Weekly Web3 Research | Last week, the crypto market commenced with a dip, followed by a recovery in its latter half. U.S. spot Bitcoin ETFs persisted in a net outflow trend

2024-05-03, 07:31

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##Weekly overview
The crypto market carried the previous week's gloom into its opening this week, starting off on a weak note. However, as the week progressed, a pivot towards recovery emerged, particularly evident in the recovery of multiple sectors. Layer 2 protocols, cross-chain solutions, and modular blockchains not only withstood the downturn but also led the charge in the market's rebound.

The crypto market saw a modest contraction in overall market capitalization this week, decreasing from $2.38 trillion to approximately $2.21 trillion when compared to the same period last week. <a href="/pt-br/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a>'s dominance in the market also experienced a slight dip, with its market capitalization share falling from 53.4% to 52.6%. Reflecting the prevailing sentiment of caution, the Fear and Greed Index also fell from 60 to around 47.

Performance across different sectors of the crypto market varied this week. A majority of cryptocurrencies, including Bitcoin (BTC), experienced a downturn, effectively putting the market through a stress test. Notably, even the Meme coin sector, previously resilient during broader market declines, succumbed to last week's downward trend. However, the mood shifted more positively in the second half of the week as several high-market-cap mainstream Meme coins made a substantial recovery. Sectors that stood out with the highest 7-day net price increases included cross-chain technologies, Layer 0 protocols, and NFT finance (NFTFi). Despite these gains, it remains uncertain whether this positive momentum will translate into a sustained market rebound.

Market transaction data this week revealed some bearish signals for the market. The Bitcoin basis narrowed from 1.36% to 1.1% for the quarter. Notably, on April 30 and May 1, the market witnessed the highest volume of long position liquidations in nearly three weeks, occurring on two consecutive days. Meanwhile, the <a href="/pt-br/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> network has been recording low transaction fees, with Gas prices maintaining a low of about 5 Gwei.

In essence, as the excitement over Bitcoin ETFs and the anticipated halving event diminishes, so does the overall market buzz. Nevertheless, certain investors with a bullish stance on the market's long-term potential are treating this dip as a strategic buying opportunity. There has been a slight uptick in derivatives trading volume towards the latter part of the week, indicating some renewed interest. However, the airdrop sector remains sluggish and may require more time before witnessing a significant upswing

The cryptocurrency market has put a pause on its steady decline, exhibiting signs of a potential upturn this week. With the pressure of the U.S. dollar's high-interest rate policy looming, the crypto sphere is in search of a fresh narrative to rekindle investor sentiment. While the market hasn't returned to a bullish trend, it's anticipated to stay within a volatile phase for the short term. Patience is required as the market awaits a more widespread and sustained increase across the board.

##Crypto market
🔥This week, the crypto market experienced a general downtrend, with a modest recovery emerging as the weekend approached.

🔥According to data from SoSoValue and Lookonchain, 9 spot Bitcoin ETFs in the United States (including Grayscale) continued to experience net outflows this week, with a total net outflow of US$478 million on May 2 and a total net outflow of US$564 million on May 1. The total net outflow on April 30 was US$162 million, and the total net outflow on April 29 was US$51.5 million.

🔥This week, Ethereum's Gas median has hit a three-year low, dropping to around 6.43 gwei on both April 27 and May 2. Additionally, over the past seven days, the circulating supply of Ethereum has seen an increase of over 10,000 units.

🔥On May 2, the London Decentralized AI Summit took place at the Gatsby Center for Computational Neuroscience within University College London. The event convened multiple industry experts who engaged in discussions about the future of decentralized artificial intelligence. Key presentations were delivered on topics such as the decentralized cloud computing infrastructure Trias, the distributed AI computing network Gensyn, and the AI privacy solution Flock.io, among others.

🔥Cross-chain interoperability protocol LayerZero announced that Snapshot #1 has been completed and more information will be announced soon.

