The US election and interest rate meeting may lead to short-term extreme market conditions this week

Original title: "Frontier Lab Crypto Market Weekly Report｜W44"

Original source: Frontier Lab

Market Overview

Summary of major market trends

1. The overall market has entered a wait-and-see phase

The market sentiment index has dropped to 14.9%, a significant drop from 41% last week, indicating that the market has entered a fear phase. BTC showed a strong rise at the beginning of this week, but then turned to volatility due to multiple factors. Altcoins performed weaker than the overall market, indicating that funds are still gathering towards BTC.

2. The DeFi ecosystem maintains a growth trend

The DeFi TVL of the entire network has steadily increased from US$33.2 billion to US$33.6 billion. The stablecoin market has expanded, and the market value of USDC has ended the previous three-week downward trend and turned to an upward trend. The BTCFi track performed outstandingly, and the TVL growth of multiple projects significantly exceeded the BTC price increase.

3. Track performance showed obvious differentiation

Meme coin led the gains, with a weekly return rate of 13.72%, mainly benefiting from the improvement in market sentiment. Layer2 and GameFi performed the weakest, with weekly returns of -2.53% and -4.01% respectively.

4. The impact of macro factors intensified

U.S. employment data and inflation indicators performed below expectations; technology stock earnings reports were generally lower than market expectations; the U.S. election and the Federal Reserve's interest rate meeting are approaching, and the risk of market volatility has increased.

5. Fund flows present new characteristics

DeFi projects continue to attract capital inflows, especially BTCFi-related projects. The market share structure of stablecoins began to change, and USDC stopped falling and rebounded.

Analysis of Market Sentiment Index

The market sentiment index fell to 14.9%, a large correction from last week's 41%, and market sentiment is in a fear stage.

Altcoin did not follow the trend of the broader market this week. The broader market rose rapidly in the first few days of this week, and then fell after Wednesday as various macro data and financial reports were released. Altcoin did not follow the rise of the broader market in the first half of the week, and fell sharply after Wednesday, resulting in Altcoin's trend this week being weaker than the broader market.

The market is currently in a neutral phase, and the US election is approaching. Therefore, the volatility risk caused by external factors in the market is very high at this stage. Altcoin will follow the market and remain volatile, waiting for the market to move in a certain direction.

Overview of overall market trends

The cryptocurrency market is in a volatile upward trend this week, and the sentiment index has entered a fear phase, which may reverse at any time.

Defi-related encryption projects have performed outstandingly, showing that the market continues to pay attention to improving basic returns.

The BTCFi track project in the Defi track has also seen an upward trend this week following the rise of the market, and the trend is stronger than the performance of the market, showing that investors are optimistic about its future market.

Hot Tracks

DeFi Track

TVL Growth Ranking

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

· Merchant Moe (MOE) (Recommendation Index: 3 stars)

Project Introduction: Merchant Moe is the largest DEX on the Mantle chain. As part of the Trader Joe ecosystem, Merchant Moe aims to change on-chain transactions through its liquidity book protocol. It provides a comprehensive and user-friendly DeFi experience that enables users to conduct seamless transactions, discretize liquidity, and obtain real returns.

Latest development: Mantle issued tokens this week, and its token COOK was listed on Merchant Moe, launching a COOK/MNT liquidity pool. Users who trade in the COOK/MNT liquidity pool can get extra MOE as a reward. In addition, Merchant Moe conducted a voting activity this week. In order to encourage users to participate, veMOE users were given 63% APY, which attracted a large number of users to participate. In addition, with the rise of the market this week, on-chain trading activities have also become active. As the largest DEX on the Mantle chain, the trading volume on Merchant Moe has increased by 198%.

· DeSyn Protocol (DSN): (Recommendation Index: 2 stars)

Project Introduction: DeSyn Protocol is a decentralized asset management platform built on the Ethereum chain, providing a full range of financial products to maximize the potential of investor funds, including derivative synthetic assets, leveraged pledge ETFs, income earning funds, RWA funds, and customized strategies, all driven by smart contracts.

