Reflexivity Research: March 2025 in Review

Before diving into February in review, be sure to check out a few recently released reports from our research team:

• Render Overview
• Fetch.ai Primer
• Near Q1 2025 Overview

Introduction

March 2025 was a pivotal month for the crypto markets, one in which macroeconomic headwinds, regulatory shifts, and intense on-chain activity converged to shape outcomes. Crypto assets contended with significant macro pressures, most notably an escalating trade conflict that dented investor risk appetite. Yet even as macro uncertainty weighed on sentiment, the policy landscape began to turn more constructive. In the United States, the government pivoted toward direct engagement and signalled a more supportive stance from regulators. In parallel, Europe pressed ahead with enforcing its MiCA framework, bringing exchanges, custodians and token issuers under unified oversight. Meanwhile, crypto networks themselves saw no let-up in development. Major decentralised finance platforms rolled out transformative protocol upgrades, new exchanges launched, and even high-profile exploits tested systems, an intensity of activity that underscored the sector’s resilience and innovation despite the turbulent backdrop. To begin with, we will dive into the global regulatory developments.

Global Regulation Developments

Overall, the summit signalled a more crypto-friendly tone in Washington, one that was focusing on fostering innovation and even establishing a federal crypto working group but left details of new regulations to be ironed out over the coming months.

In Congress, there was movement on a long-stalled stablecoin bill, with greater optimism for a federal framework to regulate stablecoin issuers, aligning with the White House’s pro-crypto agenda. President Trump’s January executive order had already directed agencies to rescind or soften crypto regulations and set a 180-day deadline (by July 2025) for unified digital asset legislation. This changing climate was reflected in agency actions: for example, by March, the U.S. SEC withdrew its appeal of a court ruling that struck down an attempt to classify DeFi platforms as broker-dealers, potentially removing a major legal overhang on DeFi. Overall, U.S. policy in March pivoted toward a more supportive approach, though market participants awaited concrete legislative outcomes.

Elsewhere in Asia, Japan maintained its balanced stance: with core inflation at 3% ( above target for three years ) the Bank of Japan stayed vigilant about crypto markets as it signalled eventual interest rate hikes. Japan continued to enforce strict exchange licensing and custody rules, though no major new crypto laws were passed in March. Singapore and South Korea likewise held course, encouraging blockchain innovation (e.g. Singapore’s Project Orchid for a digital SGD) while enforcing existing exchange rules and investor protections. India, by contrast, stuck with its cautious approach: the 30% crypto tax remained, and in March the central bank again warned against crypto trading, making any regulatory liberalisation unlikely in the near term.

Overall, March 2025’s regulatory landscape was marked by constructive developments spanning from the U.S. government engaging industry directly, to Europe operationalizing MiCA, and Asia and others refining pro-innovation frameworks, even as debates are ongoing globally.

Macroeconomic Indicators

March 2025 brought a mixed macro backdrop that significantly impacted crypto markets. Inflation showed signs of moderation in major economies – in the U.S., year-over-year CPI hovered in the 3–4% range (down from 2024 highs), while in the Eurozone, inflation was approximately 2.3% in March, roughly unchanged from February and near the ECB’s target. This disinflationary trend allowed central banks to shift tone. On 19 March, the U.S. Federal Reserve held interest rates steady (target range 4.25–4.50%) for the first time in over a year. The Fed cited stabilizing unemployment and “somewhat elevated” inflation, but noted increased uncertainty warranted a pause. It also announced a slowing of its balance sheet runoff to support liquidity.

Across the Atlantic, the European Central Bank cut rates by 25 bps at its early March meeting, lowering the deposit facility rate to 2.5%. This marked the ECB’s sixth consecutive cut since it began easing in mid-2024, as Eurozone inflation is on track to settle around 2%. Meanwhile, the Bank of Japan held its policy rate at 0.5% (the highest since 2008 after a January hike) and struck a more hawkish tone. BOJ Governor Ueda told Parliament that if rising wages spur broader price hikes, the BOJ “will keep raising interest rates” to curb inflation. Japan’s core CPI hit 3.0% and 10-year JGB yields spiked to 1.58%, the highest since 2008, on expectations of further BOJ tightening.