🔥The seven-day moving average of Bitcoin’s market capitalization to transaction fee ratio fell below Ethereum this week for the first time since July 2019, according to TheBlock data.

🔥Saylor noted in a social media post that the company purchased an additional 122 BTCs in April.

🔥Ethereum re-staking platform Eigenlayer released a white paper for its proposed new token EIGEN on April 29 and announced a token airdrop plan on April 30.

🔥The Ethereum Foundation sold 100 ETH (approximately $290,000) through Cowswap on May 2 and transferred another 200 ETH to Kraken later.

🔥According to two people familiar with the matter, venture capital firm a16z has acquired roughly $90 million worth of Optimism's native OP tokens. This investment is slated to be vested over a period of two years.

🔥This quarter, <a href="/pt-br/price/tether-usdt" target="_blank" class="blog_inner_link">Tether</a> has augmented its Bitcoin reserves by 8,900 BTC, bringing its total holdings to 75,353 BTC, which now represents 0.38% of the total supply of Bitcoin.

🔥According to Tether’s first quarter report for 2024, as of the report release date (May 1), Tether Group’s total strategic investments exceeded US$5 billion, covering fields including artificial intelligence and data, renewable energy, P2P communications and BTC mining.

🔥On their debut, Hong Kong's inaugural batch of spot cryptocurrency ETFs saw vibrant trading activity, with a turnover exceeding HK$87 million on the first day, and HK$68.4 million on the second day.

🔥Zhongan Bank stated that it will soon launch retail virtual asset transactions.

🔥Investment bank TD Cowen said the U.S. SEC is unlikely to approve a spot Ethereum ETF before 2025.

🔥US lawmakers urge SEC to approve options based on Bitcoin spot ETF.

🔥Australia is expected to approve spot Bitcoin and Ethereum ETFs by the end of 2024.

🔥According to DTCC data, the spot Ethereum ETF (FRANKLIN ETHEREUM TR ETHEREUM ETF) (code EZET) launched by asset management company Franklin Templeton has been listed on the DTCC (U.S. Securities Central Depository and Clearing Corporation) website. Create/Redemption (Create /Redeem) column is displayed as Y.

🔥The decentralized AI training platform Triathon recently launched the second phase of TDO. TDO (Test Driving Offering) is the Web3 industry's first crypto-asset issuance platform launched by the Trias ecological project Triathon.

🔥<a href="/pt-br/price/aave-aave" target="_blank" class="blog_inner_link">Aave</a> Labs released the "Aave 2030" temperature check proposal and plans to launch Aave V4, etc.

🔥Drift, the <a href="/pt-br/price/solana-sol" target="_blank" class="blog_inner_link">Solana</a> ecological DEX derivatives platform, has launched the airdrop query entrance. The token, with a total issuance of 1 billion units, set aside 12% of the total supply for airdrops.

🔥AI gaming platform Ultiverse gold chip NFT witnessed a sales volume of 33,873 ETH, valued at approximately US$100 million.

🔥Wormhole announced that three parts constitute its ecosystem: Wormhole Accelerator, Cross-chain Ecological Fund, and xGrant Plan.

##Supervision & Macro Policy
🔥Federal Reserve Chairman Jerome Powell has acknowledged that inflation continues to persist at a high level and the path ahead remains uncertain. He noted an uptick in short-term inflation expectations. Powell maintains that the current policy tightening is exerting downward pressure on demand. He reiterated that future monetary policy decisions will be made incrementally and will be guided by the evolving economic data.

🔥The Federal Reserve has maintained its benchmark interest rate steady within the range of 5.25% to 5.50% for the sixth consecutive time, aligning with what market participants had anticipated.

🔥The Federal Reserve FOMC statement indicated that the Federal Reserve plans to slow the pace of its balance sheet reduction beginning in June. The reduction of U.S. bond holdings will decelerate from $60 billion per month to $25 billion, while the reduction of mortgage-backed securities holdings will continue at the current monthly rate of $35 billion.

