LBank Labs Weekly Digest (September 17–23) #13
*All on-chain data is dated as of 12:00 a.m. EST on Sunday, September 24th.
Welcome back to LBank Labs Weekly Digest! Here we list all you need to know about crypto market in the past week(Sep.17–23).
Author: LBank Labs Research team — Hanze, Johnny
Keywords: #FOMC #Layer2 #Non-EVM
1 Macro Market Overview
U.S. Stocks Drag Lower Amid Rising Bond Yields and Interest-Rate Worries. According to WSJ, U.S. stock indexes edged lower Friday to end an ugly week after the Federal Reserve signaled it may not be done hiking rates. The Federal Reserve opted to hold interest rates steady on Wednesday, as investors expected. But central-bank officials also signaled they expect to keep rates higher further into 2024. In their projections and commentary, some officials have hinted that the so-called neutral rate, or the rate needed to keep inflation and unemployment levels stable over time, might be higher on a longer-term basis. The prospect of a prolonged period of higher rates has investors trying to assess the impact of elevated borrowing costs on consumers and companies. Higher bond yields can also make riskier assets like stocks look comparatively less attractive.
The S&P 500 closed down 2.9% for the week, its worst performance since March and third straight weekly loss. The Nasdaq Composite dropped 1.9%, and logged its third consecutive week of losses, with tech shares bearing the brunt of the recent selloff. The Dow Jones Industrial Average was 3.7% lower.
Web3-related stocks were also affected by the macroeconomic environment last week, as the prolonged high-interest rate environment led investors to opt for more conservative investment strategies. COIN, MARA, and MSTR all experienced varying degrees of decline, falling by 13.6%, 11.3%, and 5.2%, respectively.
Macro indexes
Last Friday, the U.S. Dollar Index (DXY) concluded the day at 105.58, achieving its highest point since the bankruptcy of Silicon Valley Bank on March 10, 2023. Last week, DXY exhibited a 0.5% increase, marking its 10th consecutive week of growth, the longest such streak since a 12-week period ending in October 2014.
Notably, DXY has recently completed its first “golden cross” since July 2021. This occurrence suggests a potential strengthening of the dollar, which could present additional challenges for the stock market.
On September 21st, the Federal Reserve kept the benchmark interest rate unchanged in the range of 5.25% to 5.50%, in line with market expectations. The Federal Reserve’s FOMC statement noted that recent indicators indicate the economy has been growing at a steady pace. Employment growth has slowed in recent months but remains robust, and the unemployment rate remains at a low level. Inflation continues to be relatively high. Twelve officials expect another interest rate hike this year, while seven officials anticipate no change. The median projection suggests there will be two rate cuts in 2024.
Treasury yields edged lower after closing at a 15-year high on Thursday. The 10-year Treasury yield (US10Y) fell to 4.436%, from 4.479% Thursday. Yields have pushed higher since the Fed’s Wednesday meeting, where chair Jerome Powell left the door open for another interest rate increase this year and said the central bank expects to keep rates higher for longer than it previously forecast to ensure inflation is under control.
Grayscale Files for New Ether Futures ETF. According to WSJ, Grayscale Investments filed paperwork with the Securities and Exchange Commission Tuesday for a new exchange-traded fund tracking ether futures. The ETF is filed under the Securities Act of 1933, the regulation under which commodities and spot bitcoin ETFs are filed. Grayscale also previously filed for a separate ether futures ETF under the Investment Company Act of 1940, under which most securities-based ETFs are registered.
Brazilian investment firm Hashdex was the first to file for an ETF tied to ether futures under the ’33 act last week. A dozen asset managers besides Grayscale have filed for ether futures-related ETFs under the ’40 act. Those could come to market in October if approved.
2 Crypto Market Pulse
Market Data
The cryptocurrency market cap remained relatively stable last week after experiencing some fluctuations. Early in the week, positive factors influenced the crypto market. For example, on Monday, the third-largest U.S. bank, Citigroup, announced the launch of a blockchain-based cross-border payment solution called Citi Token Services for institutional clients. Subsequently, Japan’s largest investment bank, Nomura, introduced a Bitcoin adoption fund for institutional investors through its digital asset subsidiary, Laser Digital Asset Management, on Tuesday. This led to $BTC briefly reaching a weekly high of $27,475 on Tuesday. However, later in the week, the influence of the Federal Reserve’s FOMC projections of continued high inflation expectations took its toll. $BTC rapidly lost support at the $27,000 level, and $ETH experienced a more pronounced decline.
$BTC repeatedly breached the $27,000 level during the week, but after several oscillations, it closed at $26,580 per coin as of 12:00 AM on September 24th, remaining relatively stable. $ETH is currently priced at $1,592, experiencing a 2.3% decline over the week. The total market capitalization of the cryptocurrency market stands at $1.054T. Furthermore, Bitcoin’s dominance in the overall market has increased to 49.1%, reaching $518B, while Ethereum’s dominance has slightly declined to 18.2%, now at $191B.
