Slow and Steady

The cryptocurrency market is buzzing with excitement again, and it's hard not to feel the energy at recent industry events. After a tough bear market that left many feeling disheartened and the recent sideways market after Q1 this year, the renewed enthusiasm is palpable.

Just think back to Bitcoin 2023 in Miami last year, when attendance was a fraction of what it had been before. Fast forward to today, and you’ll see crowds filled with eager faces at gatherings that are alive with new ideas and developments. It’s inspiring to witness this revitalization, and it makes you optimistic about what lies ahead for the crypto community.?

This month, Singapore hosted two major gatherings—Token2049 and Solana's Breakpoint 2024—both of which were massive successes. Attendance was high, and there were numerous significant announcements from key crypto teams.

In this edition of the Crypto Market Monitor, we'll break down the major takeaways and announcements from these two events to understand how the crypto landscape is evolving. We’ll explore the key narratives driving the market, the areas development teams are focusing on, and which segments are attracting the most investor attention. Let’s dive in.?

Resurgence of the Alt L1 narrative?

After the FTX collapse in November 2022, many DeFi users feared Solana might not recover, potentially fading into obscurity as just another failed project. However, the Solana community took control of the network's future, ensuring its resurgence. Today, the community is reveling in its comeback, and Solana’s renewed success has sparked fresh interest in other Layer 1 chains.?

In this cycle, new chains like Monad and Berachain have garnered attention, with Monad’s high throughput and Berachain’s liquidity incentive token structure standing out. Just this month, Layer 1 blockchain Sui surged over 160%, reaching as high as $1.75, following the U.S. Fed’s rate cut announcement and Grayscale’s announcement of its Sui Trust.

Much of the market’s focus on these new Layer 1 projects can be traced back to the impressive gains delivered by Layer 1s during the 2021 bull cycle. The SOL-LUNA-AVAX-FTM quartet performed exceptionally well during that period (until, of course, the Terra UST and FTX collapses derailed things).?

While some may argue it’s overly optimistic to expect such substantial returns from a single sector again, smart investmentors are investing in these promising projects. New Layer 1s like Monad, Sui and Aptos are backed by significant venture capital funding.?

However, a few challenges remain: these newer chains lack a user base comparable to that of more established networks. According to data from Token Terminal, when analyzing the average daily number of users, the only Layer 1 launched after the 2021 FTX collapse to make it into the top 20 is Aptos.

Driven mainly by user activity on its lending platform Aries Markets and liquid staking platform Amnis Finance. The same is true for top-20 lists of fees and revenue earned. This underscores the critical importance of user acquisition and the development of practical applications on these networks to ensure long-term success.?

Figure 1: Share of Active Users on Respective Blockchains

Cautious Optimism?

Major cryptocurrencies and several altcoins rallied following the Fed's recent interest rate cut—the first in four years. Another rate cut is expected later this year. The shift toward a looser monetary policy, which the Fed had hinted at for some time, is already putting more money into people's hands. For instance, the average rate on a 30-year fixed-rate mortgage—the most popular home loan—has dropped to around 6%, down from nearly 8% just a year ago.?

Despite this positive momentum, crypto markets are not entirely in the clear. Bitcoin's realized market capitalization, which values the asset based on the price each coin last moved rather than the current market price, offers insight into the market's underlying dynamics. Since early August, Bitcoin’s realized market cap has hovered around $622 billion, reflecting a slowdown on both the supply and demand sides. Only recently has this begun to shift slightly, indicating that liquidity is slowly returning to the crypto markets.?

Figure 2: Bitcoin’s realised market capitalisation had plateaued before only recently budging

Market participants are exercising caution. On one hand, the Fed's rate cut signals the potential for a more favorable monetary environment, which could benefit risk assets like cryptocurrencies. However, the effects of rate cuts take time to materialize, and the true catalyst for significant market momentum would be quantitative easing—a move that will only be on the table once inflation is fully under control.? As a result, investors are slowly accumulating high-conviction projects, while speculative activity, such as the memecoin frenzy seen earlier this year, remains subdued.?

Venture capital more wary

VC funding for crypto peaked in March, with 189 rounds totaling over $1.09 billion. April followed closely behind with similar funding levels but fewer rounds. Since then, total funding has remained around $1.05 billion, though the number of rounds has decreased. This suggests that VCs are opting for larger investments in more established projects rather than taking on the higher risks associated with smaller early-stage ventures.?