🔥The U.S. House of Representatives Financial Services Committee released a statement highlighting a discrepancy between the statement of SEC and its chairman, Gary Gensler, regarding the classification of Ethereum (ETH) as a security. The U.S. Banking Commission declared in its statement that it intends to persist in holding the SEC accountable for what it considers to be overregulation in the digital asset market. They also expressed concern that the SEC's stance on Ethereum classification could influence the outcome of the pending application for the first spot Ethereum ETF in the United States.

🔥Canadian Prime Minister proposes capital gains tax on stocks and cryptocurrencies.

🔥Effective September 1, Russia will begin enforcing strict regulations on cryptocurrency activities, significantly restricting the circulation of crypto assets like Bitcoin. Notably, these restrictions will exempt cryptocurrency mining operations and projects affiliated with the central bank from the imposed limitations.

##Crypto market Highlights
⭐️Over the past week, the cryptocurrency market has seen a widespread downturn across the board. This decline has been attributed to several factors, including the completion of Bitcoin's fourth halving event, performance of Runes which failed to meet expectations, as well as ongoing macroeconomic liquidity pressures. These elements have collectively led to a shift towards negative market sentiment. Unlike previous downturns, the current trend has not resulted in a substantial decrease in altcoin sectors. Market data also suggest a reluctance to sell among Bitcoin miners. A fresh narrative is needed to drive a market recovery.

⭐️In the face of a general market downturn, certain sectors stood out for their resilience and even showed recovery momentum. The Layer 2 sector, in particular, bounced back from its previous significant losses, demonstrating strength in this latest decline and leading the charge in the rebound with a weekly return rate of -4.99%. Notable performers in the sector were Optimism (OP) and Starknet (STRK), which saw weekly increases of 19.9% and 7.2%, respectively. Other sectors that resisted the bearish trend include cross-chain technologies and NFTs. For instance, Wormhole (W) experienced a 12.1% rise over the week, heralding the arrival of altcoin season.

![](https://gimg2.gateimg.com/image/article/171472096811.png)
(Data source: CoinGecko)

##Bitcoin & Ethereum Weekly Performance
**Bitcoin (BTC)**
![](https://gimg2.gateimg.com/image/article/171472098722.png)
(Data Sources:TradingView)

This week, Bitcoin's (BTC) price experienced an initial drop followed by a rise, culminating in a green close on the weekly candlestick for the fifth consecutive week. The initial downturn can be attributed to profit-taking by investors who capitalized on the earlier rally, a move that coincided with the waning excitement from ETF speculations and the Bitcoin halving event. In sync with Bitcoin's decline, the broader crypto market also faced a downturn, tempering the wealth creation potential that had been anticipated by market participants.

At the time of writing, Bitcoin (BTC) reached a weekly peak of $64,721 and dipped to a low of $56,573, with bulls and bears contesting the pivotal $60,000 level. While the current price is supported by the 120-day moving average, and the bearish sentiment has somewhat eased, investors are cautioned against excessive short-term <a href="/pt-br/price/optimism-op" target="_blank" class="blog_inner_link">Optimism</a>, given the recent appearance of a bearish MACD crossover.

The somewhat less pessimistic outlook on the market is bolstered by the Federal Reserve's repeated postponements of interest rate cuts, which have driven a more cautious approach to speculative investments. Additionally, ETF funds have sustained significant net outflows this week, further contributing to a dampened bullish sentiment in the market. These outflows, combined with the macroeconomic liquidity pressures, suggest that the market's enthusiasm is being tempered. This dynamic is consistent with historical patterns, where corrections often follow Bitcoin's halving events.

In summary, while the short-term market trend may be viewed with a degree of caution, we maintain that the long-term potential for profit in this bull run—sparked by the halving—has not yet been completely realized. The current market is a battleground where long and short positions are vying for dominance, and the outcome of this struggle will likely shape the market's forthcoming trajectory.

