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Market confidence is fragile but actual recession has not occurred. BTC is expected to rebound next week

BlockBeatsBlockBeats2024/09/06 09:43
By:BlockBeats

Altcoin will continue to be closely linked to the trend of the broader market in the near term and will not develop its own independent trend.

Original title: "Frontier Lab Crypto Market Weekly Report|W36"
Original source: Frontier Lab


BTC and ETH Weekly Overview


Market Performance


This week, the overall cryptocurrency market showed a volatile downward trend:


· Bitcoin: This week, Bitcoin showed an overall downward trend. The decline was due to the fact that the US ISM Manufacturing PMI and the US ADP employment in August were both lower than expected, showing the continued weakness of the US economy, causing the market to start trading again in recession, and the most important thing is that market confidence is very fragile at this stage.


· Ethereum: This week, Ethereum followed Bitcoin and also showed a downward trend. In addition to the impact of macroeconomic factors, following the disagreement within the Ethereum ecosystem on the future development direction last week, no unified opinion was formed in the Ethereum Foundation AMA this week, and there is a lack of hot spots and innovation within the Ethereum ecosystem, so investors have expressed pessimism about the development of Ethereum.


Key Events


US ISM Manufacturing PMI is lower than expected


On September 3, the US ISM Manufacturing PMI value for August was announced to be 47.2, lower than the expected value of 47.5. Although it is higher than the previous value of 46.8, the market believes that the weak performance of the manufacturing industry may trigger a US economic recession in the future.


ADP employment in the United States in August was lower than expected


On September 5, the ADP employment in the United States in August was announced to be 99,000, lower than the previous value of 111,000, significantly lower than the expected value of 145,000, a record low in three and a half years, showing a signal of a weak job market. This has intensified the market's expectations of a future US economic recession and triggered a decline in various markets.


Altcoin Overview of the Week


Overall Performance


This week, the market sentiment index fell to 11%, a sharp drop from 38% last week. As the market has been in a downward trend for two consecutive weeks, market sentiment has turned from fear to extreme fear.


The Altcoin market was affected by multiple factors this week. The external factor was that the published US macro data was lower than expected, which triggered the market to restart trading and economic recession, causing various markets to fall. The internal factors of the industry were that there were no hot spots and innovations in the Crypto industry at this stage, and it was impossible to make new narratives. In addition, the trading users in the market lacked confidence in the future, which led to a decline in purchasing power and heavy selling pressure.



Overview of TVL growth of public chains


Top 5 public chains with the highest TVL growth in the past week (excluding public chains with smaller TVL), data source: Defilama



CORE:Core is an innovative public chain compatible with EVM. Recently, LstBTC, an ERC-20 liquidity pledge token pegged 1:1 to Bitcoin, was launched. While holders can guarantee Bitcoin liquidity by holding LstBTC, they will also earn CORE tokens as rewards every day, giving BTC's LST another layer of income. And recently Binance announced its investment in Core. The popularity of the BTCFi track has returned recently. In addition, the current market situation is relatively weak. Investors believe in BTC more and increase their own income while holding BTC, so the TVL of Core has risen rapidly.


BSquared: Recently, the BTC ecosystem has regained market attention. As the leading project in the BTC-L2 track, BSquared has also taken the opportunity to actively develop. Recently, BSquared announced a strategic partnership with Aptos to expand BTCFi to the Aptos ecosystem. Echo Protocol provides an annualized return of 12% for cross-chain BTC, and has reached a cooperation with KryptosConnect.


dYdX:Recently, dYdX has started to continuously list more token trading pairs through community voting, such as OSMO, XTZ and other tokens, thereby increasing the number of token trading market makers accordingly, and the TVL of dYdX has risen recently.


Sei:This week, Sei integrated Biconomy, and users can use the account abstraction infrastructure stack; Sei is currently promoting the construction of Game Week, through vigorously promoting and promoting the Gamefi project, so that users can also receive SEI token rewards. Thereby increasing the participation of users on the chain.


Starknet:Recently, the market has begun to mention the Ethereum Pectra upgrade at the beginning of next year. The upgrade terms are very beneficial to the development of the ZK industry, so Starknet, as the leader of the ZK track in the entire Crypto, has been re-focused by the market this week.


Overview of project TVL growth


Top 5 market projects with the highest TVL growth in the past week (excluding public projects with smaller TVL, the standard is more than 30 million US dollars), data source: Defilama



Colend Protocol:


Project Introduction: Colend is a lending protocol built on the Core chain. The main collateral of the project is BTC’s LST token, which aims to promote the development of the Bitcoin-Fi track.


Latest development: This week, Core launched LstBTC, an ERC-20 liquidity pledge token pegged to Bitcoin at a 1:1 ratio. While holders can guarantee Bitcoin liquidity by holding LstBTC, they will also earn CORE tokens as rewards every day, which has caused a sharp increase in TVL on the Core chain. At the same time, in order to release the liquidity of LstBTC, users will choose Colend Protocol, a lending protocol on the Core chain, which has caused a rapid increase in TVL on Colend Protocol this week.


Maple Finance:


Project introduction: Maple Finance is a lending protocol on multiple chains.


