On the eve of the Fed’s rate cut: Recession expectations weakened, boosting BTC’s rebound

Original title: "Frontier Lab Crypto Market Weekly Report｜W37"

Original source: Frontier Lab

BTC and ETH overview this week

Market performance

The overall cryptocurrency market showed a rebound trend this week:

· Bitcoin: This week, Bitcoin showed an overall rebound trend. Market traders' sentiment towards recession trading has eased, and it is generally believed that the probability of a recession in the US economy in the future is relatively low. After the release of the US August CPI data this week, it can be seen that the CPI has been greatly alleviated and has taken another step towards the 2% that the Federal Reserve is concerned about. As a result, most market traders bet that the Federal Reserve will cut interest rates by 25BP next week, which means that it is only a defensive interest rate cut, and the US economy has not entered a recession. Therefore, this week's rebound occurred after a sharp drop in the last two weeks.

· Ethereum: This week, Ethereum's performance was weaker than Bitcoin, and the rebound was weaker than the overall market. In addition to external macro factors, the most important thing is that Ethereum is now confused about the future development direction. The market does not buy the opinions of Ethereum developers, and the opinions of market users are not adopted by Ethereum developers, so serious differences have occurred. The most important thing is that there are no innovative and rapidly developing star projects on the Ethereum chain, which lacks the ability to tell stories and the wealth-creating effect in the future, causing funds to be transferred from the Ethereum chain to other public chains, making the construction of the Ethereum ecosystem face severe challenges.

Key Events

US CPI data lower than expected, lower than the previous value

· On September 11, the US seasonally adjusted CPI annual rate at the end of August was 2.5%, significantly lower than the previous value of 2.9% and lower than the expected value of 2.6%, indicating that US inflation is rapidly declining and is under very good control at this stage. The value is constantly approaching the Fed's expected value of 2%, which further confirms the Fed's interest rate cut next week. And the market is most worried about the number and magnitude of the Fed's future interest rate cuts. Through this CPI data, the market understands that the continuous decline in CPI data is in a controllable stage and will not easily cause a rebound, so the Fed's interest rate cuts will continue for many times.

Altcoin Overview of the Week

Overall Performance

This week, the market sentiment index recovered quickly and has risen to 65.5%, a sharp increase from 11% last week. As the market gradually rebounded this week, market sentiment turned from extreme fear to greed.

The Altcoin market followed the rebound trend of the broader market this week and rebounded more strongly than the broader market. This rebound was mainly because the market believed that the possibility of a recession in the US economy in the future was reduced, which eased concerns about the recession, thus triggering this week's rise. And a lot of funds flowed out of the Ethereum ecosystem and began to flow to other public chains, causing projects in various ecosystems to rise.

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

TON:TON is a public chain project backed by Telegram. It has quickly become popular by relying on the mini-programs and mini-games bound to Telegram and has very good performance. It has even surpassed Solana in TPS testing. In the past few weeks, the arrest of the founder of Telegram in France caused some adverse effects on the TON ecosystem. As time went on, the impact of this incident gradually faded in the market, and the TON ecosystem began to recover slowly. Recently, the TON ecosystem has been issuing DOGS tokens to users, which has significantly increased the number of users on the chain, thereby promoting the recovery of TON's TVL.

Fantom：Fantom is a public chain compatible with EVM. It mainly uses the Opera mainnet and builds its architecture on the core layer to handle consensus between nodes; the middleware layer for executing functions such as rewards and payments; and the application layer, which hosts the API of dApp. This makes Fantom a high-performance public chain. Recently, Fantom changed its name to Sonic, and its mainnet was launched this week. In order to encourage everyone to enter the new network, the project announced that users of Opera and Sonic will receive an airdrop of 190 million S tokens, which has triggered active participation from users on the chain.

Sei：Sei is currently promoting the construction of Game Week, and through vigorously promoting and promoting the Gamefi project, users can also receive SEI token rewards. At the same time, the Sei Foundation and OKX Wallet jointly launched a 2.67 million SEI reward sharing event, allowing users to directly lend USDC/USDT with the lowest risk and obtain an annualized return of 11%-25%. At the same time, a certain number of SEI tokens are rewarded to participating users, thereby increasing the participation of users on the chain.

Cardano：Cardano learned from Solana and Tron, actively introduced Meme tokens, and developed a Meme listing platform similar to Pump, and launched some Meme coins that have been popular recently, such as ADADOG, etc., which have played a certain role in promoting Cardano's on-chain activities in the current environment where the money-making effect is relatively poor.

Bitlayer：Bitlayer is a Bitcoin Layer-2 with BitVM as its core. BTCFi has recently regained market attention, and Bitlayer has also returned to the public's attention. Taking this opportunity, Bitlayer and OKX launched a project for on-chain mining rewards, allocating BTR tokens and Bitlayer on-chain points to pledged users, mobilizing the enthusiasm of on-chain users to participate, and making Bitlayer's TVL rise rapidly.

