1. Introduction and macro data outlook
1. Introduction
Uncertainty in the global economy and volatile market conditions continue to influence user decisions. Last week, the risks of the yen carry trade once again became the focus of the market, and the policy direction of the Bank of Japan remains in the spotlight. The Fed's policy dynamics remain the main driver of the market, and the core economic data released in August further supports the "Goldilocks" scenario, that is, inflation is controlled and does not endanger economic growth. It is worth noting that although the US stock market continues to rebound and the Nasdaq index is close to a new high, the cryptocurrency market has failed to follow the upward trend of the US stock market, and the prices of Bitcoin and Ethereum have both fallen. Whether Bitcoin can hold $60,000 amid continued market volatility remains a focus of attention.
Nasdaq Index (Source: Bloomberg)
2. Macro data performance
Over the past week, the Federal Reserve kept the target range for the federal funds rate unchanged at 5.25%-5.50%, and continued to focus on the balance of inflation data and economic growth. The latest US economic data, including inflation, unemployment claims and retail sales data, showed the resilience of the economy, further supporting the "soft landing" scenario. This series of optimistic data helped global stock markets to recover, especially the rebound after the sharp sell-off last week.
Asian stocks rose across the board last week as investors reentered risk assets and regional indices posted their best week in nearly a year. Japanese stocks performed particularly well against the backdrop of a weak yen. The yen fell 1.3% against the dollar on Thursday, trading near 149, its worst week since May. The weak yen boosted earnings for Japanese exporters while also easing market concerns about the unravelling of large-scale carry trades. As a result, the Nikkei 225 index is expected to post its best performance since April 2020. In the U.S. stock market, the S&P 500 rose for the seventh consecutive day, with a cumulative increase of 6.6%, the best performance since November 2022.
The Russell 2000 index of small-cap stocks performed particularly well, rising 2.5%. Meanwhile, the VIX "fear index" fell to around 15, indicating that market sentiment was stabilizing. Optimism continued to grow, supported by strong consumer spending expectations and stable economic data.
In the U.S. bond market, despite the sharp drop in U.S. bonds on Thursday, the Treasury market remained generally stable. Swap market pricing shows that the Federal Reserve is expected to make three 25 basis point rate cuts in the remaining meetings in 2024, which is less than expected at the beginning of this week. This reflects that the market's expectations for the Fed's future policies are gradually becoming more moderate.
The cryptocurrency market has rebounded, with Bitcoin prices fluctuating around $58,000 and Ethereum prices fluctuating around $2,580. At the same time, more and more listed companies have begun to increase their Bitcoin holdings through the capital market.
Overall, the global market showed a strong rebound momentum last week, especially in Asia and the United States. The weakness of the yen, the adjustment of the Fed's policy expectations, and the recovery of the cryptocurrency market have become important factors driving the market up.
2. Industry data sharing
1. Overall market performance
The overall market performance was flat last week. After the mid-week CPI data fell short of expectations, BTC experienced a short-term decline, but then stabilized and the market value did not show a significant decline. In the second half of last week, the Federal Reserve reiterated its easing signal, the crypto market received strong support, and ETH and some altcoins showed obvious signs of capital inflows.
· BTCETH ETF Volumes
Judging from the ETF data of BTC and ETH last week, both are in a steady upward trend. The OTC ETF has sent enough signals to the market - slowly bottom-fishing. Although the process is not easy to detect and the capital inflow is limited, judging from the trend, the behavior of OTC funds gradually buying BTC and ETH in the current price range has restored confidence for the entire market.
· BTC SPOT price
Although the medium- and long-term trends have stabilized and become optimistic, BTC's short-term trend still faces the risk of a second bottom. This week, we will focus on the effectiveness of the bottom support range of USD 51,000 to USD 54,000. If it stabilizes, a rebound can be expected.
2. Public chain data
The on-chain data performed steadily last week, with the weekly TVL remaining stable above US$80 billion. The impact of macroeconomic factors in the middle of the week did not affect the chain.