Latest development: Maple Finance supports lending with BTC as collateral and provides at least 7% APY to lenders who provide funds. Recently, due to the very unstable market trend, users have begun to tend to hold BTC, which has also promoted the development of BTCFi.


Maple Finance decided to launch the SKRUP token in the fourth quarter and plans to convert 1MPL into 100SKRUP.


Spiko:


Project Introduction: Spiko is an RWA project. It mainly puts real assets of Euro government bonds on the chain. Thanks to the continuous decline of the US dollar against the euro, the TVL of RWA projects linked to the euro has grown rapidly.


Latest Development: Spiko's business has now expanded to include RWA of US Treasury bonds, so the TVL on the chain has grown rapidly recently.


Yei Finance:


Project Introduction: Yei Finance is a lending protocol based on the Sei chain. Compared with other lending projects, Yei Finance can cover a wider range of tokens.


Latest Development: This week, Yei Finance reached a cooperation agreement with OKX. OKX encourages users to deposit money into Yei Finance and provides up to 2.6M SEI rewards as additional rewards.


Yei Finance, as the best-developed lending project on SEI, has not issued any tokens. Recently, Yei Finance has been holding weekly events, and participants will receive Yei Finance points, so there is an expectation of airdropping tokens.


Cellana Finance:


Project Introduction: Cellana Finance is a DEX based on the Ve (3, 3) model on the Aptos chain. In the liquidity pool of its project, amAPT/APT accounts for the largest proportion of currencies, nearly one-third, with a yield of up to 6.11%. The remaining major pools are stablecoin exchanges, with an APY of up to 17%. In addition, the Ve model was introduced in the CELL token model, which was learned from Cruve. In this model, CELL is highly empowered, and it is given staking, voting, and profit distribution. The yield of staking for one year reached 50%.


Latest Development: Recently, Cellana Finance has reached a cooperation with the lending protocol Meso Finance to support staking CELL for lending, thereby increasing the leverage of users who want to participate in Cellana Finance. Therefore, its TVL has risen rapidly recently.


Overview of the Gain List


The top 5 market tokens with the highest gain in the past week (excluding tokens with too small trading volume and meme coins), data source: Coinmarketcap



This week's gain list did not show the characteristics of "sector concentration", and the rising tokens belonged to the lending, BTC-L2, Internet of Things, mining and Depin tracks.


RDNT:Radiant Capital is a cross-chain borrowing and lending protocol built on LayerZero. Recently, AAVE, the leader in the lending track, has remained strong and continued to rise in the falling market, attracting some of the market's attention and funds to the lending track. And Radiant Capital expanded its business to the Base chain this week to make it more convenient for users to borrow.


MERL:Because there was a big disagreement on the future development direction within the Ethereum ecosystem last week, and there was no new hot spot in the market this week, market funds began to choose the BTCFi track, and Merlin Chain is a leading project in the BTC-L2 track.


STMX:Its main trading volume is on the Korean exchange Upbit, and the recent trading volume of STMX in Upbit is second only to BTC and ETH. The trading volume suddenly increased, and StormX plans to start the community vote on the merger plan in September.


GOMINING:There is no obvious news or project benefits this week.


HNT:Some of the hot topics in the market this week shifted to the Depin track. As a popular project in the Depin track, HNT performed relatively strongly this week, but the project itself did not have any benefits this week.


The increase of the five tokens on the list of gainers this week is significantly lower than that of last week. This week, they have basically maintained a negative downward trend. It is expected that after the announcement of the US unemployment rate on Friday, the market will have a decline and continue to fluctuate next week.


Meme Token Gainer List


Data source: coinmarketcap.com


The Meme coin track performed very weakly this week after a strong rebound last week. As the overall market is in a downward trend this week, and the market sentiment has also entered a stage of extreme fear this week, investors are more cautious and have reduced their investment in the cryptocurrency field, especially the Meme coin track. We can find that Meme coins have rarely entered the list of gainers, which can also reflect that the market sentiment is very fragile at this stage, and the risks of the Meme track are also rising at this stage.


Social Media Hotspots


According to the top five daily growth in LunarCrush and the top five AI scores in Scopechat, the statistics for this week (8.31-9.5) are as follows:


The most frequently appearing theme is L1s, and the tokens on the list are as follows (tokens with too small trading volume and meme coins are not included):


Data source: lunarcrush and Scopechat


According to data analysis, the Layer 1 blockchain projects with the highest social media attention this week generally showed a downward trend, which was mainly affected by the overall market volatility and decline this week. And after Ethereum had internal disagreements on the development path last week, the market began to gradually turn its attention to various public chain projects. Due to the impact of the overall market downturn this week, various public chain projects have not been able to independently develop their own trends from the market.


Theme Tracking


Data source: SoSoValue


According to weekly return rate statistics, the NFT track performed best, while the GameFi track performed the worst.


· NFT track:The recent lack of hot spots in the Crypto market, coupled with the pessimism of market investors, has caused the liquidity in the market to be not very good, and funds are not concentrated in a certain field but dispersed. The NFT market has been in a tepid state since the last round of bull market, and in this round, inscriptions and Meme have taken over its original position, resulting in a gradual decrease in the scale and popularity of the NFT market. Due to its small capital volume, some funds can be entered to gain an increase, so there has been an upward trend this week.