Overview of project TVL growth

Top 5 market projects with the highest TVL growth in the past week (public projects with smaller TVL are not included, the standard is more than 30 million US dollars), data source: Defilama

DeSyn Protocol:

Project Introduction: DeSyn Protocol, as a decentralized asset management platform built on the Ethereum chain, provides a complete set of financial products to maximize the potential of investors' funds, including derivative synthetic assets, leveraged pledge ETFs, income-earning funds, RWA funds and customized strategies, all of which are driven by smart contracts.

Latest Development: DeSyn Protocol has cooperated with HashrateAsset, Bullishs_io, AILayerXYZ, Ionic and Bitfi_Org in the past week. The cooperation with these projects has attracted some funds to flow into the DeSyn Protocol, and jointly developed various innovative financial products and launched new cryptocurrency funds.

Suilend:

Project Introduction: Suilend is a lending protocol launched by Solana Ecological Lending Protocol Solend on Sui, with a very strong financial background.

Latest development: This week, Suilend increased its ETH deposit limit from 2,000 ETH to 2,500 ETH, and Suilend launched a 2-week event. Depositing or borrowing SUI, USDC, USDT, ETH or SOL will share 436,386 SUI. These two policies have made Suilend's TVL grow very rapidly this week.

Yei Finance:

Project introduction: Yei Finance is a lending project backed by the Sei public chain. It is also the largest lending project on the Sei chain and is supported by the Sei project.

Latest Development:

This week, Yei Finance increased its deposit limits for USDT and USDC from 50 million USDT and USDC to 15,000 ETH, respectively. The Sei Foundation and OKX Wallet jointly launched a 2.67 million SEI reward sharing event, which allows users to directly lend USDC/USDT with the lowest risk and obtain an annualized return of 11%-25%. At the same time, it rewards participating users with a certain number of SEI tokens, which has rapidly increased Yei Finance's TVL this week.

DeDust:

Project Introduction: DeDust is a DEX project based on the Toncoin chain, using the innovative DeDust Protocol 2.0. It focuses on user experience, gas efficiency and scalability, and has developed a cross-chain bridge product that allows users to seamlessly connect between the Toncoin and Ethereum chains.

Latest Development: Because the Meme coin project DOGS is very popular recently and the price of the coin has risen significantly, DeDust has added DOGS/USDT and DOGS/TON liquidity pools to the project, and encourages users to add liquidity. In addition to the basic APY, users who add liquidity are also given SCALE tokens as rewards.

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 LstBTC holders can guarantee Bitcoin liquidity, they can 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 of Colend Protocol this week.

Overview of the gainer list

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

This week's gainer list did not show the characteristics of "sector concentration", and the rising tokens belonged to DEX, GameFi, public chain, AI and payment tracks.

DRIFT： Drift Protocol is the largest perpetual exchange on the Solana chain. Recently, the well-known investment institution Multcoin Capital announced that it has accumulated a large number of positions on Drift and believes that its reasonable valuation is 3.58, while the current price is 0.62. The price gap is large, and many KOLs followed Multcoin Capital's voice and called for DRIFT, causing DRIFT to rise significantly this week.

SUPER： SuperVerse is a decentralized ecosystem that combines multiple products under a governance token SUPER. SuperVerse's products have two core verticals: NFT market and games. This week, SuperVerse launched the Base chain-based L3 chain Super Champs Chain, which is a game-optimized L3 chain that has attracted investment from institutions such as Coinbase Ventures.

SUI: Sui chain game consoles started pre-sale this week, similar to Solana's mobile phone airdrop, and this week it can be clearly seen that funds began to enter the Sui ecosystem. BLUB and LIQ on its chain rose very rapidly this week, creating a wealth-making effect on the Sui chain. This week, Grayscale Fund announced that Sui Trust has been opened to qualified investors who invest in SUI, increasing the purchase of SUI tokens.

FET:The Super AI Alliance ASI, formed by the merger of FET, AGIX, and OCEAN, proposed to add the distributed AI computing project Cudos to its collective, and convert Cudos's token cudos into FET at a ratio of 112.427:1, with a price difference of 15 points, which caused FET to rise rapidly this week.

COTI:Recently, a new track PayFi has emerged in the market. Solana Ecosystem regards it as a key track for future development. As a veteran project in the payment track, COTI performed relatively strongly this week, but the project itself did not have any positive news this week.

The five tokens on the gain list this week have significantly higher gains than last week. It is expected that after the Fed cuts interest rates next Thursday, the market will have a large fluctuation and maintain a downward trend.

