CMC Market Pulse delivers actionable market insights, giving you all the key narratives and developments you need in under 5 minutes.
Market Overview 📉
Crypto markets bled this week, continuing last week’s lackluster price action as we enter the end of summer. Despite expectations of a rate cut in September, the market still shows no appetite for risk-on assets.
The equities market went into a selloff in the early half of the week, following the labor day holiday on Monday, leading to a heavy selloff in crypto as well.
Bitcoin (BTC) saw a fall of over 5.11% across the week, while Ethereum (ETH) largely traded in tandem as well, losing around 6% across the last seven days.
Daily liquidations as a whole hovered in the $100M range, but despite the volatility, liquidations did not increase significantly, with daily liquidations staying under the $200M level. Funding rates on BTC finally climbed back into the positive range while funding rates for ETH fell instead, possibly reflecting the conflicting opinions on the two assets.
📌 Ethereum ETF flows, in both directions, have fallen to almost zero, just one month after the launch of the ETFs — Link
📌 The FTX bankruptcy estate is finally expected to begin returning $16B in funds to creditors, possibly as early as Q4 2024 — Link
📌 Founder of DeFiance Capital Arthur points out the devastating altcoin capitulation, with some alts even dropping lower than its bear market lows in 2022 — Link
Why does it matter?
The crypto market continues to underperform, with a strong correlation with the traditional equities market, but only to the downside.
This week finally saw a weakening in the equities market, which has been slowly recovering from the impact of the unwinding of the USD-JPY carry trade in early August. The move was largely driven from a spike in the Yen following the BOJ’s announcement that it might hike rates in December.
Furthermore, leading chipmaker Nvidia suffered a record $279 billion loss in market value, following weak U.S. manufacturing data, fears of an economic slowdown and overall investors’ pessimism in the AI sector. This has dragged down tech stocks and other risk-on assets, including crypto.
Altcoins held relatively flat against BTC this week, with TOTAL3/BTC squeezing out a slight 0.5% gain this week. Among altcoins, selected DeFi coins outperformed, including Uniswap (UNI) and Aave (AAVE). Other strong performers include gambling protocol, Rollbit (RLB), and DePIN network, Helium (HNT). However, as Arthur from DeFiance Capital pointed out, select altcoins, like Cosmos (ATOM), have suffered “proper capitulation,” trading even lower than its 2022 lows. Meanwhile, some coins, like Algorand (ALGO), Conflux (CFX), MultiversX (EGLD) and Polkadot (DOT), have retraced its entire rally from October 2023.
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Narrative of the Week 📰
Solana L2s, or as some like to call, Network Extensions, take center stage as Solana and Ethereum supporters debate the nature of Network Extensions and what they mean for the Solana L1. The discussion was kicked off with a tweet from Austin Federa, discussing how Solana’s Network Extensions achieve things that are not possible on the L1 and as such should not be thought of as an L2.
📌 Kyle Samani weighs in on Austin’s tweet, stating that Network Extensions are not parasitic to the Solana L1 as they were not possible on the L1 to begin with — Link
📌 Ethereum investor, Ryan Berckmans, pokes fun at Kyle Samani for his examples of Network Extensions, which describe themselves as L2s in their own tweets — Link
📌 Mert from Helius, states that while he agrees that they shouldn’t be called Network Extensions, he couldn’t care less about the entire debate and would just rather keep building — Link
Why does it matter?
Solana supporters have long criticized the Ethereum ecosystem and its L2s for their parasitic nature towards the Ethereum L1. This is because everything on the Ethereum L1 can be replicated on a general purpose L2, leading to much of the activity from Ethereum shifting to its L2s. As a result, Ethereum has seen much lower usage in recent months, leading to less ETH burn and inflationary pressures.
However, with the shift towards Network Extensions, Ethereum supporters have now accused Solana of giving up on their monolithic model by moving towards L2s, just as Ethereum had.
Major Project Updates 🗓️
📌 Kaia chain launches their mainnet, an EVM-based L1 blockchain backed by South Korean conglomerate Kakao and leading Japanese company LINE NEXT. Kaia is also launching Kaia Wave, an initiative to incentivise the development of Mini DApps within the LINE ecosystem — Link
📌 Arbitrum launches Arbitrum Stylus on Arbitrum One and Nova, enabling smart contracts on these chains to be written in other programming languages besides Solidity, such as Rust, C/C++ and more — Link
📌 Polygon completes its token migration from the original MATIC token to the new POL token, introducing a 2% annual emission model, of which half will be allocated to validators and the remaining half to the Treasury to support the ecosystem — Link
📌 Arweave and AO unveil ArFleet, a temporary storage solution, designed to work in tandem with Arweave’s current long-term storage solution. ArFleet is currently in Testnet — Link
📌 Frax Finance introduces the Frax Name Service (FNS), a fork of Ethereum’s ENS service, but instead using the FXS token for payments for .frax usernames — Link
Why does it matter?