**Ethereum (ETH)**
![](https://gimg2.gateimg.com/image/article/171472100133.png)
(Data Sources:TradingView)

Fundamentally, Ethereum (ETH) has struggled since the Cancun upgrade, primarily due to a perceived lack of innovative developments to drive growth. Its market share has been further eroded by the growth of Bitcoin (BTC), Solana, and several emerging Layer 1 (L1) ecosystems. This week, Ethereum reported low transaction fees, around 6 Gwei, and experienced a symbolic moment when Bitcoin surpassed it in NFT sales, underscoring a decline in market sentiment following the subsiding hype. However, historical patterns suggest that when gas fees reach a nadir, it may presage a potential sharp recovery from the bearish trend. With this in mind, there remains an anticipation for a market resurgence.

It's noteworthy that the ETH/BTC pair has been on a downtrend for the past year and a half,  a trend that can be partly attributed to the uncertainty surrounding the SEC’s review of Ethereum's spot ETF. This regulatory uncertainty has contributed to Ethereum's lackluster price performance.

Overall, during this bull run, both BTC and ETH have seen their values soar to unprecedented levels. The peak they may ultimately reach is likely to hinge on the extent to which U.S. economic policies can temper the strength of the U.S. dollar.
We will closely monitor the development of new narratives, such as modularization and re-staking, in the coming phase. These emerging concepts are expected to be significant catalysts for Ethereum's recovery and future robustness.

##Web3 project trends
Amidst the broader market correction, five specific project types still witness signs of recovery in terms of total market capitalization. However, due to the absence of fresh, stimulating developments and constrained liquidity prospects, the current rebound appears to be confined to a select few sectors. These sectors, which experienced significant losses in the prior downturn, are now experiencing a rotational recovery.

The prospect of the current recovery transforming into a solid rebound is still in question, given the absence of significant growth catalysts from high-profile projects like In_script_ion, AI, and DePIN, which were key drivers of the previous surge.

This week's standout sectors include cross-chain, NFTFi,Telegram Apps and Cat-themed MEME coins.

| Category  | Weekly change | The top three gainers  | Overview  |
| ------------ | ------------ | ------------ | ------------ |
| Layer 0 | 6.4% | DOT，GEEQ | The Layer 0 sector led the gains, mainly due to the small number of tokens sampled in this sector. |
| Cross-chain Communication  | 6.3%  |W，AXL，ZETA |Tokens within the cross-chain sector have emerged as some of the top performers this week, showcasing their resilience amid the general market downturn. LayerZero, a highly prominent cross-chain project of late, has successfully completed its inaugural snapshot. The anticipation of its upcoming token airdrop is poised to bring even more focus and interest to this sector. |
| NFTFi  | 3.9%  | BLUR，JPEG，X2Y2 | The NFT Finance (NFTFi) sector, which had previously been showing lackluster performance, has seen low selling pressure amid this week's market decline.|
| Telegram Apps  | 1.1% | BANANA，DATA，HGPT |Boasting a user base in the hundreds of millions, Telegram possesses significant traffic potential that can be leveraged through its decentralized applications (Dapps). Currently, there is a marked enthusiasm in the market for speculating on projects within this space, rendering it a realm brimming with boundless possibilities for innovation and growth.|
| Cat-Themed Coins  | 0.9%  | POPCAT，MOCHI，WEN | Cat-themed meme coins, a niche segment of the broader MEME sector, have garnered the attention of numerous Key Opinion Leaders (KOLs) and communities. There is an expectation that they might shift the landscape currently dominated by dog-themed meme coins within the industry. At present, this track is in the early stages of establishing consensus, a phase that is typically characterized by high volatility and fluctuations. |

<div class="blog-details-info">
<div>Author:** Charles T.**, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

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