$LINK, $IMX, and $CRV emerged as Top 3 gainers, while $RUNE, $GALA, and $SNX were Top 3 losers. Chainlink, a leading blockchain oracle network, has grown due to various factors, including partnerships with major traditional financial institutions like SWIFT. As it connects more blockchain projects, its network’s value and utility should rise. Furthermore, the upcoming staking mechanism will incentivize long-term $LINK holders. ImmutableX’s native token ($IMX) surged recently without specific news catalysts, with Upbit exchange’s wallets accounting for $9.45M in $IMX on Thursday, according to pseudonymous blockchain analyst Lookonchain. $CRV’s price has risen nearly 20% in under two weeks, potentially driven by active whale participation in the market, following a consolidation period near its lows.
For the top losers, they are facing selling pressure due to the ongoing pressure on the broader cryptocurrency market. $RUNE is experiencing this pressure because it had previously seen a significant price increase and was in an overbought state, which is leading to some profit-taking and selling. Additionally, $GALA is also facing selling pressure as a result of recent lawsuits among its founding team members, which has negatively affected investor confidence and led to a decline in the token’s value.
Last week, the market capitalization of stablecoins remained relatively stable overall. Notably, the supplies of stablecoins ended a year-long period of net capital outflows and started showing capital inflows into the digital asset space, indicating an increase in demand. However, during the latter part of last week, there was a resumption of net outflows in exchange net holdings, once again highlighting the ongoing pressure on the cryptocurrency market due to expected sustained high-interest rates.
In the derivatives market, both $BTC and $ETH saw a slight increase in their total open interest for futures contracts last week, suggesting that new capital entered the market. Market activity peaked around the 21st of the week, which corresponds to a rapid decline in the prices of both $BTC and $ETH on that day. Furthermore, according to the clearing results, both bullish and bearish sentiments coexist in the current market, once again indicating market volatility and uncertainty.
In the DeFi market, TVL remained relatively stable last week and currently stands at $381 billion. The seven-day trading volume for DEX reached $9.7B, marking a 19.3% decrease from the previous week. Additionally, the market share gap between DEX and CEX remained largely unchanged, currently at 10.3%. Furthermore, among the top 10 blockchain platforms ranked by TVL, all have seen growth over the past 7 days, with Tron notably maintaining the highest growth rate at 20.74%.
Last week, the NFT market continued its downward trend, with a 6.7% decrease in market cap, bringing the total market value to $4.39 billion. Additionally, there was a significant drop in trading volume over the past seven days, down by 31.2%. The floor prices of blue-chip NFTs continued to decline, with Bored Ape Yacht Club (BAYC) falling by 3.6% and CryptoPunks dropping by 3.2%. Market sentiment remains subdued.
LBank Labs’ Recap
We see another week of low trading activity of BTC as no major market news on the calendar. Altcoins will attract more attention as BTC prices stabilize.
From a macroeconomic perspective, last week witnessed a notable development as the Fed made hawkish remarks concerning its interest rate decision. This pronouncement subsequently resulted in a downturn in the traditional financial markets. Interestingly, despite these external pressures, the closing price of BTC at the end of the week remained remarkably close to its opening price. It is worth noting that the trading dynamics in the crypto market are predominantly influenced by institutional participants, which exert considerable control over trading levels.
In terms of geographical influence, Western markets have notably outpaced their Asian counterparts in trading volume during this period.
Furthermore, recent discussions within the crypto space have brought to the forefront an ethical dilemma surrounding the conduct of major market makers, particularly following Token 2049. Given the relatively low liquidity in the crypto market, market makers play an essential role in facilitating efficient trading. Ideally, the operations of these market makers should be neutral, ensuring volume for retail traders to execute orders. However, it has come to attention that in certain instances, market makers may have stronger incentives to influence prices in a specific direction. This has led to inquiries regarding potential market manipulation by certain market makers.
In light of these developments, we intend to closely monitor projects associated with prominent market makers, as they are likely to experience heightened trading activity. As the ethical considerations surrounding market makers continue to evolve, vigilance in assessing their impact on the broader crypto market will remain a paramount concern.
Price Range
- BTC price optimistic: $26800 — $29500
- BTC price neutral: $24800-$26800
- BTC price pessimistic: $22800 — $24800
3 Major Project News
[Ethereum] The 118th Ethereum ACDC meeting: Due to the failed launch of the Holesky testnet, the activation of the Dencun mainnet may not take place this year. Christine Kim, Vice President of Research at Galaxy, summarized the 118th Ethereum Core Developers Consensus Meeting (ACDC), which primarily focused on the preparations for Devnet-9 and changes to the Ethereum Consensus Layer (CL). Devnet-9 is the second testnet and includes a full set of code changes for the Dencun upgrade. Devnet-9 will be the first testnet to activate EIP-7514 and EIP-7516, two new EIPs that were added to the Dencun upgrade during last week’s execution layer meeting.
