TL;DR

• This week saw significant market fluctuations. BTC failed to break $70K and subsequently pulled back. It further dropped below $64,000 due to factors such as U.S. government on-chain transfers and international political situations.
• ETH and altcoins also experienced notable declines, with the Rune sector seeing substantial drops.
• The ETF market overall underperformed last week. The Ethereum spot ETF saw a $341 million net outflow, while Bitcoin ETF had a mere $106 million net inflow.
• Compound Finance faced a governance attack, highlighting the ongoing issues with decentralized governance.
• Wormhole (W) will unlock $174 million worth of tokens this week, accounting for 33.33% of the circulating supply.
• 15 projects secured funding this week, spanning areas such as payments, AI, gaming, and community building.

Market Analysis

Review and Insights

• BTC Market — BTC experienced increased volatility this week. After a steady rise over the weekend, BTC briefly surpassed $70,000 on Monday before quickly retracing, experiencing a $4,000 drop to around $65,000. On Thursday, the escalation of the Israel-Palestine conflict further fueled the bearish trend in BTC. As of 12 PM on August 1, BTC had fallen to $63,945, with no signs of a rebound.
• ETH Market — On August 1, ETH’s price movement mirrored BTC’s, sharply dropping below $3,140. Currently, ETH’s 50-day and 100-day EMAs are about to converge, indicating a potential bearish trend. If the 50 EMA falls below the 200 EMA, forming a death cross, it could put further downward pressure on Ethereum’s price. On a positive note, the Ethereum ETF has recently seen an increase in inflows, indicating rising demand for ETH.
• Altcoins — The total market cap of altcoins mirrored the overall trend of BTC this week. Although the pullbacks in BTC and ETH triggered a general decline in altcoins, most altcoins saw relatively limited drops, simply following the downward trend of major cryptocurrencies. The sector with the largest declines was the rune sector represented by Runes, with some leading projects falling by over 10%.
• Macroeconomic Data — On August 1, the Federal Reserve announced for the eighth time that it would keep the benchmark interest rate unchanged at 5.25%-5.50%, in line with market expectations. Chairman Powell also mentioned the possibility of rate cuts, stating that if inflation targets are met, the Fed could cut rates as early as September. This is the first time since 2024 that he has expressed a willingness to lower rates. There is a strong likelihood of a rate cut in September. If rates are lowered, the crypto market may attract more “hot money,” further increasing market liquidity.

Weekly Focus

Compound Finance Governance Attack Highlights Ongoing Issues in Decentralized Governance
Recently, a proposal passed by the Compound Finance community has been accused of being a governance attack. A small group led by “Humpy” acquired a large amount of tokens on the market, allowing them to narrowly pass the proposal despite opposition from many community members. Additionally, the proposal suggested allocating approximately $24 million worth of 499,000 COMP tokens to a high-yield protocol controlled by the so-called “Golden Boys.”[1]

The “Golden Boys” are essentially an address controlled by the group led by Humpy, who has previously conducted governance attacks on DeFi protocols like Balancer and SushiSwap. In this attack, Humpy intended to use his voting power to transfer $25 million worth of tokens directly from the Compound treasury to an address under his control. Although the proposal claimed to seek high-yield opportunities for treasury funds, it lacked detailed informatin and failed to disclose how the funds would be utilized. The proposal also did not undergo prior discussion in the forum. This situation exemplifies a typical governance attack where individuals or entities with significant token holdings can manipulate voting outcomes. After discussions between Compound core contributors and the major whale behind the proposal, it was ultimately canceled. The community has decided to launch a new staking product, Stake COMP (stCOMP), controlled by Compound DAO. This incident has highlighted flaws in decentralized governance.

Ethereum ETF’s First Week Sees $1.5B Net Outflow for Grayscale’s ETHE
The Grayscale Ethereum Trust (ETHE) experienced significant capital outflows last week. Despite positive inflows for eight other Ethereum ETFs, the overall Ethereum ETF market recorded net outflows for four consecutive days. By July 30, the total outflow from Ethereum ETFs reached $98 million.

The substantial outflows from ETHE can be attributed to two main factors:

1. High Fees: ETHE charges a relatively high fee of 2.5%, whereas most other ETFs have fee ranging between 0.19% and 0.25%. Grayscale has also launched a lower-fee product, the Grayscale Mini Trust Ethereum ETF (ETH). The significant fee difference has notably reduced ETHE’s attractiveness to investors.