Figure 3: Crypto venture capital has seen an increase in the number of larger check sizes

Another key reason behind the safer bets of crypto VCs is the pressing need for real, impactful use cases in the crypto space. For instance, AI projects built on crypto were highly touted but ultimately felt like a passing trend, failing to achieve the anticipated level of adoption. As a result, venture capitalists are holding off on making bolder investments until projects begin addressing significant problems that can attract and retain a loyal user base. Only when these solutions demonstrate strong, lasting value will we likely see a resurgence in aggressive venture capital bets in the crypto sector.?

Spotlight on Solana?

Everyone loves a good story, and Solana’s journey is one of the most compelling in crypto. After nearly facing collapse following the FTX crash in November 2022, Solana has rebounded to a total value locked (TVL) of over $5.27 billion, making it a standout project this cycle. Its remarkable comeback has earned the admiration of a diverse range of participants—builders, investors, speculators, and newcomers alike—cementing its place as a crowd favorite in the crypto space.?

Firedancer soon?

Solana’s Breakpoint event brought two significant announcements for the project. Jump Crypto revealed the testnet launch of the long-anticipated independent validator client, Firedancer. At the event, they also announced the mainnet release of Frankendancer, a prototype of Firedancer. This follows the launch of Solana's first independent validator client, Agave, on mainnet in August.??

Having a variety of independently-developed validator clients is crucial for the decentralization and security of a blockchain network, as reliance on a single client can leave the network vulnerable to bugs and attacks. Beyond enhancing decentralization, Firedancer is expected to deliver much higher performance than the Agave client. In fact, its developers have reported achieving 1 million transactions per second (TPS) in a test environment. For comparison, Solana typically handles around 3,000 TPS, and even fewer when focusing solely on user transactions (non-vote transactions), according to Solana Compass.?

The Solana Seeker??

Solana also unveiled its second crypto phone, the Seeker, which is set to launch in 2025. This new device promises to be a significant upgrade from Solana’s first phone, Saga, featuring an improved battery, a stronger camera, and a lighter design.?

This announcement underscores Solana's commitment to mobile development, particularly in light of the latest crypto adoption index, which shows countries like India and Nigeria leading the way. In these nations, over 75% of internet traffic comes from mobile devices. By intensifying its focus on mobile development, Solana positions itself as a leading blockchain ready to benefit from the shift toward mobile-first internet usage.?

The network is swiftly enhancing its market standing across various dimensions—strengthening its mobile capabilities, advancing decentralization and security through additional validator clients, and establishing a growing roster of merchant partnerships with major players like Stripe and VISA.?

Conclusion?

We are beginning to gradually emerge from the long-term consolidation phase. The U.S. Fed has finally started to cut rates, which could soon lead to liquidity flowing back into risk assets. With a general rise in optimism, the outlook is slowly improving.

While challenges like user stickiness and fragmented liquidity remain, the situation is likely to enhance as innovative projects that deliver real value come to the forefront—Eigen Layer and Pendle Finance are notable examples. Although the market has significantly cooled from the highs and speculative enthusiasm seen in March, the prospects look brighter as developers focus on adding value and building a better future for crypto.

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Disclaimer

This document is provided by AMINA Bank AG (“AMINA”) and is intended for educational and informational purposes. AMINA’s weekly Crypto Market Monitor is not intended for distribution in any jurisdiction where such distribution would be prohibited. Furthermore, it is not aimed at any person or entity residing in such jurisdiction. It does not constitute an offer or a recommendation to subscribe, purchase, sell or hold any security or financial instrument. The document contains the opinions of AMINA as at the date of issue, which do not take into account an individual’s circumstances and objectives. AMINA does not make any representation that any investment or strategy is suitable or appropriate to individual circumstances or that any investment or strategy constitutes personalized investment advice. Some investment products and services may be subject to legal and regulatory restrictions or may not be available worldwide on an unrestricted basis. The information and analysis contained in this Crypto Market Monitor are based on sources considered as reliable. AMINA makes its best efforts to ensure the timeliness, accuracy, and comprehensiveness of the information contained in this document. Nevertheless, all information indicated herein may change without prior notice.