Weekly Rollup - September 4, 2024

• Markets are down across the board.
• Bitcoin ETFs had their first net outflows since May.
• Elon Musk’s Dogecoin class action is dismissed.
• Telegram CEO Pavel Durov is formally indicted and unable to leave France.
• Cardano’s transition to a token-based decentralised governance system has started.

Macro Market Updates:

There were few macroeconomic updates this week. Preliminary quarter-on-quarter gross domestic product (GDP) figures were released in the US, plus China released its manufacturing purchasing managers index (PMI) update for August. Coming in at 49.1, it’s the fourth consecutive month of contraction in China’s manufacturing activity, indicating that economic headwinds in the region could be persisting. In our view, the sentiment transferred into the crypto market, where investors withdrew funds from bitcoin exchange-traded funds (ETFs). The withdrawals marked the first net outflows since May, reflecting that investors may be looking to build up cash reserves or at least take their funds out of riskier assets for now.

• The Conference Board’s US consumer confidence figure for August came in higher than forecast at 103.3.
• Preliminary GDP for the second quarter of 2024 came in at 3%, 0.2% higher than forecast.
• US unemployment claims came in as forecasted at 231,000.
• Europe’s consumer price index (CPI) estimate for August came in as forecast at 2.2%.

Crypto Market Sectors:

Along with a decline in prices, all sectors across the crypto sector contracted this week. The average performance across all sectors was -3.6%. The worst hit were data availability services, which likely struggled due to scaling challenges and broader market pressure on storage-centric technologies. Similarly, the Artificial Intelligence (AI) sector saw steep declines, as newer technologies like AI-focused blockchain projects tend to experience sharper downturns under selling pressure. These projects often include platforms offering development resources to blockchain developers and AI-driven applications. The standout performer in the market was Helium (HNT), which bucked the overall market trend by posting a significant 15.4% gain this week. Helium's upward momentum is attributed to strong technical indicators and growing market confidence in its decentralised cellular network.

Bitcoin started the week finding resistance below the key level at US$65,500. Price then declined throughout, closing at US$57,469 on Friday 30 August. The month of August saw a decline of over 10% for bitcoin.

Bitcoin asset investment products saw outflows of US$319 million, and short bitcoin investment products saw inflows of US$4.4 million, indicating a potential shift in sentiment. It’s the first week of net outflows for bitcion asset investment products since May. Although the outflows may be concerning, they are negligible in comparison to the inflows recorded since spot bitcoin ETFs launched in January.

The price declines this week appear to be due to reawakened concerns about the excess supply of bitcoin that may grow in the coming months if defunct cryptocurrency exchanges, their creditors, and governments liquidate their holdings. In a report released by crypto data provider Kaiko, key issues causing downward pressure on bitcoin’s price include the ongoing Mt. Gox distributions, the Japanese yen carry trade that became more challenging when the Bank of Japan raised interest rates in July, and slowing demand.

Bitcoin is currently trading at US$56,793, a decrease of 4.3% on the week.

Opening the week at US$2,748, Ethereum proceeded to slide over 13% to around US$2,395. The second-largest cryptocurrency ended August down over 20%. The next key level to the downside is at US$2,320. Ethereum’s price hasn’t traded consistently below this level since November 2023.

Ethereum investment products saw inflows of US$5.7 million this week. However, trading volumes were minimal at just 15% of the levels from the week the products launched.

Ethereum is currently trading at US$2,366, a decrease of 3.1% on the week.

DePIN gains

• Helium (HNT) was the biggest gainer across the crypto market this week, growing by 18.4%. This takes the market cap for the decentralised cellular technology project to US$1.24 billion. The gains follow recent weeks of positive developments for the Helium team, including the Carrier Offload beta going live, which saw 60,000 new users offloaded from major US carriers to Helium’s decentralised network. There are also two proposals open for voting on the network. HIP 130 proposes that the network should expand by using any hotspot that uses passpoint authentication. HIP 131 proposes measures to protect the network’s reward system.