Meme Token Gain List

Data source: coinmarketcap.com

Although the entire market is on an upward trend this week, except for a few tokens that have seen a sharp increase in the Meme coin track this week, most tokens are on a downward trend. This is mainly because the funds in the market are very limited at this stage. After experiencing a large-scale market decline last week, market funds either fled or entered projects with larger market capitalization. Only a small amount of funds entered the Meme coin track, which is not enough to support the rise of the entire Meme coin track. Therefore, it can be seen that the Meme coin craze in the market is constantly retreating, and the risks of the Meme track are also increasing at this stage.

Social Media Hotspots

According to the data of the top five daily growth in LunarCrush and the top five AI scores in Scopechat, the statistics for this week (9.6-9.13) 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 followed the market and showed an upward trend, and the trend this week was stronger than the market. After the internal disagreement on the development path of Ethereum, the market began to gradually turn its attention to various public chain projects, and the market funds gradually began to flow into various public chains, so that each public chain project has its own independent trend this week.

Theme Tracking

Data Source: SoSoValue

According to weekly return rate statistics, the SocialFi track performed best, while the Payment track performed the worst.

SocialFi Track: In the SocialFi track, TON is still the absolute main force. A few weeks ago, the founder of Telegram was arrested and the TON public chain crashed, causing TON to fall sharply. As time went on, the market gradually faded the impact of this incident, and the TON ecosystem began to recover slowly. The TON ecosystem carried out some activities this week, such as adding taxi services on the chain and airdropping DOGS tokens to TON chain users, which made TON rebound significantly this week, and other tokens in the SocialFi track also rebounded significantly this week with the market.

Payment track: XRP and BCH account for a large proportion in the Payment track, and the combined share of the two reached 79.6%. Although XRP and BCH also rebounded this week with the market, the rebound strength was lower than that of other tracks, especially XRP, which only rebounded 5% this week, and XRP accounted for 65.88% of the entire Payment track, making the entire Payment track the worst performer this week.

Market discussion direction this week

The market discusses the difficulties and future development of ETH

Ethereum's performance has not been very good in recent period, coupled with the disagreement on the development direction within the Ethereum ecosystem, which has led to the market's analysis of the difficulties faced by Ethereum. The main reason is that as more and more transactions are processed on the second-layer solution, the fees and economic activities that would have benefited the Ethereum mainnet are increasingly redirected. This shift may lead to a decrease in ETH demand and a significant reduction in Gas fees, and the sharp drop in Gas fees has also affected the amount of ETH burned, causing ETH to resume inflation.

There are many opinions on Ethereum in the market regarding the current situation, which can be summarized as follows: It is generally believed that Ethereum should give up the continued heavy investment in infrastructure construction, but should recognize the nature of the current predicament and introduce a large number of top applications to attract more users; increase the income from staking ETH through projects such as Eigenlayer; increase the standard of basic charges in Ethereum Gas fees to increase Ethereum's income, thereby increasing the burning of ETH through EIP-1559; modify the pricing mechanism of Blob, etc.

Solana proposes the definition of PayFi and positions it as the future development direction

Lily Liu, chairman of the Solana Foundation, proposed the concept of PayFi: PayFi's motivation is to realize the initial vision of Bitcoin payment. PayFi is not DeFi, but a new financial market built around the time value of money. This on-chain financial market can achieve new financial paradigms and product experiences that traditional finance cannot achieve. Through the concept it proposed, we can regard PayFi as a fusion of DeFi + Web3 payment, with the focus on helping users maximize the time value of money. PayFi is suitable for applications in Web3 transactions, off-chain consumption scenarios, retail environments, creator monetization, accounts receivable, payment processing, private credit pools and other scenarios. From its application scenarios, we can see that the Payfi track can be regarded as a sub-track of the RWA track. At present, it is still mainly iterating around the two needs of accounts receivable factoring and cross-border payments for Web2. The PayFi track is one of the few new concept tracks at present when there is a lack of market hotspots. The main intention is to connect the funds and assets on and off the chain. Most of the projects in its track are in the early stages and are just telling a very beautiful story to the market.

Projects worth watching this week

Nansen

Nansen was originally a blockchain analysis platform, mainly used to detect the movements of various smart money on the chain, so that users on the chain can discover market trends and opportunities in a timely manner, especially for NFT and Meme coin players. This week, the node staking project stakewith.us was acquired. Nansen users can stake their assets in more than 20 ecosystems, including Solana, Ronin network, SuiNetwork, SkaleNetwork, Cosmos, dYdX, etc. Now users can use Nansen to analyze data, monitor their own investment portfolios and staked assets.