Tim Beiko, a core Ethereum developer, raised concerns about the Dencun testnet timeline. He stated that if developers cannot ensure the release of Dencun on the public testnet before the Ethereum Developer Conference, Devconnect, in November 2023, then the mainnet activation of Dencun is likely not to happen this year.
[Layer2] Idealistic Ethereum community-built zkEVM Scroll launching in weeks. After two years of development, a group of Ethereum idealists are close to launching their zero-knowledge EVM (Ethereum Virtual Machine) — Scroll — developed with Ethereum’s values in mind. While there are already several zero-knowledge EVMs in existence today, Scroll co-founder Ye Zhang said that the project was “idealistic” as the team was sticking to the philosophy and the principles that Ethereum already cultivates. The new zkEVM is set to launch within weeks, having already undergone extensive testing and carried out audits on the code. Zhang said Scroll will launch after some final testing and major projects like Uniswap and Aave are ready to deploy on Scroll at launch.
[Layer2] Chainlink CCIP revolutionizes cross-chain interoperability on Arbitrum One. The leading decentralized Oracle protocol, Chainlink, has expanded its ecosystem by launching its Cross-Chain Interoperability Protocol (CCIP) on the Arbitrum One mainnet. As detailed in the announcement shared by Chainlink, this integration now enables developers on Arbitrum to access CCIP, which is considered one of the most powerful smart contract development environments. Given that most developers in the Web3 space are seeking ways to transfer tokens, send messages, and initiate actions across various blockchains, CCIP has proven to be the right tool to accommodate all of these functionalities. It’s worth noting that with the robust support of Chainlink’s oracle network, developers will also benefit from high security when executing tasks.
Furthermore, Arbitrum Stylus has completed a new upgrade, enabling developers to write smart contracts in C language using the Stylus C-SDK. It’s worth noting that Stylus VM doesn’t only support C language. In fact, any programming language compiled to WebAssembly can, in principle, be deployed on chains that support Stylus. The official ports currently support Rust SDK, C/C++ SDK, and Bf SDK, with more ports set to be released soon.
[Layer2] Embracing Optimism with Pessimism. Coinbase’s Layer 2 network, Base, has announced the open-sourcing of its monitoring system called ‘Pessimism.’ This move aims to enhance security for all OP Stack and EVM-compatible chains. Since the launch of Base, the Coinbase team has been using Pessimism internally to monitor the Base mainnet. Base has stated that Pessimism will be open-sourced as free and permissionless software.
[Layer2] Synthetics platform for Starknet, inspired by GMX v2 design. Starknet has published a post on the X platform introducing the newly launched synthetic platform called Satoru Starknet by the Starkware Exploration Team. The project aims to create a decentralized synthetic platform for Starknet using the Cairo language, inspired by GMX V2 design principles and free from Solidity constraints.
Satoru Starknet aspires to be a neutral public good, allowing anyone to build products/businesses on top of it. Its architecture is modular, with different modules interacting with each other, and user interaction primarily occurs through routing.
Furthermore, the first end-to-end Minimum Viable Product (MVP) is set to be released by the end of October. Notably, the project claims to have no token, no Discord, and is 100% open source for everyone to build upon. Its long-term goal is to be self-governing, maintained by the community, similar to other exploration projects.
[Sui] zkLogin is scheduled for a mainnet launch later this month. Sui, in a recent post on the X platform, announced that its Web3 identity verification solution, zkLogin, has made progress in the DevNet phase and is now ready for deployment on TestNet, with plans for a mainnet launch later this month.
Additionally, Sui Network has announced the first batch of recipients for the Sui Education Grants Program. This grant program is designed to support developers interested in nurturing the next generation of innovators. In this round, a total of 9 teams have been awarded over $300,000 in grants. The selected proposals include the development of bootcamps, courses, gamified learning tasks, developer education tools, and technical workshops.
[Polkadot] Polkadot eyes support for 1,000 parachains in future. The core developers at Polkadot are looking to expand the ecosystem’s current parachain limit of 100, aiming to eventually onboard 1,000 parachains in future with help from software updates. “Asynchronous backing” is one such update to Polkadot’s parachain consensus protocol. The update is designed to halve the parachain block time from 12 seconds to 6 seconds and augment the block space for each block by 5–10 times. “Asynchronous backing enables flexible scheduling for our future scaling work through elastic scaling and instantaneous coretime. We have a credible roadmap to get Polkadot to support 1,000 parachains and 1m+ transactions per second. The design is there — we know how to scale Polkadot for the indefinite future,” Parity Engineering Lead Sophia Gold said in a statement.