Telegram and its L1 blockchain, The Open Network (TON), has been one of the dominant narratives of the year, with TON breaking into the top 10 cryptocurrencies by market capitalization. Additionally, several tokens in the TON ecosystem belonging to Telegram Mini Apps such as NOT and DOGS have achieved market capitalizations of over $500M.
In East Asia however, apps like Kakao and LINE remain the top used messenger applications. With the success of Telegram and TON, LINE and Kakao seek to replicate their success with the Kaia L1 and the Kaia Wave incentive program to incentivize the development of applications for the LINE ecosystem, similar to what TON has done for Telegram’s Mini App ecosystem.
DeFi Brief 🏦
📌 Trump-backed DeFi project, World Liberty Financial, will be built on Aave on Ethereum. Additionally, it is believed that the team originates from Dough Finance, a recently hacked DeFi platform — Link
📌 Sky (formerly MakerDAO) and Aave partner up to form the Sky Aave Force, to strengthen Ethereum DeFi through integrating USDS and sUSDS on Aave V3 as well as creating a new Spark/Aave market for seamless integrations between the two projects — Link
📌 Modular lending platform on Ethereum, Euler Finance, launches Euler V2, which enables greater customizability over lending markets and reduction in liquidity fragmentation — Link
📌 Yield tokenization platform, Pendle, onboards EtherFi’s eBTC product onto Pendle, granting users greater flexibility on leveraged yield and point farming as well as fixed yield opportunities — Link
📌 Penpie, a yield platform built on Pendle, was exploited for $27M in rswETH, wstETH, agETH and sUSDe, through a re-entrancy attack. Pendle was unaffected by the attack, although contracts were temporarily paused — Link
📌 Blast-based Perpetuals DEX, 100x Finance, launches Prediction Markets on their platform, all under one cross-margin account and zero fees — Link
📌 Dinero (formerly known as Redacted Cartel), will be building the native ETH liquid staking token on the upcoming Ethereum L2, Movement, known as MoveETH — Link
📌 Solana liquid restaking platform, Fragmetric, introduces fragSOL, in collaboration with Jito Network, which leverages Token Extensions to distribute AVS rewards accurately to holders of liquid restaking tokens — Link
Why does it matter?
After long term underperformance, Ethereum and its DeFi ecosystem have slowly gained traction among crypto investors again, in a return to fundamentals. The shift in sentiment has resulted in Aave being one of the main favorites among fundamental investors.
With Trump’s DeFi project, World Liberty Financial, leveraging Aave, and the new partnership between Sky and Aave, Aave’s position as a core DeFi token continues to grow stronger, with whales accumulating AAVE on-chain.
Meme Coins 🚀
📌 Dubbed the “pump.fun of Ethereum”, Ethervista launches on mainnet, alongside their token, VISTA. Ethervista is a new age automated market maker (AMM), designed to align devs and token holders — Link
📌 Prominent cryptocurrency investor, Eric Wall will debate MOTHER’s founder and rapper Iggy Azalea over the merits of “celebrity coins” during Solana Breakpoint in Singapore — Link
Fundraises 💰
📌 Time tokenization platform, Time.fun, raises $3M in a seed round led by Brevan Howard Digital, with support from Coinbase Ventures, Zee Prime Capital, Breed VC and more — Link
📌 Web3 payments firm, Bridge, raises $58M in funding from investors including Sequoia, Ribbit Capital, Index Ventures and Haun Ventures among others — Link
📌 Web3 cyber-security firm, Hyperactive Labs, raises $16M in a Series A funding round, with backers including Bloccelerate VC, Boldstart Ventures, Borderless Capital and more — Link
📌 Intent-based exchange, Odos Protocol, closes their Series A funding round for an undisclosed amount, with investors including Uniswap, Mantle, Curved Ventures, and Orbs Network, among others — Link
Airdrops Abound 🎁
📌 Cross-chain bridging protocol, DeBridge, reveal details for their upcoming launch on Jupiter’s LFG launchpad, including a fixed bid price on their token launch at $0.025 as well as participation limited only to DeBridge users and JUP stakers — Link
📌 Zero-knowledge rollup, Scroll, teases users “Scroll. Soon.”, possibly hinting at an upcoming Scroll airdrop announcement — Link
📌 AI data layer, Grass, releases their airdrop checker, with 10% of their total token supply to be released in the upcoming airdrop — Link
📌 EigenLayer announces EIGEN Season 2 Stakedrop, rewarding ETH stakers, operators, ecosystem partners and the community — Link
Tweet of the Week 📝
Source: SmokeyTheBera
Industry-level mogging.
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