One Quarter in 2021, More Than One Year in 2020: Weekly Market Review by TokenInsight

However, the market will never disappoint optimistic investors: Bitcoin quickly rebounded after bottoming out and returned to above the $56,000 line, showing tenacious value resilience.

In this weekly report, we review and summarize the digital asset market in March. In less than three months, the digital asset market has achieved a transaction level close to that of last year, and the market value has once again set a new record. With the leap-forward development of the digital asset market, supervision and compliance are constantly improving. 

“One Quarter, One Year”

Compared with January and February, the total market cap of digital assets in March reached a new high of $1.66 trillion, which is comparable to the Australian stock market, and its scale is still expanding. The development of the non-Bitcoin market is currently the main driving force for the accelerated expansion of the digital asset market: compared with January, the total market value of non-Bitcoin digital assets doubled in March to $655.21 billion, which is equivalent to the market value of the Singapore stock market in March.

Compared with January and February, the market-wide trading volume has shrunk in March. On the one hand, it is because of the Fed's cautious attitude towards the digital asset market. 

On the other hand, the rise in the U.S. Treasury yields also could be an affective factor. A combination of these factors has caused people's attention to begin to turn back to traditional markets. 

The number of active Bitcoin addresses dropped slightly by 0.8% in March, and Grayscale Bitcoin Trust continued to keep a negative discounted rate (lower than -6%) throughout March, which provides some evidence for this view. In addition, in the traditional market, the price of gold as a safe-haven asset also continued to fall in March, reflecting the changes in investors' investment direction from other perspectives.

Among all digital assets, non-Bitcoin transactions are more active than Bitcoin. In March, the total transaction volume of the non-Bitcoin market reached $1,909.33 billion, accounting for 58.7% of the total market transaction volume. The market cap of non-Bitcoin assets accounted for 39.32% of the total market cap, the highest point ever. 

In the derivatives market, perpetual contracts have always been the main product in the digital asset market. As of Mar. 25, the total trading volume of the March perpetual contracts was $3,138.48 billion, which is expected to be slightly higher than the February trading volume for the entire month, maintaining a historical high. The trading volume of derivatives throughout the first quarter exceeded that of last year (the trading volume of digital asset futures last year was $12,314 billion, and from the beginning of the year to Mar. 25, the trading volume of perpetual contracts alone reached $10,947.7 billion).

From the perspective of market volatility, the market in March showed a marked decline in trading enthusiasm. The volatility of both spot and perpetual contracts has fallen to the lowest level since 2021. 

Although there was a short-selling signal in the middle of the month and a large-scale option delivery occurred at the end of the month, these two points had a greater impact on the prices of mainstream digital assets (Bitcoin, Ethereum), but they did not significantly affect the overall market volatility. From the perspective of skewness, market confidence is still relatively positive, but it is gradually biased towards neutrality and rationality.

Among the major spot exchanges counted by Tokeninsight in March, the spot trading volume of the three exchanges accounted for more than 80% of the total market trading volume, and other exchanges only accounted for 20%. 

In the derivatives market, Binance and Huobi also occupy important positions. The combined trading volume of the two exchanges in March reached $1,295.93 billion.

Compliance: Anti-Money Laundering And Capital Gains Tax

Compliance progress in March mainly focused on anti-money laundering and capital gains tax.

The founder of BitMEX, Ben Delo, surrendered to the US authorities under the pressure of investigation by the US regulatory authorities, releasing a clear signal of strengthening the supervision of digital assets. BitMEX was accused of violating the Bank Secrecy Act and anti-money laundering compliance regulations. In response to anti-money laundering risks, the Simplify U.S. Equity PLUS Bitcoin ETF, which plans to list in the United States, chose to purchase Grayscale Bitcoin Trust as an investment method to meet compliance requirements.

At the same time, the income tax on digital asset transactions has also entered the legal framework at the same time. 

South Korea requires all digital asset businesses (exchanges, asset management institutions, wallets providers and custody platforms) to file their transaction records with the regulatory authorities. Digital asset service providers must adopt a reliable KYC agreement. In addition, any suspicious transactions must be flagged and reported to the regulator for further money laundering investigations. Failure to comply with the regulations before Sept. 24 may result in a fine of up to 50 million won (44,000 U.S. dollars) or five years in prison. Under this influence, some existing exchanges have announced their withdrawal from the Korean market.

It is worth noting that the scale of digital asset transactions in South Korea has surpassed the domestic stock market, and South Korea has begun to levy digital asset-related capital gains taxes in January. The high returns of digital assets can bring huge taxes, and compliance measures have been systematized since the beginning of the year. 

For the capital market that is advancing the compliance of digital assets — especially markets like Singapore that have begun to formulate relevant digital asset-related transaction licenses — South Korea’s current practices and future trends are worthy of attention. 

Once a large digital asset exchange settles in Singapore, South Korea's experience can provide a certain reference and reference for the formulation and implementation of Singapore's corresponding digital asset compliance and taxation strategies.

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