Latest Development: Recently, DeSyn Protocol has reached cooperation with multiple public chains, including Core and AILayer, to expand DeSyn's ecosystem and improve accessibility, and has optimized and deployed Restaking products, integrated point rewards and automatic airdrop allocation, and repaired and updated the mainnet, solving key performance issues on the mainnet, thereby improving the stability and functionality of the platform. This week, DeSyn Protocol launched a joint mining S3 activity with Bitlayer. Users who deposit at least 0.000076 wBTC per day can get up to 25 BTR boxes and share $500,000 in DSN.

· Bedrock (unissued): (Recommendation index: 4 stars)

Project introduction: Bedrock is a multi-asset liquidity re-pledge protocol that obtains native token rewards through re-pledge while providing security for the ecosystem. Bedrock supports multiple assets for restaking and is supported by a non-custodial solution designed in cooperation with RockX. Bedrock uses its universal standards to unlock the liquidity and maximum value of tokens.

Latest development: This week, Bedrock launched the staking activity of Epoch, and increased the limit of uniBTC on Etherum, BNB Chain, Arbiturm and Optimsim chains, while giving high rewards to users who participated in the activities on these four chains, including 84 Bedrock diamonds, Babylon points and 1.5 times Epoch points. At the same time, a pyramid scheme activity was launched on the chain. Users who invite people to participate in Restaking on Bedrock can earn 30% of all the diamonds they generate. In addition, new users will also receive an additional 30%. Due to the large increase in BTC this week, users are more enthusiastic to participate.

· Aera (unissued token): (Recommendation index: 3 stars)

Project Introduction: Aera is a treasury management protocol that DAOs can use to deploy fund management strategies that grow with the market while also having downside risk. Developed by the team behind Gauntle, Aera enables DAOs to easily choose and implement long-term strategies for their financial departments without the burden of complex governance, all with transparent on-chain reporting and the unique needs of non-custodial treasury DAOs designed around them.

Latest Developments: This week Puffer finance compounded interest through Eigenlayer programmatic incentives, in which the hybrid TWAP strategy was executed through the Aera treasury to increase user returns. Compound voted to increase the use of the Compound Reserve Aera treasury, and the treasury strategy will target risk-adjusted returns, aiming to expand TVL by using idle reserve tokens (WETH, DAI, and USDC) in the Compound v3 market.

· Pell Network (unissued token): (Recommendation index: 3 stars)

Project introduction: Pell Network is the first project to provide cryptoeconomic security for all AVS through BTC re-staking. Pell Network achieves this goal by providing a decentralized token economic security leasing platform. The platform mainly serves Bitcoin holders. Through Restaking technology, BTC and its liquid pledge derivative assets scattered on various Layer2s are aggregated.

Latest development: Recently, Pell Network has received $3 million in seed round financing from Halo Capital, Mirana Ventures and Paper Ventures. This week, Pell Network and BitBoy announced a partnership to bring classic games to BTC-related chains.

In summary, we can see that the projects with faster TVL growth this week are mainly concentrated in the BTCFi track and the Defi track.

Overall performance of the track

· The market value of stablecoins has grown steadily: USDT has increased from $125.6 billion last week to $125.9 billion, and USDC has increased from $34.4 billion last week to $34.9 billion, an increase of 0.23% and 1.45% respectively. The total amount of stablecoins in the market has remained the same, and USDC, which is mainly in the US market, has ended its three-week downward trend and turned to an upward trend.

· Liquidity is gradually increasing: The risk-free arbitrage rate in the traditional market is constantly decreasing as the interest rate continues to fall, while the arbitrage rate of the on-chain Defi project is constantly increasing due to the increase in the value of cryptocurrency assets. Returning to Defi will be a very good choice.

· New growth point: In addition to the previous traditional projects such as lending and DEX, Defi has added two powerful engines at this stage—LSD and Restaking projects of BTC and ETH.

TVL of each track of Defi (data source: https://defillama.com/categories)

Funding situation: The TVL of Defi projects has risen from US$33.2 billion last week to US$33.6 billion now. There has been a continuous increase in recent weeks, proving that funds are constantly flowing into Defi projects.