2. Excessive Initial Capital Allocation: Before transitioning to an ETF, the Grayscale Ethereum Trust managed assets worth approximately $10 billion (around 2.9 million ETH), with $9.2 billion allocated to ETHE.[2]

As of August 1, ETHE’s assets under management have decreased to about $7.5 billion (around 2.28 million ETH). Based on recent trading data, ETHE is experiencing an average daily net outflow of approximately $378 million. At this rate, the selling pressure is expected to dissipate in the coming weeks.

Bitcoin 2024: Crypto Technology Gains Broad Attention, Politicians Extend Olive Branches
On July 28, the three-day Bitcoin 2024 conference in Nashville concluded. The event saw extensive discussions on the expansion of Bitcoin Layer 2 solutions and the DeFi ecosystem. During the conference, presidential candidate and former President Donald Trump announced that the Department of Justice would not sell any more Bitcoin during his tenure if re-elected. While this is a positive development, it is not expected to significantly impact on Bitcoin’s price for the rest of the year. If Trump is elected and follows through with this plan, it could encourage other countries to adopt similar measures. Thus, while this announcement could benefit Bitcoin’s price in the long term, it is unlikely to cause any immediate significant price changes unless further government announcements are made.

During the Bitcoin 2024 event, Bitcoin’s price approached $70,000, a dramatic increase from around $120 during the inaugural Bitcoin conference in 2013. At one point, Bitcoin’s market capitalization even surpassed that of silver, solidifying its status as a significant asset in global financial markets.[3]

JD.com (JINGDONG) Enters Stablecoin Market, Hong Kong’s Stablecoin Sandbox Testing Begins
On July 18, the Hong Kong Monetary Authority (HKMA) announced the first batch of three institutions participating in its “sandbox” program. Among the selected participants is JD.com’s subsidiary, Coinlink Technology, which is particularly notable. According to the company’s website, JINGDONG Coinlink focuses on digital currency payment systems and blockchain infrastructure and is set to launch a stablecoin pegged 1:1 to the Hong Kong Dollar (HKD) in Hong Kong. The JINGDONG stablecoin will be issued on a public blockchain and is intended to be a stablecoin directly linked to the HKD.[4]

However, the approval for the JINGDONG stablecoin at this stage does not mean it has been fully recognized by the HKMA or the issuance of a stablecoin license. Further approvals are needed before the official launch. After the “sandbox” testing phase, Hong Kong is expected to develop more comprehensive stablecoin legislation and clearer regulatory processes. Looking ahead, Hong Kong could see the coexistence of multiple stablecoins based on existing legislation and sandbox testing. For instance, banks and exchanges might issue their own independent stablecoins. If banks succeed in launching their stablecoins, Hong Kong could become the first region globally to have bank-issued stablecoins, setting a precedent for stablecoin regulatory policies and market structures worldwide.

Weekly Spotlight

SOL Ecosystem — New Developments in Liquid Staking and Memes Play
During this month’s wide fluctuations in the crypto market led by BTC, both the price of SOL and developments in the Solana ecosystem have been notable. According to DeFiLlama data, the competitive landscape of liquid staking on Solana has undergone significant changes. Initially dominated by Marinade’s mSOL, Lido’s stSOL, and Sanctum’s scnSOL, the sector now features over 20 related protocols.

Currently, three protocols—Jito, Marinade, and Jupiter—dominate 72.3% of the market share. Jito’s Total Value Locked (TVL) exceeds $2.17 billion, with a 36.2% increase over the past 30 days and $12.92 million in transaction fee revenue. Marinade’s TVL stands at $1.45 billion, up 25.9% in the last month. Jupiter’s TVL has reached $500 million, marking a 40.4% rise in the past month. The steady growth in Solana’s TVL reflects the thriving development of its DeFi projects, attracting more developers and investors, and further boosting the use and value of SOL.[5]

Meanwhile, the launch of dumpy.fun has introduced a new play in the Solana ecosystem’s meme space. dumpy.fun allows users to short memecoins on Solana. Similar to traditional shorting mechanisms, users must deposit collateral, which can be USDC or SOL, to borrow and sell meme coins. They can then buy back the meme coins at a lower price to return them to the platform, akin to options and futures trading in traditional finance.

Trending Categories

According to Coingecko data, the three top-performing categories this week are: Layer 1 (L1), Proof of Work, and smart contract platforms. The early-week rise in Bitcoin significantly boosted positive sentiment in the crypto market, but the subsequent decline also led to a general drop in altcoins. Some categories experienced smaller declines and still maintained positive returns.