DeFi declines

• Liquity (LQTY) declined by 34.9%, taking its market cap to US$66.8 million. Price for the decentralised lending and borrowing network presumably declined due to wider losses in the DeFi market. The sector contracted by almost 15% this week, likely due to investors liquidating their positions in DeFi networks. The LNT team announced this week that it’s releasing an updated version of its stablecoin, allowing the network to pass on a positive spread between borrowers and Stability Pool depositors (earners).
• Renzo (REZ) lost 30.7%, which takes its market cap to US$57.9 million. The network’s price has been in a steady decline since May 2024. It recently launched layer two restaking, resulting in US$1 billion total value locked and a 90% reduction in gas fees.
• Aevo (AEVO) lost 27.1%, which takes its market cap to US$37 million. The central limited order book (CLOB) Layer-2 network has been running a global trading competition, though that wasn’t enough to sustain prices given selling pressure across the wider market.

Smart Contract Platforms struggle

• Dymension (DYM) declined by 29.9%. This takes its market cap to US$250.6 million. Since its launch in March 2024, DYM has declined from around USDT$8.00 to where it’s currently trading at USDT$1.24. The losses across the wider market aren’t buoying Dymension’s price despite its technology that supports the development and deployment of RollApps. Gaming platform ALLiN BETS, which is built on Dymension, recently made its testnet live, while the Rivalz network, also built on Dymension, just successfully closed a US$9 million funding round.
• Saga (SAGA) lost 27.7%, taking its market cap to US$119.6 million. Another altcoin that was launched earlier in the year, its price has declined from almost US$7.90 in May to the current price of US$1.18. The Layer-1 protocol that enables developers to create parallelised, VM-agnostic and interoperable dedicated chains recently completed its fourth airdrop.

This week saw outflows of US$305 million for digital asset investment products. The shift in sentiment could be due to strong macroeconomic data, which is causing uncertainty over whether the US Federal Reserve will continue with its narrative that it will deliver a September rate cut. The US saw the largest outflows at US$318 million. This was followed by Canada and Germany, which saw US$13 million and US$7.3 million in outflows, respectively.

• The Open Network (TON) experienced two outages last week. The first was due to validators being unable to achieve consensus as a result of old transactions that couldn’t be cleaned. And the second likely occurred due to a surge in usage around the time of an airdrop launching Dogs (DOGS), a new memecoin. It marks another week of challenges for TON as Telegram’s CEO Pavel Durov was formally indicted by French authorities, alleging the chat platform has been involved in enabling illegal activities. Durov is unable to leave France while the investigations are ongoing.
• The first stage of Cardano’s Chang upgrade is live. The hard fork marks the first major blockchain to transition from centralised governance to a token-based decentralised governance system. As part of the upgrade, ownership of the blockchain transitioned to the holders of the native ADA token. The first stage of the hard fork will occur over the next three months, with security and continuity being the goal of stage one. ADA is currently trading at US$0.336.
• Elon Musk has successfully had the class action lawsuit against him dismissed. The suit, which alleged that Musk’s comments manipulated the price of Dogecoin, was filed in June 2022. Investors claimed that Musk’s statements, including saying he would become Dogecoin’s CEO or putting a Dogecoin in SpaceX and sending it to the moon, were harmful to investors. U.S. District Judge Alvin Hellerstein said the investor’s statements were “aspirational and puffery, not factual and susceptible to being falsified.” Dogecoin is up 3.9% in the last 24 hours at the time of writing, and its market cap is US$14.5 billion.

• The US Securities and Exchange Commission (SEC) has warned bankrupt crypto exchange FTX that the regulator reserves the right to challenge how it pays back creditors, especially if the exchange makes money from its current crypto asset holdings. Since FTX collapsed in November 2022, a number of options have been explored to maximise creditor recovery. One proposal included relaunching the exchange and making distributions to creditors as tokens that can be traded.
• The US SEC filed a Wells notice with OpenSea. The notice alleges that non-fungible tokens (NFTs) sold on the platform are securities. OpenSea’s CEO Devin Finzer said that taking legal action against the NFT marketplace would stifle innovation amongst creators.