Global Market Factors

A major macro headwind in March was escalating trade tensions. The Trump administration’s protectionist trade policy rattled markets: effective 1 March, the U.S. imposed 25% tariffs on imported goods from Canada and Mexico, reversing NAFTA-era free trade on those partners. By late March, Trump was also threatening steep tariffs on European auto exports, raising the spectre of a transatlantic trade war. These moves dented global risk appetite. Investors piled into safe-haven assets, U.S. Treasury yields fell to two-month lows as bond prices jumped and conversely, risk assets like equities and crypto saw outflows.

ETF Flows

Across both asset classes, the flow data point to a broad reduction in exposure to crypto ETFs in March, particularly during the first two weeks. The presence of inflows in the latter half of the month suggests some re-entry or stabilisation, but overall, March marked a period of net capital withdrawal from both Bitcoin and Ethereum exchange-traded products.

Project-Specific Highlights and Developments

March 2025 featured several significant project and protocol developments including major DeFi protocol upgrades, exchange launches, and one high-profile exploit.

Hyperliquid – JELLY Incident and Staking Tiers

Hyperliquid, a decentralized perpetual trading platform, experienced a dramatic market incident in late March. On 26 March, a whale trader exploited Hyperliquid’s liquidation system via the low-cap “Jelly-my-Jelly” token (JELLY), executing a short squeeze that nearly wiped out Hyperliquid’s insurance fund. The attacker opened massive opposing positions on JELLY perps – an ~$8 million short against longs – then artificially pumped JELLY’s price on-chain, causing the short to be liquidated into Hyperliquid’s liquidity provider vault (the HLP). The HLP inherited a $12 million loss within minutes. In response, Hyperliquid halted and delisted JELLY perpetual contracts, citing suspicious activity. The exchange was able to settle the remaining JELLY positions and ended up with a $703,000 profit after reversing it to the price of where the manipulation occurred. Hyperliquid announced it would reimburse all affected users (except the exploiter) from its foundation’s funds.

The incident raised concerns about Hyperliquid’s risk controls – critics noted that the exchange’s liquidation engine allowed a single illiquid token to cascade losses, a vulnerability more commonly seen in centralized exchanges. Comparisons were drawn to FTX’s meltdown in how a risky asset could jeopardize a platform. Hyperliquid’s team reacted quickly: within days, they introduced governance changes, including fully on-chain voting for asset delistings to increase transparency, and tightened margin requirements on small-cap assets.

Separately, earlier in March Hyperliquid rolled out a new Staking Tier system for its HYPE token holders.

Starting 30 April, users can stake HYPE to receive trading fee discounts, with tiered benefits based on the amount staked. This fee model overhaul, featuring a flat 0.025% taker fee minus rebates for stakers, is aimed at rewarding loyal users and bolstering HYPE token utility. The introduction of staking tiers was well-received, and despite the JELLY drama, Hyperliquid avoided long-term damage, with many traders returning as the team shored up trust through swift action and a commitment to cover losses.

Aave – “Aavenomics” Tokenomics Upgrade

Decentralized lending giant Aave moved forward with a major tokenomics revamp in March, in what is considered one of the protocol’s most significant updates since launch. The Aave Chan Initiative (ACI), led by community member Marc Zeller, unveiled an Aavenomics implementation proposal on 4 March. Touted as “the most important proposal in Aave’s history,” it aims to greatly enhance the value accrual and safety mechanisms for the AAVE token. Key features include:

• A new revenue redistribution model: Aave generates substantial revenue from interest and fees, and the proposal introduces a system to share more of this revenue with AAVE stakers. The existing “Merit” reward for GHO stablecoin stakers would continue, but an additional token called “Anti-GHO” will be issued to AAVE stakers. Anti-GHO (a non-transferrable token) can be burned by holders to cancel an equivalent amount of GHO stablecoin debt or converted into yield-bearing Staked GHO – effectively giving AAVE stakers a claim on protocol stablecoin income. Half of all GHO stablecoin interest revenue (currently around $6 million per year) would fund Anti-GHO rewards.
• An “Umbrella” Safety Module: This next-generation version of Aave’s insurance fund aims to lock up significant capital (potentially “up to billions”) from AAVE and other assets to backstop any shortfall events. It introduces a cooldown period for withdrawals to prevent bank runs, thereby strengthening protocol resilience. The design was informed by lessons from past lending collapses, aiming to fortify Aave against tail risks.
• An Aave Finance Committee (AFC): The proposal creates a four-member committee to actively manage treasury funds within parameters set by governance. The AFC would be empowered to execute on initiatives like buybacks once approved.
• Token Buyback and Distribution: To directly reward token holders, Aave is planning a $1 million per week buyback programme. Under this plan, the AFC would deploy $1 million of Aave’s excess treasury each week to buy AAVE on the open market and distribute it to stakers or ecosystem participants. This “buy-and-distribute” scheme would run for at least six months (totalling around $24 million) and can start once authorized. It is an effort to support AAVE’s price and make holding AAVE more attractive by tying it to protocol success.

Community feedback on the Aavenomics update was very positive, AAVE’s token price jumped significantly in the 24 hours after the announcement, vastly outperforming the market. Holders welcomed the prospect of profit-sharing and stronger safeguards. The proposal, initially green-lit in concept in August 2024, comes as Aave sits on $115 million in cash reserves (up 115% since mid-2024) and a circulating GHO stablecoin supply of about $200 million. In short, Aave is extremely well-capitalized, and now wants to “give back” to its community and token holders. By late March, on-chain governance votes for the first phases of Aavenomics were passing with overwhelming quorum, indicating the changes will be implemented in stages during Q2. Aave’s move reflects a broader trend of DeFi protocols revamping tokenomics (Compound, for instance, is in discussion around a similar proposal) to renew investor interest and adapt to a maturing market. If successful, Aave’s model could set a benchmark for how DeFi platforms align token incentives with protocol usage.

Pump.fun – Launch of PumpSwap DEX

The third major development came from Pump.fun, the viral Solana-based memecoin platform.

Pump.fun made a big splash in March by launching its own decentralized exchange PumpSwap. Pump.fun is known as a social token launchpad where anyone can create fair-launch meme tokens, which until now primarily traded on third-party AMMs like Raydium. On 20 March, Pump.fun officially unveiled PumpSwap, a native AMM designed to “redefine liquidity” for its ecosystem. Uniquely, PumpSwap is integrated directly into pump.fun’s platform, eliminating the need for separate token migration once a meme token’s initial bonding curve sale ends. This integration brings unmatched efficiency: creators and traders can instantly provide liquidity and trade newly created coins on PumpSwap without delays.

The launch was hugely successful. Within two weeks, PumpSwap amassed over $1 billion in trading volume, riding on the frenzy of meme coin trading. By 25 March, PumpSwap had become the #2 AMM on Solana by volume, capturing around 18% of Solana DEX market share (second only to Raydium’s approximately 50%). Its most active liquidity pools were, fittingly, meme tokens. PumpSwap offers benefits over the previous setup: crucially, it keeps SOL liquidity within pump.fun (in the past, when pump.fun tokens moved to Raydium, the SOL from their initial sale would leave pump.fun’s pools). Now, pump.fun retains that liquidity and earns transaction fees from PumpSwap’s volume, adding a revenue stream for the project. Pump.fun’s anonymous co-founder “Alon” also teased that token creator fee-sharing is coming soon – so if you launch a token on pump.fun, you could receive a share of the trading fees your coin generates on PumpSwap. This prospect could draw even more creators to the platform.

