In August 2024, the cryptocurrency market experienced a 13.1% drop in total market capitalization influenced by major global macroeconomic concerns. Weaker-than-expected U.S. unemployment data and a significant interest rate hike by the Bank of Japan led to a ripple effect in global stock markets, particularly in Asia. The crypto market saw over US$819M in liquidations in a single day, the highest since April 2024. Despite a "flash crash," the market began to recover as U.S. Federal Reserve Chairman Jerome Powell hinted at a potential rate cut in September, and the U.S. Bureau of Economic Analysis revised second-quarter GDP growth to 3%, exceeding expectations.
The U.S. federal funds rate has been at its highest level since 2001, following a significant rate hiking cycle between March 2022 and July 2023. After holding rates steady for 8 consecutive meetings, all eyes point to a rate cut in the next meeting on September 17-18. For context, the Fed adjusts the federal funds target rate in response to economic conditions. This is done to serve their dual mandate of maintaining stable prices (i.e. keeping inflation under control), and supporting maximum employment. Now that U.S. inflation is significantly down from the highs, and fast approaching its 2% target, the Fed’s focus has been shifting towards unemployment. Lowering their target rate (i.e., the price of credit) should hopefully lead to a fresh influx of money into the economy, which can support more hiring and better employment figures.
Ethereum Layer-1 gas fees have reached their lowest levels in over five years, with several instances of low-priority transactions costing one gwei or less in recent weeks. The decline in gas fees can be attributed to lower network activity and the introduction of blobs during the Dencun upgrade in March, which not only reduced Layer-2 gas fees but also alleviated congestion on Ethereum Layer-1, thereby contributing to the overall reduction in gas fees.
Despite the emergence of competing meme coin launchpads, Pump.fun remains the frontrunner, setting a new record this month with over 20K tokens created in a single day. The platform has now launched nearly 2M tokens and, since mid-August, has accounted for over 60% of daily transactions across Solana-based decentralized exchanges (“DEXes”). As market competition intensifies, it will be interesting to see if Pump.fun can maintain its dominance as the leading meme coin launchpad.
The stablecoin market continues to boom, with transaction counts approaching all-time highs and significant growth being seen in the CELO and Solana ecosystems. While CELO's USDT supply reached US$200M quickly, Solana led in transactions – boosting PayPal’s PYUSD to a US$1B market cap. As stablecoins gain global traction, it will become increasingly important to monitor how macroeconomic factors and regulatory changes impact the sector's development.
Please feel free to share with us any feedback or suggestions you may have via this form