Kaiko_Research_March_2021_Cryptocurrency_Market_Report.pdf

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March 2021
Kaiko
Research
Monthly Market Report
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here.
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MONTHLY
OVERVIEW
Q1 2021 has come to a close, and with it one of the most consequential quarters in the history of crypto.
A wide range of milestones was reached across various sectors of the industry:  Tesla purchased a
historic amount of bitcoin for its balance sheet, a record number of  firms submitted crypto  ETF
applications, Visa enabled stablecoin settlement, Coinbase filed their S-1 in preparation for going public,
BNY Melon announced crypto services for their clients, and a non-fungible token sold for $69 million.
The bullish activity propelled bitcoin and ethereum towards new all time highs, and altcoins also  had
their moment:  tokens associated with NFT marketplaces and alternative blockchain networks posted
triple—and at times quadruple—digit returns. Total Q1 trade volumes were magnitudes greater than any
other quarter, although March trade volume was down slightly from February along with the inflow of
dollars. Overall, crypto maintained its position as the best-performing asset class as traditional financial
markets stumbled, with equities up only single digits and gold down more than 13% YTD.
This monthly report was written by Clara Medalie with help from the Kaiko team.
About Kaiko
Kaiko is the leading digital assets data
provider for institutional investors, funds,
regulators, researchers,  exchanges, and
platforms. We  enable seamless connectivity
to historical and live data feeds across 100+
spot and derivatives exchanges. For every
enterprise client, we build custom data plans
designed for your unique use case. Contact us
at hello@kaiko.com to get started today. 
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Record High Q1 Trade Volume
Q1 trade volumes reached record highs, although growth slowed slightly in March. Overall, volumes for the top BTC-
USD spot markets are magnitudes greater than they were a year ago, mostly fueled by new institutional investors who
flooded markets with Bitcoin buy orders starting last fall. In March, the pace of dollar inflows slowed, although the ratio
of dollar to tether volume is at its highest point in years.  The ratio of BTC-USD to BTC-USDT trading volume can be
considered an indicator of institutional inflows into crypto, assuming that institutional investors prefer using regulated
fiat exchanges such as Coinbase, as opposed to exchanges that only offer stablecoin pairs such as Binance. From
October to December 2020, USD volumes soared as Bitcoin underwent a record-setting bull run. However, throughout
2021 this trend has reversed slightly. The majority of Bitcoin trades are still executed against Tether, which recently
reached a settlement with the New York Attorney General, clearing the way for the stablecoin's continued growth.
Trade Volume BTC-USD Spot Markets
Ratio of Dollar to Tether Volume
Monthly trade volume aggregated across 17 reputable exchanges
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02
How Stable Are Stablecoins?
In late March, Visa announced that they would enable settlement using the stablecoin USD Coin, a significant step
towards the adoption of this  technology at a global scale. Dollar-pegged stablecoins like USDC are designed to have
minimal price movements and must be consistently monitored by their issuing organizations to ensure that supply and
demand is at equilibrium. In reality, though, most stablecoins experience occasional drift from their pegs depending on
market volatility. Below, we chart the USD exchange rate for six dollar-pegged stablecoins, demonstrating how over the
course of one week, stability can be difficult to achieve during price movements.
USD Exchange Rate, Six Stablecoins
20D Rolling Volatility
Stablecoins have become a
lot  more stable over time as
the  management of supply and
demand  improves.  We can
observe that 20D volatility for
most dollar-pegged stablecoins
has declined significantly  since
2020.  USDC has the lowest
measure for rolling  annualized
volatility, which suggests its
stability mechanism is the most
efficient. Binance's stablecoin
BUSD ranks second, while
Tether (USDT), the most-used
stablecoin, falls somewhere in
the
middle. 
Competition
between stablecoins is heating
up as more real-world use cases
become available.  
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03
Its Altcoin Season: 'Ethereum-
Killers' and NFT Marketplaces
Altcoins posted record-setting returns in Q1, particularly those connected to NFT marketplaces (which enable the
exchange of non-fungible tokens) and alternative blockchains (often referred to as 'Ethereum-Killers' for their scaling
solutions). What do NFT marketplaces and 'Ethereum-Killers' have in common?  Most platforms that enable the
exchange of NFTs operate on the Ethereum blockchain and have had to deal with high transaction fees and congestion
that have plagued the network for years, renewing attention towards alternative blockchains such as Solana and
Polkadot. Despite record high fees, Ethereum's on-chain activity still remains magnitudes greater than any competing
network which suggests projects are not yet at the point of vacating. 
NFT Marketplace Token YTD Returns
While NFTs themselves have sold
at increasingly excessive rates,
tokens affiliated with NFT
marketplaces have tangentially
benefitted from the mania. The
Rarible marketplace's token has
appreciated 2,455% since
January 1st. Decentraland, a
virtual world where players can
purchase NFTs, has seen its
MANA token soar 1,249%. These
tokens serve functions such as
governance, utility, and rewards,
but also serve as a gauge for
sentiment surrounding the NFT
industry.
Blockchain Token YTD Returns
It is no surprise that the tokens
powering competing blockchains
have seen huge returns over the
past few months as Ethereum's
potential scalability is hindered
by high transaction fees. The
Solana blockchain's SOL token
has gained more than 1,177%
YTD while the Cardano
blockchain's ADA token has risen
more than 560%. ADA was at one
point the third largest crypto
asset by market cap. Ethereum's
returns of 152% pale in
comparison. 
www.kaiko.com
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