Layer 1 (L1) — This week, the Layer 1 category experienced volatility, ending with a 2.1% decline. Layer 1 refers to the foundational layer in blockchain technology, responsible for processing and recording transactions. Additionally, Layer 1 protects the network from attacks through consensus mechanisms such as PoW and PoS. Despite facing scalability challenges, Layer 1 blockchains are continuously improving to handle more transactions. The primary role of Layer 1 is to provide a solid foundation for other layers, like Layer 2, thereby supporting more complex and efficient applications.

Proof of Work (PoW) — This week, PoW saw a slight decline of only 1.2%, despite the overall downturn in all categories. PoW is a consensus mechanism used in blockchain networks to ensure transaction security and decentralization. The basic principle of PoW requires network nodes (miners) to solve complex mathematical problems to verify and add new transaction blocks to the blockchain. PoW’s main advantages are its security and resistance to censorship. Due to the significant computational resources required, it is challenging for attackers to control the network and tamper with transaction records.

Smart Contract Platforms — Smart contract platforms are usually blockchains that host smart contracts or decentralized applications. Users can interact with different smart contracts on these platforms to perform various operations, such as lending funds, staking assets, or creating NFTs. Smart contracts are programs stored on the blockchain that automatically execute when predetermined conditions are met.

Top Performers

According to CoinGecko, the top 3 performers over the past 7 days are:

CYDX — CyberDEX is a decentralized perpetual contract trading platform based on Optimism. Supported by Synthetix, the exchange allows traders to leverage a large liquidity pool and trade with minimal slippage and market impact. CYDX tokens can be traded on decentralized exchanges. [6]

AIT — AIT Protocol is an AI data infrastructure that provides Web3 AI solutions. The AIT decentralized marketplace offers millions of cryptocurrency users the opportunity to participate in “train-to-earn” while actively contributing to the development and progression of AI models. Additionally, AIT is responsible for the Einstein-AIT subnet on Bittensor, specializing in mathematics, logic, and data analysis.[7]

CSWAP — ChainSwap is a solution aimed at achieving blockchain interoperability. Utilizing ChainLink’s CCIP (Cross-Chain Interoperability Protocol) architecture and Circle’s CCTP (Cross-Chain Transfer Protocol), it has developed the fifth layer of secure cross-chain swap protocols. ChainSwap places significant emphasis on privacy issues in the blockchain space and is developing advanced privacy swap and mixer technologies.[8]

Data Highlights

Macro Funds

As of July 25, the weekly net inflow of BTC ETFs was $105 million, bringing the total cumulative net inflow to $17.6 billion. The weekly trading volume was $4.05 billion, with ETF net assets accounting for 4.48% of BTC’s market cap. The total net inflow of Bitcoin spot ETFs continues to reach new highs. While BTC ETF net inflows remained stable this week, the market cap of stablecoins decreased by 0.33%. Despite the sharp fluctuations in BTC prices, external funds still show considerable enthusiasm for BTC.[9]

Ethereum ETFs saw a weekly net outflow of $64 million, bringing the total cumulative net outflow to $450 million, with a weekly trading volume of $1.34 billion. The intense selling pressure on ETH spot ETFs is largely due to sales from Grayscale’s ETHE. But the good news is recent sell-offs have eased, with current outflows only a quarter of those on the first listing day, and over 20% of fund holdings have been sold. The outflow rate seems to be declining.

Ethereum Gas Fees

The average Ethereum Gas Fee remained in the single-digit range this week, with on-chain activity showing a slight increase.[10] Among the Top 5 Gas consumers, Telegram trading bots Banana Gun and Maestro surpassed numerous DeFi protocols. One of Banana Gun’s main functions is to defend against large or bulk transaction attacks, allowing Sniper bots and Sell bots to operate normally under congested blockchain conditions. The Maestro protocol offers tools such as multi-chain (BSC and ETH) sniper bots, wallet trackers, and whale bots.[11]

Top 3 Fastest Growing TVL

An increase in Total Value Locked (TVL) indicates active capital participation and greater liquidity within a protocol. According to DeFiLlama, among projects with over $10 million in TVL, the top three fastest-growing protocols are:

Sailing Portfolios: Sailing is a company addressing key limitations in the US stock market by bringing stocks on-chain. Developers can also incorporate these tokenized stocks into their dApps using their platform. Built on the KAVA blockchain, Sailing currently has a TVL of approximately $10.95 million, with a weekly growth of 131%.

HiveSwap: HiveSwap is a decentralized exchange (DEX) within the Bitcoin ecosystem. Leveraging the MAP Protocol, it provides liquidity services for assets within the Bitcoin ecosystem, including assets on Bitcoin Layer 1, the MAP Protocol interoperability layer, and various Bitcoin Layer 2s. Built on the Map Protocol, the project currently has a TVL of $18.26 million, with a weekly growth of 104%.

