Web3 AI Daily Review (2024/9/3)

1. Attention Value - Market Highlights

1. Market Trends

(1) Macroeconomic Environment:

l U.S. markets closed, European stocks mixed

On Monday, U.S. financial markets were closed for Labor Day, with attention on the ISM Manufacturing Index to be released on Tuesday, the U.S. August ISM Non-Manufacturing Index on Thursday, and the U.S. August Non-Farm Payroll data on Friday, seeking clues about whether the Federal Reserve will cut rates by 50 basis points or 25 basis points.

(2) Web3 Sector:

l QCP Capital: September will see seasonal declines

According to an analysis released by QCP Capital, Ethereum significantly underperformed Bitcoin in August and warned of further declines in September. QCP Capital analysts noted that Bitcoin fell by 8.6% in August. The month began with the "Japanese stock market crash," and Bitcoin has failed to recover above $65,000. Ethereum's performance in August was even worse, with a decline of 22.2%, reportedly due to sell-offs by Jump Trading. The significant price volatility last month started on August 4, when major tokens experienced a sharp sell-off alongside the stock market, triggered by the Bank of Japan's interest rate hike and the subsequent appreciation of the yen against the dollar. This sell-off marked one of the most severe declines in risk assets since the "Black Monday" crash of 1987.

According to QCP Capital, Ethereum has underperformed Bitcoin since this deleveraging event, possibly due to Jump Crypto (the cryptocurrency division of Jump Trading) transferring a large amount of Ethereum to exchanges.

l Bitfinex: Bitcoin may rise before falling

The Bitfinex research team analyzed the dynamics of the U.S. economy and decision-making, Bitcoin's future expectations, and cryptocurrency politics and regulation in their latest report, emphasizing that Bitcoin's price will be heavily influenced by Federal Reserve decisions. They believe that if rate cuts materialize, it could lead to a "Sell the News" event, causing further declines in Bitcoin. Although Bitcoin recently fell below $60,000, Bitfinex pointed out that it had actually risen by 32% since the sharp drop on August 5, primarily driven by the market's reaction to the Fed's dovish comments. However, Bitfinex also believes that if the Fed decides to cut rates, it may lead to a rapid spike in Bitcoin's price, followed by a potential correction due to heightened recession fears. Bitfinex emphasized that despite the positive sentiment surrounding the halving, Bitcoin's recent performance will be heavily influenced by Fed decisions, with August's performance serving as the best proof.

Bitfinex speculates that after a rate cut, Bitcoin could experience a 15-20% decline, seeking support between $40,000 and $50,000. This is not a random prediction but is based on historical data showing that Bitcoin's return peaks typically decline by about 60-70% in each cycle, along with a gradual reduction in volatility during bull markets.

2. Hot Events

Web3 Sector:

l Ripple plans to launch XRPL EVM sidechain in 2025

On September 3, Ripple announced key updates released this week in South Korea and Japan, stating that Ripple and the XRP community are committed to bringing new programmability to the XRPL ecosystem through the XRPL EVM sidechain (currently in progress) by 2025, including smart contracts, and exploring native functionalities on the XRPL mainnet. Additionally, the metaverse startup Futureverse has partnered with Ripple Custody to securely manage its assets. Futureverse has adopted the XRPL NFT standard, using XRP as its gas token on the Root network, and has integrated with the XRPL DEX to provide network liquidity.

According to an official release from Ethena Labs, the second season of the Ethena protocol ended on September 2. During the second season, the supply of USDe grew from 1.3 billion to nearly 3 billion, generating over $105 million in revenue for the protocol. The third season rewards will automatically begin on September 2, and users can check the ENA available for claim at claim.ethena.fi on September 9, with claims available until September 30. Additionally, Ethena launched sENA, a liquid and transferable staking token, requiring users to convert locked ENA into sENA to earn rewards in the third season.

3. Hot Narratives

Recently, there has been a lot of disappointment within the community regarding the Ethereum ecosystem, as the secondary market performance of Ethereum ecosystem projects has not been satisfactory or has not met community expectations. At its core, this may stem from dissatisfaction with the overall underperformance of altcoins. The obsession with infrastructure is not limited to the Ethereum ecosystem; the entire Web3 space is still in this phase. This situation is partly due to the limitations of value capture in Web3—"fat protocols, thin applications."

Since most of the value is captured by the underlying chains, VCs are generally keen to invest in various layer 1 and layer 2 projects, as the rent-seeking logic at the protocol layer is relatively easier to achieve high market capitalization. Moreover, projects with various segmented functional modules are increasingly deepening their technical narratives, which may only be responsible for a very small part of the entire industry. Because of the introduction of innovative technologies like ZKP and FHE, the first market valuations have already reached the ceiling, and the secondary market performance will naturally undergo valuation corrections. However, these types of projects have made little contribution to attracting new users and mass adoption. The hope for breaking this deadlock may still lie at the application layer.