In-depth analysis

-Rising driving force: The overall market has seen a rise this week, and Altcoin has also followed the upward trend, but the Defi track has shown a stronger trend than Altcoin, and still provides users with higher APY returns. The main reason is that market investors are still very optimistic about the future price trend of the two basic assets BTC and ETH, so they still hold firmly, and the price of BTC has been in an upward stage recently, which has further increased the benefits brought to customers, so investors actively participate in various Defi projects to increase the benefits obtained when holding assets.

-Growth leader: For Defi projects, the growth of TVL is the most intuitive manifestation of it. This week, the basic assets have shown an upward trend. At the same time, we can see that the overall TVL of Defi projects has increased more than the price of the basic assets, so in fact, Defi projects have always been in a trend of capital inflow. From the statistics of the TVL growth list of projects, we can see that the project with the largest growth this week is the BTCFi project in the Defi track. The essence of the BTCFi project is to guide users to deposit assets into its project, which helps users to find the most profitable underlying protocols in the market. In the end, the funds deposited by users are transferred to various underlying protocols. Therefore, investors should pay more attention to the BTCFi project that issues LRT based on BTC when investing in the near future.

BTCFi track

Track status

This week, BTCFi track projects also rose due to the rise in market prices. In the entire BTCFi track, the liquidity staking projects that pledged BTC to mint the packaged asset LST performed the best. All projects have increased to varying degrees in TVL, and even the TVL increase of most projects far exceeds the price increase of BTC. Its performance is still a strong sub-track in the BTCFi track.

Current track situation:

· BTC rose 3.36% this week. After excluding the decline of BTC, the TVL of Bedrock, Lombard, Lorenzo, Pell Network, PumpBTC, Solv Protocol and Stakestone, which are LRT projects based on BTC, increased by 58.53%, 7.85%, 46.26%, 42.32%, 4.11%, 8.81% and 1.02% respectively.

· BedRock supports the use of wBTC to pledge to obtain uniBTC, and also supports the pledge of wBTC to obtain basic income. This week, Bedrock launched the staking activity on Epoch and increased the limit of uniBTC on Ethereum, BNB Chain, Arbiturm and Optimsim chains, while giving high rewards to users participating in the activities on these four chains, including 84 Bedrock diamonds, Babylon points and 1.5 times Epoch points. At the same time, a pyramid scheme-style activity was launched on the chain, where users who invite people to participate in Restaking on Bedrock can earn 30% of all diamonds they generate, and new users will also receive an additional 30% boost.

· Lombard allows users to stake Bitcoin through Babylon, and Lombard is responsible for managing the restaking process. Lombard launched the Luminary plan, in which all newly staked BTC will receive double points. In cooperation with DeFi Vault, DeFi Vault provides LBTC with a stable annualized APY of 6%. Hourglass and Lombard launched joint mining, allowing users to obtain up to 162 times Lombard points by purchasing PYT.

· After launching SAL, Solv Protocol actively cooperated with various ecological projects and Defi projects to access as much liquidity as possible. This week, Solv Protocol joined the core mining pool of Venus Protocol, and SolvBTC.CORE, which cooperated with Core, opened the second phase. The limit on Core is 500 BTC. Investors can earn 4% APY through liquidity on Core. In cooperation with Bera Chain, Bera fren was launched, which is a protocol that builds infrastructure around the proof of liquidity (PoL) mechanism pioneered by Berachain.

· Lorenzo Protocol launched a staking campaign with OKX Web3 this week to provide 2 million Lorenzo points and a 20% multiplier on all Lorenzo basic points to OKX Web3 wallet users, cooperated with Bitlayer to hold a Mining Gala, rewarded participating users with 1 million Lorenzo points, and cooperated with Cygnus Finance to integrate stBTC into Cygnus's full-chain liquidity verification system.

· PumpBTC announced this week that it has completed a $10 million seed round of financing, led by SevenX Ventures and Mirana Ventures, with participation from well-known institutions such as UTXO and Mantle Ecosystem Fund, and attracted the attention of multiple projects such as Quantstamp and Veda.

· Pell Network recently received $3 million in seed funding from Halo Capital, Mirana Ventures, and Paper Ventures. This week, Pell Network and BitBoy announced a partnership to bring classic games to BTC-related chains.