PumpSwap’s debut shook up the Solana DeFi landscape: Raydium, which lost volume, responded by fast-tracking its own “LaunchLab” memecoin launchpad to compete. There were also questions about the quality of PumpSwap’s volume: observers noticed obscure tokens with tiny market caps generating large volumes, raising suspicions of wash trading. A Telegram group offering “Solana volume boosts” was discovered advertising fake volume services now compatible with PumpSwap. Pump.fun acknowledged the issue and promised to crack down on any inorganic activity to maintain credibility. Additionally, PumpSwap isn’t limited to Solana: through a partnership with TRON DAO, it will leverage LayerZero and Wormhole bridges to enable cross-chain liquidity, including routes between Solana and Tron’s ecosystem. Tron’s founder Justin Sun praised the collaboration as advancing cross-chain DeFi, and by bridging SOL and TRX liquidity pools, PumpSwap could tap into Tron’s large user base.

In summary, PumpSwap’s launch was a consequential DEX launch for Solana and marks pump.fun’s evolution from a meme token factory into a more holistic DeFi platform.

Additional Noteworthy Highlights

Major Exploits and Security

While March was mercifully quieter in hacks than earlier in the year, one incident stood out: the Bybit exchange hack, which actually occurred in late February but reverberated into March. North Korean Lazarus hackers stole $1.46 billion from Bybit by exploiting wallet vulnerabilities. Bybit quickly started working with law enforcement and blockchain analytics firms to trace the funds, but only a small fraction had been frozen. This hack, combined with the Hyperliquid exploit, served as a stark reminder of security risks, prompting many projects to double-check their smart contracts and backends. DeFi platforms are increasingly turning to insurance funds and on-chain risk monitoring to prevent such disasters.

Protocol Upgrades and Milestones

Several other projects reached technical and ecosystem milestones in March:

• Ethereum Layer-2 networks continued development. StarkNet released an alpha version of its Rust-based sequencer. zkSync Era surpassed $1 billion in total value locked, coinciding with speculation around potential token airdrops.
• Initia – Airdrop Eligibility Checker Launch: Initia, a new Layer-1 blockchain focused on an “interwoven multichain ecosystem,” announced an upcoming token airdrop and provided tools for users to participate. On March 31, the Initia Foundation released an airdrop eligibility checker on its website, allowing users to see if they qualify for the first batch of INIT token rewards
• Tron introduced a “Gas Free” USDT transaction model, allowing network fees to be paid in USDT rather than TRX. This change aims to simplify stablecoin transfers and may further entrench Tron’s role in low-cost stablecoin movement. The update coincided with over $800 million in USDT/USDC inflows during February and contributed to a modest increase in Tron’s March TVL.

Conclusion

In retrospect, March 2025 encapsulated a set of clear themes and turning points for crypto. Macroeconomic turbulence set a volatile tone, translating into risk-off flows and price pressure across digital assets. Nevertheless, the month also marked a notable thaw in the regulatory climate. U.S. policy pivoted towards a more accommodative approach, while Europe’s implementation of MiCA provided much-needed clarity for market participants. Equally significant was the unabated pace of innovation on the ground: development activity remained robust. Leading protocols executed sweeping tokenomic overhauls and new decentralized platforms gained traction, demonstrating a maturing industry able to adapt under stress. Even security incidents were met with swift, effective responses, reinforcing confidence. In sum, March 2025 stands out as a pivotal chapter for the industry, defined by its ability to advance and adjust amid formidable headwinds.

Disclaimer: This research report is exactly that — a research report. It is not intended to serve as financial advice, nor should you blindly assume that any of the information is accurate without confirming through your own research. Bitcoin, cryptocurrencies, and other digital assets are incredibly risky and nothing in this report should be considered an endorsement to buy or sell any asset. Never invest more than you are willing to lose and understand the risk that you are taking. Do your own research. All information in this report is for educational purposes only and should not be the basis for any investment decisions that you make.