerment → token appreciation, but there have not been outstanding on-chain projects emerging in the process of user return → re-staking → developer aggregation. Therefore, while Berachain's high-interest model can lead to rapid development of the on-chain ecosystem in the short term and promote the rapid rise of the project token BERA, it will inevitably face increasing selling pressure in the future. When the funds of new users entering the market are insufficient to cover the selling pressure from arbitrage, the price of the BERA token will decline. Once the BERA token price declines, the yields of various projects will inevitably decrease, leading to the exit of arbitrageurs. Thus, in the future, more attention should be paid to whether new star projects emerge on the Berachain chain and whether the interest rates offered by on-chain LSD projects significantly decrease.

Overall Market Overview

Data Source: SoSoValue

According to weekly return rate statistics, the Sociafi sector performed the best, while the PayFi sector performed the worst.

Sociafi Sector: In the Sociafi sector, TON and CHZ have a significant share, accounting for a total of 95.17%, with weekly declines of -4.86% and -4.79% respectively. Although both are in a downtrend, they still performed better than other Altcoins, leading to the overall Sociafi sector index performing the best.

PayFi Sector: In the PayFi sector, XRP, LTC, and XLM have a significant share, accounting for a total of 94.62%, with weekly declines of -19.23%, -1.21%, and -16.96% respectively, resulting in the worst performance for the PayFi sector.

Next Week's Major Crypto Events

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

Wednesday (March 5): U.S. February ADP Employment Numbers; Pectra network upgrade plan to launch on Ethereum testnet

Friday (March 7): U.S. February seasonally adjusted non-farm payrolls; U.S. February unemployment rate

Summary

This week, the cryptocurrency market experienced a significant decline, with the market sentiment index sharply dropping, reflecting widespread investor concerns. Despite this, some projects like LTC, Sonic, SoSoValue, and Berachain attracted users through high APY strategies. However, in the long run, market stability and the emergence of new projects will be key factors. Investors are advised to closely monitor market dynamics and proceed with caution.

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