Dinari: Dinari is a Web3 platform for trading company equity. Dinari is launching a trading platform called dShare, which will match tokens 1:1 with underlying securities to allow users to obtain company equity. Built on Arbitrum, Kinto, ETH, and Blast, the protocol currently has a TVL of $10.94 million, with a weekly growth of 87%.

Market Opportunties

Project Airdrops

Airdrop project to watch this week: Covalent

Introduction

AI modular data infrastructure Covalent announced that it will launch an ecosystem airdrop on August 1, distributing $100,000 worth of TAIKO tokens to CXT stakers. The tokens will be automatically airdropped to eligible staker wallet addresses.

This ecosystem airdrop plan aims to reward loyal CXT token holders, allowing them to receive various incentives from Covalent’s ecosystem partner network. As an infrastructure integrated with over 230 blockchains, Covalent plans to continue offering opportunities and rewards to its community. By collaborating with long-term partners such as Taiko, Covalent aims to enhance market dynamics and deepen community engagement. The plan mainly targets long-term supporters who have experienced staking migrations from Moonbeam to Ethereum and token migrations from CQT to CXT.

How to participate: Visit the official website and navigate to the [Airdrops] section to check eligibility.

Weekly Fundraising Report

Several projects across various sectors, including payments, AI, gaming, and community building, successfully closed crucial funding rounds this week. According to RootData, between July 26 and August 1, a total of 15 projects announced securing funding, with one project raising over $10 million. Seed rounds accounted for 6 of the top 10 funding deals. Here are the top three funding rounds:

Layer2 Financial - Raised $10.7 million in Series A funding. Layer2 Financial is a service platform offering payment and banking functionalities. The platform aims to provide fintech companies and their customers with fully compliant multi-currency payments, banking, and digital asset wallets. Users can access all platform services through APIs.

Daylight - Secured $9 million in Series A funding. Daylight is building a decentralized protocol that allows users to connect their energy devices (such as thermostats, batteries, electric vehicles, and solar inverters) to their app and earn rewards. Users can access home or building energy upgrades like solar panels, electric vehicle chargers, heat pumps, and water heaters by joining the Daylight marketplace.

Mezo - Raised $7.5 million in its latest funding round. Mezo is a Bitcoin Layer 2 network that enables users to access applications that facilitate the use of Bitcoin tokens, driving a circular Bitcoin economy as a form of “savings technology”. Mezo uses the idle Bitcoins of currency holders through the “HODL Proof” points program. The longer the storage time, the greater the “HODL score multiplier” of the contributor.

What to Watch Next Week

Token Unlock

According to Token Unlocks data, several significant token unlock events are scheduled for the upcoming week (August 2-8, 2024). Among these, Wormhole (W) has a notably large release. On August 3, Wormhole (W) will unlock approximately 600 million tokens, accounting for 33.33% of the current circulating supply, valued at approximately $174 million. Galxe (GAL) will unlock around 4.17 million tokens, representing 3.52% of the current circulating supply, valued at approximately $13.6 million.

Crypto Calendar

The upcoming week is set to be pivotal for the blockchain and cryptocurrency industry, with several significant events spanning Layer 2, blockchain gaming, and airdrops. Additionally, multiple conferences and in-person events are scheduled. Notably, Gitcoin’s highly anticipated GG21 initiative will run from August 7 to 21, and is worth keeping an eye on. On a macro level, attention should be paid to the “U.S. July Unemployment Rate” and the “U.S. July Nonfarm Payrolls (in thousands)” data, which will be released on August 2. These figures are crucial reference points for the Federal Reserve (FED) when making monetary policy decisions. If the data falls short of expectations, such as an increase in the unemployment rate or a decline in nonfarm payrolls, the market may anticipate a more accommodative monetary policy from the Fed.

References:

1. Coumound，https://compound.finance/governance/proposals/289
2. SosoValue，https://sosovalue.xyz/assets/etf/us-eth-spot
3. Gate.io，https://www.gate.io/trade/BTC_USDT
4. JdHK，https://www.jdcoinlink.com
5. Dune，https://dune.com/summit/solana-defi
6. RootData，https://www.rootdata.com/zh/Projects/detail/CyberDEX?k=MTI3MDk=
7. Gate.io，https://www.gate.io/zh/price/ait-protocol-ait
8. Gate.io，https://www.gate.io/zh/price/chainswap-cswap
9. Defillama，https://defillama.com/stablecoins
10. Etherscan，https://etherscan.io/gastracker
11. Ultrasound，https://ultrasound.money

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