Recently, Ethereum co-founder Vitalik Buterin mentioned on Twitter the types of Web3 applications he hopes to see, which should have two characteristics: they should be continuously useful and should not sacrifice principles (such as permissionless and decentralized). From an investment perspective, two additional criteria can be added—there should be a certain level of self-sustainability, and ideally, some positive externalities. For Web3 applications with these characteristics, Vitalik listed three specific directions: DEX, Decentralized Stablecoin, and Polymarket. Vitalik candidly stated that he "does not respect" matters that derive their appeal from unsustainable temporary sources. He cited the example of liquidity mining in 2021 (referring to liquidity mining token incentives being unsustainable temporary sources of income).

4. Potential Catalysts

Data shows that DOGS buyers are returning. DOGS was launched on August 26 after Telegram CEO Pavel Durov was arrested in France, experiencing a highly volatile token generation event (TGE) with over 400 billion tokens distributed to users. The immense selling pressure caused DOGS' price to drop from $0.0017 to $0.0010. However, hourly chart analysis shows a significant increase in the Money Flow Index (MFI), indicating that capital inflows into the cryptocurrency are increasing. MFI is a technical indicator that shows the level of capital inflow into cryptocurrencies. When it declines, it indicates rising selling pressure. Conversely, an increase suggests otherwise. In the case of DOGS, the price decline alongside an increase in the Money Flow Index (MFI) indicates that selling pressure is easing, and buyers are stepping in, forming a bullish divergence. This pattern typically suggests that prices may soon rise. Additionally, the derivatives market is showing similar optimism, with rising funding rates as evidence. Higher funding rates indicate that buyers (longs) are paying sellers (shorts) to maintain their positions, suggesting a more widespread bullish sentiment.

Figure 1: DOGS Funding Rate

Source: Coinglass, Dot Labs

2. Attention Value - Hot Projects

1. Social Media Highlights

Solana has recently gained widespread attention on social media platforms, with its popularity continuing to rise. The Solana ecosystem has developed rapidly in recent years, becoming one of the major players in the cryptocurrency market. As of 2024, Solana's TVL has reached approximately $4.8 billion, growing 20 times since 2023, with the daily active addresses on the Solana network reaching 1.3 million and monthly active addresses surpassing 15.6 million, showing significant growth compared to 2023. In the second quarter, Solana's total economic value increased by 53% quarter-on-quarter, reaching $151 million, demonstrating its continued activity in the cryptocurrency market. These data indicate that the Solana ecosystem is showing strong growth momentum in 2024, attracting more developers and investors' attention.

Key Projects:

· IO

Recently, io.net has reached a strategic partnership with Chainbase to jointly promote the training and application of the crypto-native AI large model Theia, leveraging the high-performance computing power provided by io.net to accelerate model training. Additionally, io.net and Flock.io joined forces to create Proof of AI (PoAI), a proof-of-work and consensus mechanism centered around AI. This system requires nodes in a decentralized network to complete AI training tasks to verify their integrity. Nodes that successfully execute these tasks can earn rewards from the DePIN and AI training network.

2. Smart Money Accumulation

· Smart Money Holdings

Source: ChainEDGE, Dot Labs

Project Overview:

1. VISTA (@ethervista /X)

The Ethervista standard sets custom fees that can only be paid with native ETH, which are cleverly distributed to liquidity providers and token creators. Each exchange adopts a new mechanism to reward users with low gas costs. Protocol fees can be allocated to smart contracts and funds. A key feature of this model is that market makers and creators benefit from trading volume rather than token prices, incentivizing long-term rather than short-sighted price behavior. Investors benefit from mechanisms that prevent rapid withdrawals, reducing market risk and increasing investment success rates. Ethervista plans to expand services, including ETH-BTC-USDC pools, offering loans, futures, and free flash loans, aiming to become an integrated decentralized application.

2. FWOG (@solfwog /X)

FWOG is described as a community-driven meme coin, with its official website and related information not providing specific identities of founding team members or developers. However, reports indicate that FWOG's CTO is a team member named @deecayz, who has showcased past successful meme coin projects on Twitter, suggesting that FWOG's development team may be a small, focused team on meme coins rather than a large development company.

· Smart Money Inflows

Source: ChainEDGE, Dot Labs

Project Overview:

1. SunDoge (@sdg_eth /X)

As a governor with fluffy ears and aquamarine eyes, $SunDoge is known for his striking appearance and sharp intelligence. He is always impeccably dressed, navigating the ever-evolving cryptocurrency world, never satisfied with his achievements.

2. aura (@auracoinsolana /X)

Aura is the energy that people emit; everyone has some degree of aura, and having an "aura" is one of the greatest compliments a person can receive, indicating that we have transcended to a new level through execution, knowledge, and intuition.

3. Attention Value - Sector Rotation

1. Hot Sectors

Source: Dune, Dot Labs

Source: Dune, Dot Labs

2. Internal Sector

Source: Dune, Dot Labs