1. Conclusion

1. Summary at the Macro Level and Future Predictions

Last Friday, the Fed's preferred inflation indicator rose moderately, and household spending remained stable, indicating that policymakers may achieve a soft landing, thus reducing the necessity for a 50 basis point rate cut in September. However, Wall Street still expects significant rate cuts in November or December.

In the future, the market will continue to closely monitor changes in the labor market and upcoming employment data. Although a rate cut has become highly probable, the resilience of the economy and the moderate rise in inflation may limit the extent of the cuts, especially if the economic fundamentals remain stable.

2. Market Movements and Warnings in the Crypto Industry

The cryptocurrency market showed insufficient upward momentum after several days of rebound, continuing to exhibit weakness last week, with most cryptocurrencies experiencing a pullback. BTC fell to around $57,100 again, while ETH dropped to a low of $2,400. Most opinions suggest that the market is in a secondary bottom-testing phase, with market sentiment still reflecting panic. The market is waiting for more macro data signals for guidance.

It is noteworthy that due to the market downturn in the last two weeks of August, Bitcoin and Ethereum prices fell by 8.6% and 17.3%, respectively, while global stock and bond indices rose by about 2% during the same period, indicating that mainstream coins significantly underperformed traditional mainstream assets in August.

3. Industry and Track Hotspots

Ethereum continues to show a downward trend, with the community attributing part of the blame to the Ethereum Foundation and Vitalik Buterin. The recent transfer of 35,000 ETH by the Ethereum Foundation has drawn widespread attention and skepticism from the community. Community members pointed out that the foundation's annual expenditure report lacks transparency, raising doubts about its use of funds.

Vitalik Buterin's views on decentralized finance (DeFi) in recent discussions have sparked controversy. His statements have been interpreted by some community members as a misunderstanding of DeFi, believing he failed to clearly express its potential value and applications. This communication breakdown may lead to doubts about his leadership capabilities, further exacerbating concerns about Ethereum's future development.

Additionally, MakerDAO's brand upgrade and the launch of its new stablecoin USDS and freezing feature have sparked debates about decentralized stablecoins. Although stablecoins play an important role in the cryptocurrency market, issues of centralized control are gradually emerging, especially with the introduction of freezing features, which contradicts the original intention of decentralization, casting a shadow over the future of DeFi.

This incident not only indicates that DeFi projects need to make compromises under regulatory pressure but may also lead to community divisions. Nevertheless, in the long run, this could prompt deeper innovation and transformation in the DeFi space, exploring new technological solutions to balance compliance and decentralization.

2. Review of Macro Data and Key Macro Data Release Points for Next Week

Last week, U.S. stocks welcomed four consecutive months of gains. The Dow Jones Industrial Average rose by 0.94%, reaching an intraday historical high. In Europe, the German DAX30 index fell slightly by 0.02%, the UK FTSE 100 index dipped by 0.04%, and the French CAC40 index decreased by 0.13%. The Asia-Pacific stock markets also generally rose after experiencing fluctuations at the beginning of the month, with the Hang Seng Index performing particularly well, rising over 3.7%. The Nikkei 225 index accumulated a 1.5% increase for the month;

Bitcoin's August Trend Source: Investing.com

The cryptocurrency market exhibited a volatile downward trend last week. Bitcoin and Ethereum both saw weekly declines of around 10%, with Bitcoin touching a low of $57,230 at one point. Data shows that Bitcoin's decline in August reached 8.6%.

This week's focus will be on the U.S. non-farm payroll report. Fed Chairman Powell hinted at a rate cut in September due to slowing inflation and moderate growth in the labor market.

U.S. Employment Growth Slows Source: Bloomberg

Next week, several important data points will be released. The U.S. will announce the August non-farm payroll report, July job vacancy data, weekly initial jobless claims, and ADP employment data, all of which will influence the Fed's rate cut decisions. The market expects the Bank of Canada to cut rates for the third consecutive time.