Among the top 10 public chains in the past week, except for Base and Blast which are on the rise, only TRON and Polygon achieved positive growth in TVL.
Among them, TRON has set off a wave of market enthusiasm due to its meme launch platform SunPump. Polygon has benefited from its unique and innovative market prediction platform Polymarket, with a large amount of capital inflow mainly concentrated on betting on the US election and a large number of current hot events.
Airdrop potential agreement
Among the top protocols with airdrop expectations, Symbiotic has achieved a surge in TVL in the past week, which also indirectly reflects that the market is still bullish on the current restaking sector. Web3 users can focus on this project in the future.
· Layer 2
On the L2 side, the top protocols that achieved positive growth in TVL in the past week are still the OP series. Among them, Arbitrum has been very active recently. The release of the L3 technology stack has given a glimmer of hope to many Web3 project teams that are struggling with technical difficulties. TVL may continue to grow in the future.
In contrast, the ZK-related protocols are slightly sluggish. As Starknet is negatively affected by relevant management changes in the short term, only ZKSync is growing steadily. The innovation on the technical side and the in-depth understanding of ZK make this protocol likely to become the leading project for the future ZK explosion.
3. Analysis of hot tracks and projects
VC trend
Among the Web3 protocols most favored by VCs this month, infrastructure, DeFi and AI continue to dominate the list, with financing amounts ranging from US$1.5 million to US$55 million.
Hot tracks and projects
SUI: A new generation of high-performance public chain SUI rebounded by 140% in the past week when the altcoin market was generally sluggish, becoming almost the only dazzling project outside the Meme track. The reason is not that the project itself has made any great breakthroughs or progress, but that Grayscale has intriguingly added SUI's investment trust to its crypto portfolio, which seems to convey to the market the possibility of buying a large amount of SUI in the future, boosting the buying of SUI.
SUI will also face large amounts of unlocking in the next few months. The abnormally strong price of the currency at this time may be a trap set by whales to lure more. After all, there are still a large number of tokens waiting to be unlocked, and the possibility of whales raising shipments exists.
Chain abstraction-ZetaChain: Considering that chain abstraction may become the main track that the future crypto market focuses on, ZetaChain has achieved good results in project progress in the past week and has also attracted a lot of market attention.
ZetaChain uses its technical features to achieve cross-chain exchange of different tokens, allowing users to exchange tokens with one click. The current LayerZero and Wormehole only have the ability to seamlessly cross-chain a single token. If you want to convert it into different types, you need to go through the DEX on the target chain for replacement. Therefore, the operation complexity and gas fees will be higher than ZetaChain. The cleverness of ZetaChain's design lies in the fact that its actual cross-chain process is to first let the token cross-chain to ZetaChain, complete the transaction on ZetaChain, and then cross-chain to the target chain. The cross-chain process itself is lossless because it does not involve liquidity, it is just a process similar to encapsulation.
On ZetaChain, all tokens need to establish a liquidity pool with ZETA, which means that A token is traded for ZETA, and ZETA is then traded for B token. ZETA token has become an indispensable link in the cross-chain process, so the more ZetaChain's cross-chain is used, the higher the demand for ZETA. The high demand for ZETA pushes up the price of ZETA, which can further increase the liquidity on ZetaChain, thereby reducing cross-chain wear and tear and lowering costs.
Fractal: In addition, Fractal, a project that natively extends Bitcoin, has also become a focus of attention for some VCs. Its feature is that it uses BTC core code to recursively create infinite extension layers on the BTC main chain to improve transaction processing capabilities and speed, while maintaining full compatibility with the existing Bitcoin ecosystem.
In short, Fractal is an extension of the BTC core code with the following features: 1. Fast transaction speed: The block confirmation time of the Fractal network is about 30 seconds, and the transaction processing capacity is 20 times that of the BTC main chain. 2. Native compatibility: Fractal Bitcoin is developed based on the BTC core code, so it is fully compatible with existing Bitcoin wallets, tools and mining equipment. 3. Dynamic adjustment: The recursive system based on the BTC main chain can automatically adjust the number of extension layers according to the degree of network congestion. 4. Secure and traceable: All transactions conducted on the Fractal network can ultimately be traced back to the Bitcoin main chain.