Furthermore, stablecoin issuer Circle has deployed the USDC stablecoin in the Polkadot ecosystem of parachains, further expanding the native availability of the dollar-backed stablecoin to new blockchains.
[Cosmos] The Interchain Stack Roadmap: Help Shape the Future. Cosmos has unveiled its 2024 roadmap for the Inter-Blockchain Communication Protocol (IBC), focusing on two main themes: scalability and usability. Under the scalability objectives, the roadmap aims to reduce the time required for native IBC implementations, lower the maintenance costs of IBC, and enable various blockchains to establish IBC connections. The usability goals aim to enhance and differentiate the developer experience for IBC users and support the construction of more advanced cross-chain workflows on top of IBC.
Additionally, Cosmos has announced the release of CometBFT version 0.38, which includes the second part of ABCI++ and introduces methods like ExtendVote and Verify Vote Extension. These enhancements are designed to improve the latency of interchain applications by providing advanced control over the replication engine, boosting performance, and unlocking new use cases to further advance the development of the interchain ecosystem.
4 Key Fundraising Data
Last week witnessed a total of 20 financing events, raising a substantial amount of over $208.5 million*.
Financing activities showed continuous growth compared to the previous week, with an increase in the total funding amount. Last week, the Blockchain Service sector garnered significant attention, comprising 40% of the total fundraising activities and reaching a total funding amount of $116M, accounting for 55.64% of the total funds raised. The largest fundraising activity of the week took place in the Service sector, specifically with the Core Scientific project, which raised $53M. Core Scientific is a company offering blockchain and artificial intelligence hosting, transaction processing, and application development. Further details are below.
*4 events of unknown amount are included, which have been excluded from the remaining data.
Below, we listed the most noteworthy fundraising deals for you:
Celsius, the leading global cryptocurrency yield-earning platform, confirms a $54m investment in carbon neutral Bitcoin mining leader Core Scientific , the leader in high-performance, 100% net carbon-neutral infrastructure and software solutions powering the world’s leading blockchain companies. Core announced its intent to go public via a $4.3B merger with XPDI.
This investment is part of an over $200M expenditure in North American Bitcoin mining, positioning Celsius as one of the largest U.S. investors in the Bitcoin mining industry.
- Official Link: https://corescientific.com/
2. [GameFi] FarmVille co-creator’s startup raises $33 million from a16z crypto and others.
A high-profile list of investors including a16z crypto, Anchorage Digital and Naval Ravikant have participated in a $33M seed round in a blockchain-gaming startup led by FarmVille co-creator Amitt Mahajan. Greenoaks co-led the seed round alongside a16z. On top of Ravikant, who invested in both Uber and Twitter at an early stage, other participants in the round included Balaji Srinivasan, Twitch founders Justin Kan and Emmett Shear, in addition to Mercury, Firebase, Zynga, and Alchemy, the statement said.
Proof of Play, co-founded by its CEO Mahajan, aims to create fun and accessible blockchain games. Its first title, a social role-playing game called Pirate Nation, released in beta form in December.
- Official Link: https://www.proofofplay.com/
3. [Service] Crypto Startup Led by Former Andreessen Executives Raises Cash.
An Andreessen Horowitz-backed startup bent on bringing blockchain technology to the corporate world has managed to raise new funds, despite the bear market in digital assets.
Bastion, co-founded by two former executives with Andreessen’s crypto division, came out of stealth mode last Monday with a seeded funding round worth $25M led by a16z crypto. Investors also include Nomura Group’s Laser Digital Ventures, Robot Ventures and crypto influencer Packy McCormick’s Not Boring Capital, among others.
- Official Link: https://www.bastion.com/
4. [CeFi] Mesh, which helps people manage their digital assets, raises $22M.
Mesh (formerly Front Finance), a startup developing a service to help customers transfer and manage digital assets like crypto, has raised $22M in a Series A funding round led by Money Forward with participation from Galaxy, Samsung Next, Streamlined Ventures, SNR.VC, Hike VC, Heitner Group, Valon Capital, Florida Funders, Altair Capital, Network VC and various angels.
Mesh will use the new cash, which brings its total raised to date to $32M, to further develop its tools for deposits, payments and payouts, co-founder and CEO Bam Azizi says, as well as support its go-to-market operations.
- Official Link: https://www.meshconnect.com/
See you next week! 🙌
📢 Disclaimer: The weekly crypto market insights are provided for informational purposes only and should not be considered as financial advice. The cryptocurrency market is highly volatile and unpredictable. Prices and trends can change rapidly, and past performance is not indicative of future results. Always conduct thorough your own research and consult with a qualified financial professional before making any investment decisions.