· Stakestone: It is expected to adopt a model similar to ETH-STONE, where users stake native Bitcoin to Babylon and mint yield-based STONEBTC for cross-chain liquidity. This week, Stakestone announced a partnership with Bitget Wallet.

In the entire BTCFi, the recent performance of various projects that issue LST based on BTC has been relatively outstanding. For the BTCFi project, TVL is an important indicator of its prosperity. From the above data, we can see that with the rise in BTC prices this week, the TVL of the BTCFi project has also risen. This is mainly because users are more optimistic about the future development trend of BTC. Most investors believe that BTC should be held firmly at this stage, so they hope to get more other benefits while holding BTC. Therefore, they deposit their own BTC into other protocols and package them into packaged assets to become LST tokens. At the same time, they use LST tokens to pledge in other projects to obtain more benefits, so that the BTC in their hands can achieve the effect of killing two birds with one stone. Therefore, from a medium- and long-term perspective, BTC has the conditions and space for rising, which has also become the basic driving force for the vigorous development of the BTCFi project. Therefore, the BTCFi track is worth considering for investment users.

Performance of other tracks

Public chain

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

BSquared: BSquared has cooperated with some projects this week, including Native Network to enhance the capabilities of BTC-L2, achieve trust-minimized bridging, and aggregate liquidity of the entire BTC ecosystem through rapid termination; at the same time, it has reached a strategic agreement with Chainlink CCIP to make it the cross-chain infrastructure of BSquared; and cooperated with Up Network to develop an Android fork to attract more Web 2 users to BSquared.

Mantle:This week, Mantle issued the token COOK, which is used as Mantle's governance token. The previous MNT was used as the on-chain Gas token. COOK was quickly launched on some CEX and DEX after its issuance, attracting some market attention for Mantle. At the same time, Mantle announced the issuance of a new LRT after mETH—cmETH, which is a permissionless and composable LRT that can further increase the returns of investment users. This week, Mantle and OKX Web3 jointly launched a Telegram mini-game activity to enhance its on-chain activities.

Core:This week, SolvBTC.CORE opened its second phase, with a limit of 500 BTC on Core. Investors can earn 4% APY through liquidity on Core, and deposits in Core's dApps can also get 4 times the points of deposits in Core's dApps. The number of active users on the Core chain reached 900,000 this week, indicating that the activity of users participating in transactions on the Core chain has increased significantly.

dydx:Recently, driven by BTC, the price of the crypto market has shown an upward trend this week, and the number of users engaging in transactions has increased significantly. As a top-ranked DEX on the chain, dydx's trading volume has also risen rapidly this week with the market trend. In addition, dydx learned from Polymarket to open a prediction plate for the US election. As the US election approaches, the number of transactions on dydx for Trump's winning rate has also increased rapidly, further driving the increase in dydx's TVL. In addition, the founder of dydx returned to dydx this week to serve as CEO again, saying that he would lay off 35% of employees and further develop dydx, which made some users begin to look favorably on the future development of dydx.

Polygon: Recently, with the approach of the US election, the gambling prediction project Polymarket on the Polygon chain has received great attention from the market, especially with the upcoming US presidential election next Tuesday. More than $2 billion of funds have been gambled on Polymarket, driving the TVL of the Polygon chain to rise.

Overview of the Gain List

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

This week's gain list did not show the "sector concentration" feature, and the rising tokens belonged to SocialFi, Depin, public chain, AI and decentralized sorter.

MASK：The main goal of Mask Network is to provide decentralized tools for the existing centralized Internet, build a bridge between the real world and the encrypted world, and realize the liberalization and privacy of personal data. Recently, because the topic of the US presidential election is very hot, it has aroused heated discussions on the Internet, so the number of Mask's on-chain interactions has surged.

NOS：Nosana is a decentralized GPU cloud computing platform that aims to provide accessible and affordable AI computing power through the Solana chain. Nosana uses the token NOS to enable users to monetize idle hardware and provide affordable AI computing power, thereby solving the GPU shortage problem and combining AI with cryptocurrency to enhance AI process execution. Nosana has no good news this week.