Europe will release the Eurozone policy statement, German factory orders, and industrial production data, Eurozone three-month GDP data, as well as the final data for the UK manufacturing and services PMI.

3. Industry Data Sharing

1. Overall Market Performance

1.1. Spot BTC ETF

Last week, the main buyers of spot BTC were still Ishares, which purchased over $7.6B of BTC in the past seven days. This indicates that even if BTC's price falls below the $60,000 mark again, the downward momentum is slow, which is typically the result of continuous batch purchases by ETFs, thus can be interpreted as positive for the overall market.

1.2. Spot ETH ETF

ETH buyers clearly showed lackluster buying sentiment last week, as the chart indicates a nearly flat trend, with the total weekly purchases by various ETFs not even reaching $1B, reflecting the low willingness and proportion of asset management giants to include ETH in their asset allocation. The road for ETH to become "digital silver" remains challenging.

2. Public Chain Data

Layer1 Summary

Last week, new and old EVM public chains exhibited completely different market performances. The public chain TON suffered continuous selling pressure due to the arrest of its founder, performing the worst, but is expected to show strong rebound performance after the founder's bail.

Meanwhile, the established public chain Fantom unexpectedly became the best-performing public chain last week, likely benefiting from the positive news of its rebranded Sonic Labs launching a new version of the testnet. Additionally, the appointment of AC as CTO has provided reassurance to Fantom users.

As new Layer 1 players, SEI and APTOS also delivered good results in the past week due to the continuous development of their ecosystems.

Layer 2 Summary

This week, as the overall market weakened again, L2 funds fled entirely, with the overall TVL experiencing a net outflow of nearly 10%. Among the top ten protocols, except for the consistently strong Base, the leading ZK protocols Scroll, and the OP mainnet with declines below 10%, the remaining protocols all saw declines of over 10%.

Notably, Blast's total locked value (TVL) has dropped 62% from its historical peak, with daily active users falling to the lowest level in six months. At the beginning of August, the network lost over $300 million in liquidity, with TVL dropping from $1.1 billion to $785 million, marking the lowest point in six months.

DEFI Sector

1.1. RWA

Last week, on-chain RWA assets remained stable overall, but suddenly experienced a sharp decline on Sunday. Analysis suggests that this may be due to the RWA segment of the BTC ecosystem's re-staking protocol, Solv protocol, plummeting by 76% within 24 hours over the weekend, thus DeFi users should be cautious of the risks associated with this protocol.

1.2. Restaking

This week, the restaking sector saw a slight downturn, as last week's market performance was lackluster, leading to a decrease in DeFi yields, which in turn reduced on-chain trading and lending activities, inevitably lowering restaking yields.

However, with the rise of the BTC ecosystem BTCFi, restaking of BTC and its related assets will have significant potential for imagination.

3. Analysis of Hot Tracks and Projects

1. How does the arrest of the TON founder impact the crypto market, and which types of meme tokens benefit?

After the release of the TON founder, panic sentiment on the TON chain gradually dissipated, and TVL stabilized. Therefore, if there are no major changes in the future, the TON ecosystem is likely to rebound again. However, crypto users should be aware that the alarm from this incident has not been fully lifted.

This event may benefit meme tokens related to concepts like "freedom" and "democracy" in the meme sector in the coming period.

2. Is the rebranding of MAKER DAO to SKY and the token upgrade a positive or negative development?

MakerDAO was once a pioneer of decentralization in the DeFi space, with its DAI being a stablecoin not subject to centralized control. However, with the launch of USDS, its philosophy seems to have diverged from its original intent.

It is reported that USDS may introduce freezing features similar to centralized stablecoins USDT and USDC, allowing the issuer or relevant governance entities to freeze users' funds under certain circumstances.

The designers of USDS claim that the freezing feature is intended to mitigate risks and ensure compliance. However, this raises a fundamental question: if a decentralized stablecoin can be remotely controlled, and such centralized control requires users to rely on the goodwill and compliance of the issuer to some extent, rather than having complete control over their assets, then the meaning of DeFi is lost.