· GameFi track:The rise of IMX supported the entire GameFi track last week, making the decline of the GameFi track smaller than that of other tracks. This week, the projects in the GameFi track are all in a downward trend with the market, and the leader of the GameFi track, IMX, has fallen by nearly 10% this week, causing the GameFi track to make up for the decline as a whole. As a result, the GameFi track performed the weakest this week.


Market discussion direction this week


Ethereum's future development direction and problems it faces


Vitalik's previous tweet that he did not support DeFi projects triggered discussions in the market about Ethereum's future development direction and the problems it faces at this stage. The focus is mainly on Layer-2's role in sucking blood from Ethereum, not creating value, and even reducing Ethereum's income; the reasons for Ethereum's future appreciation; and the upcoming Ethereum Pectra upgrade.


Although Vitalik and Justin responded to the issues of Ethereum's future infrastructure and Layer-2, the market did not agree with their answers. The market still believes that Ethereum's existing infrastructure construction is sufficient to cope with the current development of Ethereum. The next step is to focus on the development of applications within the Ethereum ecosystem and strive to create a hot spot to lead the development of this bull market. The market did not pay too much attention to the upcoming Ethereum Pectra upgrade, but only responded to ZK, smart contract accounts and other closely related tracks.


Reflections on the Restaking Track after Penpie was attacked


The attacker created a fake market on Pendle and forged SY tokens. Although this did not harm Pendle itself, Penpie did not consider such malicious scenarios, allowing the attacker to perform a reentry attack. The attacker stole $27 million worth of rswETH, wstETH, agETH and sUSDe tokens.


This type of attack has caused the market to think deeply about the Restaking track. Although the Restaking project can bring more additional benefits to the stakers, the security assessment of the Restaking track is often overlooked, especially the smart contract risk. Depositing LP tokens in another smart contract will introduce significant additional risks, which must be carefully evaluated. And usually the potential returns are not enough to compensate for these additional risks. Therefore, the most important point for market users to participate in the Restaking project is its security rather than the profitability.


The return of BTCFi


Recently, due to the disagreement on the development direction within the Ethereum ecosystem, many on-chain users are not optimistic about the future development of Ethereum, and have turned their attention to the BTC ecosystem, which is larger than Ethereum. Although the BTC ecosystem was hot for a while because of the inscription, the decline of the market later caused the decline of most projects and criticized the Bitcoin ecosystem for copying the development route of the Ethereum ecosystem, causing the market to temporarily ignore this field. After the Ethereum ecosystem split, more on-chain users began to enter the Bitcoin ecosystem, hoping to develop on the Bitcoin ecosystem in a way that the Ethereum ecosystem does not support. Therefore, a large number of Defi infrastructure projects in the BTC ecosystem began to develop this week, such as lending and staking. If Ethereum does not adjust its development strategy in the future and still focuses on infrastructure as the main construction direction, more and more Ethereum chain users will choose to leave Ethereum for other ecosystems, and BTC's industry status in Crypto will give the BTC ecosystem a natural development advantage.


Preview of Crypto Events Next Week


· Tuesday (September 10) Trump and Harris’ first debate

· Wednesday (September 11) U.S. August seasonally adjusted CPI annual rate; Permissionless

· Friday (September 13) IBC 2024


Outlook for Next Week


1. Bitcoin: Bitcoin currently lacks its own positive factors and is in a state of volatility. Its price fluctuations are mainly affected by market news and macro data. This week, it fell due to the impact of macroeconomic data and began to trade in a recession. The two data to be announced, the US unemployment rate in August and the US seasonally adjusted CPI annual rate at the end of August, are the most concerned in the market. These two data even determine the extent of the Fed's interest rate cut in September to a certain extent. It is generally believed that the interest rate will be cut by 25BP, but if the data does not meet expectations, it will be immediately revised to 50BP, thereby exacerbating concerns about economic recession. It is expected that Bitcoin will continue to follow the trend of macro data next week. Although the market is trading in a recession, the actual recession has not occurred. Therefore, it is expected that Bitcoin will rebound next week after two weeks of decline.


2. Ethereum: In addition to being affected by external macroeconomic data this week, Ethereum's internal development direction is still uncertain. Vitalik has already called out at the Tokyo DevCon that "Ethereum will enter an application-centric era", but no unified opinion was formed in the 12th Ethereum Foundation AMA this week. There is still a disagreement between continuing infrastructure construction and vigorously supporting specific application projects. Before the Ethereum Foundation and market users reach an agreement, the construction of the Ethereum ecosystem will face severe challenges. Therefore, ETH is expected to perform worse than BTC next week.


3. Altcoin:Crypto market lacks hot spots and innovations at this stage, so Altcoin projects do not have a concentrated outbreak direction, and before the interest rate cut and the general election, the market will be in a state of repeated shocks. Coupled with the current trading users' lack of confidence in future development, Altcoin will continue to be closely related to the trend of the market in the near future, and will not have its own independent trend.


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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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