After Nansen added the pledge business, it represented a major change in its project narrative. Nansen had accumulated a large number of excellent on-chain users when it was doing analysis business before, and these users were all active participants in on-chain activities. Now Nansen has added more than 20 chain node pledge services, which not only include a wide variety of chains, but also have a very friendly exit mechanism, allowing users to exit the pledge in a shorter time. In this way, on-chain users can pledge their assets into the corresponding chain to obtain income without jumping to the application while monitoring the real-time data on each chain, and can withdraw the pledge in time when they need to participate in the on-chain activities of the chain, and choose the project to participate according to the on-chain data they monitor. Not only can it reduce the daily on-chain operations of users, but Nansen also clearly concentrates the pledge income of each chain in the interface, allowing users to maximize the income they can obtain.

Recently, Nansen has been reposted by various high-quality KOLs and projects, and its market popularity has further increased.

Huma Finance

Recently, Lily Liu, Chairman of the Solana Foundation, proposed the concept of PayFi, making PayFi one of the few innovative races in the market at this stage. PayFi aims to apply web3 technology to the real economy, which is essentially to introduce programmable currency and token economics into the real economic system. PayFi is committed to exploring two aspects: on the one hand, further promoting the financial transformation of RWA physical assets, exploring derivative applications such as off-chain consumption scenarios, retail environments, creator monetization, accounts receivable, and payment processing; on the other hand, in response to the current pure on-chain DeFi interest-bearing Yield trapped in the dilemma of stacking leverage, through the commercialization of AVS security consensus and DA capabilities, the real business economy is connected with web2, bringing a richer source of Yield to the on-chain world.

Huma Finance was originally a decentralized lending platform, mainly in the scope of loans and revolving credit lines, and positioned as the lending track in RWA. After acquiring the payment application Arf Financial, it began to upgrade its business. Combining its own RWA lending technology with Arf Financial's cross-border payment licenses in multiple countries, it naturally entered the PayFi track. After the upgrade, Huma Finance increased the credit line for accounts receivable guarantees to attract institutional investors, and adopted a modular approach in its construction, including the transaction layer, currency layer, custody layer, compliance layer, financing layer, and application layer, establishing a common framework and standards for the PayFi track.

Preview of Crypto Events Next Week

· Tuesday (September 17) U.S. August Retail Sales Monthly Rate; Stable Rise

· Wednesday (September 18) Verdict on Trump’s “hush money” case; TON Asia-Singapore

· Thursday (September 19) Federal Reserve Interest Rate Decision; Solana Breakpoint; DeFi 2049—Beyond THE Horizon; Impact 2049

· Friday (September 20) ETHGlobal Singapore

· Saturday (September 21) U.S. Securities and Exchange Commission (SEC) decides on Bitcoin ETF options

Outlook for Next Week

1. Bitcoin: Currently, Bitcoin lacks its own positive factors. Its price fluctuations are mainly affected by market news and macro data, and it cannot move independently. Because last week, the market mainly traded concerns about the impending recession of the US economy, which triggered a significant decline. This week, the sentiment for recession trading has eased. The market generally believes that the probability of a recession in the US economy in the future is relatively low. After the release of the US August CPI data this week, it can be seen that the CPI has been greatly alleviated and has taken another step towards the 2% that the Federal Reserve is concerned about. As a result, most traders in the market bet that the Federal Reserve will cut interest rates by 25BP next week, which means that it is only a defensive rate cut. The US economy has not entered a recession, so this week, it rebounded after a sharp drop in the last two weeks. It is expected that the trend of Bitcoin next week will fluctuate before and after the Federal Reserve announces the interest rate cut decision, and will be greatly affected by the dot plot released by the Federal Reserve.

2. Ethereum: Ethereum has been weaker than the broader market this week, and the ETH/BTC exchange rate has been in a downward trend. In addition to external macro factors, the most important thing is that Ethereum is now confused about its future development direction. The market does not buy into the opinions of Ethereum developers, and the opinions of market users are not adopted by Ethereum developers, which has caused serious disagreements. The most important thing is that there are no innovative and rapidly developing star projects on the Ethereum chain, which lacks the ability to tell stories and create wealth in the future, causing funds to transfer from the Ethereum chain to other public chains, making the construction of the Ethereum ecosystem face severe challenges. It is expected that ETH will perform worse than BTC in the future, and the ETH/BTC exchange rate will continue to fall.

3. Altcoin:Although Altcoin closely followed the rebound trend of the market this week and the rebound was stronger than the market, there was no unified market hotspot in Altcoin, and the innovative tracks that emerged were in the early stage and not perfect, so the funds were scattered and could not form a joint force for a certain track or project. In addition, the funds in the market were not sufficient at this stage and the trading users lacked confidence in future development, which would make Altcoin only follow the trend of the market in the future and would not develop its own independent trend. Therefore, it is expected that Altcoin will continue to follow the trend of BTC next week.

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