Of course, we can understand that MAKER DAO, due to its reliance on the RWA sector, will ultimately move towards compliance, and this upgrade is a compromise that MAKER DAO must make to continue to survive in the future. After all, if it continues to insist on decentralization, its RWA business will inevitably be cut, leading to a significant reduction in this substantial profit.

However, from the perspective of the crypto industry, MAKER DAO's "betrayal" represents a regression in development.

3. Can Babylon ignite the next bull market?

Babylon is a protocol aimed at leveraging Bitcoin's security to provide security guarantees for other PoS chains. Babylon can offer secure, non-cross-chain, non-custodial native staking solutions for PoS chains, including BTC layer2, and promote cross-chain interoperability, often compared to Ethereum's Eigenlayer.

Core Principles

Remote Staking: Utilizing Bitcoin's UTXO model and scripting system to achieve staking, forfeiture, and rewards for Bitcoin.

Timestamp Server: Providing immutable timestamps for events on PoS chains by recording them on the Bitcoin blockchain.

Three-Layer Architecture: Bitcoin as the base layer, Babylon as the middle layer, and PoS chains as the upper layer. Babylon is responsible for recording the checkpoints of PoS chains onto Bitcoin.

4. Potential Sectors This Week

Fractal Bitcoin

Fractal Bitcoin is another scaling solution for Bitcoin developed by the UniSat team. By using BTC core code, it innovates an infinitely scalable layer on the main chain to enhance transaction processing capacity and speed while being fully compatible with the existing Bitcoin ecosystem.

Currently, the testnet wallet addresses have exceeded ten million. Its potential application scenarios may include: serving as a BTC testnet, OP_CAT experimental field; providing low-cost participation in the BTC ecosystem for project parties and users; driving the development of microtransactions.

Its ecosystem is currently in a very early stage, so users are reminded to be cautious of risks while participating.

Satlayer

Based on Babylon, SatLayer is a Bitcoin re-staking platform that leverages Bitcoin's power as a universal security layer. By deploying smart contracts on Babylon, SatLayer enables Bitcoin stakers to use their BTC for validation services, thereby protecting various decentralized applications or protocols.

The ecosystem of SatLayer is relatively simple, with several important participants:

• Re-stakers: Wrap BTC assets for re-staking on SatLayer.

• Operators: Choose Bitcoin validation services (BSV) to provide security and earn re-staking rewards.

• BVS: Use BTC to launch their crypto-economic security PoS networks or applications.

SatLayer's revenue mainly comes from BTC staking rewards on Babylon, additional staking rewards from SatLayer BVS, and its composability, which can be used in other BTCFi to generate further yields.

Referring to similar protocols in the same sector like Solv protocol, Satlayer can at least provide objective returns for re-staking BTC users in the early stages, thus becoming a market focus in the short term.

4. Regulatory Policies

While there have been no significant changes in global regulatory policies over the week, the crypto industry is penetrating various fields at an unprecedented speed, and governments around the world are gradually changing and improving their regulatory attitudes towards the crypto industry.

Russia

Russia plans to begin testing the use of cryptocurrencies for cross-border payments. According to a new law signed by President Putin, these payments will be conducted under the supervision of the Central Bank of Russia, but the ban on cryptocurrencies as legal tender remains in place, limited to cross-border payments only. This move indicates that Russia aims to ensure that economic activities are not affected by international sanctions through cryptocurrencies.

New Zealand

New Zealand's tax minister has introduced a tax bill proposing the implementation of the OECD's Crypto Asset Reporting Framework (CARF). If passed, New Zealand's crypto asset service providers (CASPs) will be required to collect and report transaction information of reportable users, with fines imposed on non-compliant CASPs and crypto asset users.

Nigeria

Obinna Iwuno, head of the blockchain advocacy organization in Nigeria, stated that Nigeria has recently approved two digital asset exchanges, which is a positive development for the industry. He believes that Nigeria, as a major player in cryptocurrency trading in Africa, should take the lead in regulating and issuing licenses.