Therefore, whether from the perspective of project concept or implementation mechanism, it seems that Fractal, which has always insisted on expanding based on the orthodoxy of the BTC main chain, has indeed used creative mechanisms to achieve the native expansion of BTC.
3. Regulatory policies
This year, the crypto market has been affected to some extent by the progress of the US election. On Polymarket, Trump's chances of being elected president dropped to 48%, while Vice President Harris rose to 50%. Trump rose 4 percentage points compared to last week, while Harris fell 4 percentage points. In Trump's X live broadcast with Musk on Monday, the expected content of talking about cryptocurrencies did not appear, and the crypto market responded by falling.
On the 15th, Harris' supporter, U.S. Senate Majority Leader and Democratic Senator Chuck Schumer, stated at the Crypto 4 Harris Town Hall Meeting that if Harris is elected president, he will be committed to introducing pro-encryption laws before the end of the year to promote innovation in the encryption field in the United States.
On the SEC side, according to documents, Nasdaq ISE withdrew its proposal to list Ethereum and Bitcoin spot product options trading on August 13. Also on the 13th, the SEC accused NovaTech and its principals and promoters Cynthia Petion and Eddy Petio of implementing a $650 million fraud scheme.
Separately, Indonesia’s Financial Services Authority (OJK) is preparing new tax adjustments for crypto asset transactions. This is part of a plan to transfer regulation of crypto assets from the Commodity Futures Trading Supervisory Agency (Bappebti) to OJK in early 2025. According to Hasan Fawzi, CEO of the Financial Sector Technology Innovation Supervision, OJK will work with the Ministry of Finance to implement the new crypto tax. At the same time, OJK aims to achieve a transaction volume of 1,000 trillion rupiah (64 billion U.S. dollars) in the digital and crypto financial sector by 2028.
IV. Conclusion
1. Macro-level summary and future forecasts
Judging from the Fed’s policy goals and officials’ recent statements, it is “highly likely” that interest rates will be cut in September: on the one hand, inflation is falling toward the 2% target, and the labor market has also cooled. The overall and core CPI continued to fall year-on-year in July, the unemployment rate rose to 4.3%, and non-farm payrolls were lower than expected, all of which paved the way for the Fed’s September rate cut; on the other hand, Fed officials’ recent speeches were dovish, warming up for the rate cut. In particular, Powell emphasized in his interviews with the Washington Economic Club and many other speeches that there is no need to wait until inflation drops to 2% before cutting interest rates, and he is worried that cutting interest rates too late will put pressure on the economy. Therefore, “easing” will become the main theme in the second half of the year, which is good news for risky assets.
2. Crypto industry market changes and warnings
The performance of Bitcoin and Ethereum ETFs is showing an upward trend. The inflow of OTC funds may push up prices, but volatility remains unclear. Especially in the case of a tie between Trump and Harris in the US election, there are still variables as to what may happen to industry regulation in the future.
In the coming week, five projects will have a one-time large-scale token unlocking, with a total of US$217 million, of which Pixels (PIXEL) is worth approximately US$7.8 million; Avalanche (AVAX) is worth approximately US$197 million; SPACE ID (ID) is worth approximately US$6.63 million; Galxe (GAL) is worth approximately US$1.55 million; and Ethena (ENA) is worth US$4.44 million.
3. Industry and track hot spots
With Bitcoin and Ethereum still dominating the main market, altcoins are performing poorly, but the popularity of the Meme track has added a new direction for the industry to develop. The popularity of Meme has also driven the growth of public chains, including TRON, Solana, etc.
In terms of L2, the leading protocol with positive TVL growth is the OP field, while the ZK series protocol is slightly sluggish. The Bitcoin L2 ecosystem has attracted much attention from industry insiders, and how to leverage Bitcoin's security and leverage Bitcoin's applications has become a common focus.
In addition, the concept of chain abstraction aimed at improving user experience is becoming a key focus of the industry.