PAAL：Paal AI is an ecosystem that combines artificial intelligence and machine learning technologies to simplify tasks that usually require human intelligence. Paal AI's main goal is to change the way people access and navigate cryptocurrencies and blockchain technology through the power of artificial intelligence, enabling users to make decisions. This week, Paal AI launched a new product, PaalX, which is an automatic DEX with AI functions, combining AI with DEX for the first time in the DEX industry.

KAIA:Kaia is a new mainnet born from the merger of Klaytn and Finschia chains, aiming to create an open source, transparent and permissionless public chain for everyone. Kaia supports EVM smart contracts and has the lowest transaction latency in the leading EVM L1, with a block time of 1 second and instant finality, providing a smooth user experience for application scenarios that require near real-time response. This week, Kaia released Portal V1.2, adding incentives for multiple core Defi pools, and changing Kaia's token KLAY to KAIA.

LQTY：Liquity is a decentralized stablecoin lending protocol, whose main business is to provide interest-free lending and stablecoin management. There is no good news for Liquity this week.

From the above table, we can see that most of the Altcoin tokens are in a weak trend this week, and did not follow the rising trend of BTC in a timely manner. Instead, they were sucked by the rise of BTC.

Meme Token Rising List

Data source: coinmarketcap.com

This week, the overall market is in an upward trend, and the tokens of various tracks are also in an upward trend. This week, the trend of Meme projects is stronger than the market, especially the Meme coin projects on Solana and Ethereum chains have risen significantly this week, creating a wealth effect.

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 (10.26-11.1) 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 project has received the most attention on social media this week, and generally has not followed the market to show an upward trend. However, in the case of BTC's exclusive rise in the market, the performance of major public chains is often better than other sectors. In particular, the performance of Ethereum at this stage has caused dissatisfaction among users in the market, which has accelerated the withdrawal of funds from Ethereum to choose new public chains. This phenomenon reflects that in the current market environment, investors maintain relatively stable confidence in infrastructure projects.

Overall Overview of Market Themes

Data Source: SoSoValue

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

· Meme track:This week, the Meme coin project took advantage of the hot spots of the US election and the optimistic sentiment of the general rise of the market to start a sharp rise, which has a significant wealth-making effect. Market users have begun to return to the Meme track to play games. Among them, DOGE and SHIB account for a large proportion of the Meme coin track, accounting for 50.71% and 22.43% respectively. This week, DOGE and SHIB rose by 11.13% and 7.32% respectively, expanding the increase of the entire Meme coin track. And Musk once again called for DOGE, which attracted a lot of traffic to the Meme track.

· Gamefi track: In this cycle of this year, the Gamefi track has not received much attention from the market, and thus little capital and traffic have entered, resulting in the lack of the previous wealth-making effect of the Gamefi track, which has led to a decreasing attention. Among the tracks, IMX, BEAM, GAL, and AXS account for as much as 62.96% of the total. These coins have shown a downward trend this week, resulting in the worst performance of the Gamefi track.

Preview of major Crypto events next week

The 2024 presidential election will be held in the United States on Tuesday (November 5)

Thailand Summit will be held on Wednesday (November 6)

Bank of England interest rate decision will be held on Thursday (November 7)

Friday (November 8) Federal Reserve Chairman Powell will hold a monetary policy press conference; Federal Reserve interest rate decision (upper limit)

Outlook for next week

The US ADP employment data and the US core PCE price index released on Wednesday and Thursday did not perform well, reflecting that inflation is still stubborn and the US economy is relatively hot. At the same time, the technology stock earnings released this week are not ideal, and Coinbase and MicroStrategy The financial report of the US Treasury bond index was not ideal, and Trump's election situation was fluctuating, which led to the strong upward trend of the market price at the beginning of the week turning into a volatile decline at the weekend. The US presidential election will be announced next week, and the Federal Reserve will also release its interest rate decision, which is expected to have a greater impact on the market fluctuations within the period. However, it is expected that the market will choose the initial trend after the election results are announced next week, so investors should adopt a cautious strategy to avoid short-term extreme market conditions that may occur next week.

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