Frontier Lab Crypto Market Weekly Report | W36

12 min readSep 6, 2024

BTC and ETH Weekly Overview

Market Performance

This Week’s Cryptocurrency Market Review: Volatile Decline

Bitcoin: This week, Bitcoin showed a downward trend. The drop is mainly due to the disappointing U.S. ISM Manufacturing PMI and the August ADP employment figures, which both fell short of expectations. These indicators reflect the continued weakness in the U.S. economy, leading the market to price in a potential recession. Most importantly, market confidence is currently very fragile.

Ethereum: Ethereum followed Bitcoin this week, also experiencing a decline. In addition to macroeconomic factors, last week’s internal disagreements within the Ethereum ecosystem about its future direction further contributed to downward pressure. During this week’s Ethereum Foundation AMA, no consensus was reached, and with a lack of significant innovation or hotspots within the Ethereum ecosystem, investors have expressed a pessimistic outlook on Ethereum’s future development.

Key Events

U.S. ISM Manufacturing PMI Below ExpectationsOn September 3rd, the U.S. ISM Manufacturing PMI for August was reported at 47.2, below the expected 47.5. Although this figure was higher than the previous 46.8, the market viewed the manufacturing sector as weak, which may trigger concerns of a potential U.S. recession in the future.

U.S. August ADP Employment Figures Below ExpectationsOn September 5th, the U.S. ADP employment numbers for August were reported at 99,000, lower than the previous 111,000 and significantly below the expected 145,000. This marks the lowest level in three and a half years, signaling a weakening job market. As a result, market expectations for a future U.S. recession have intensified, leading to declines across various markets.

Altcoin Market Overview

Overall Performance

This Week: The market sentiment index dropped to 11%, a sharp decline from last week’s 38%. As the market has been on a downward trend for two consecutive weeks, sentiment shifted from fear to extreme fear.

The altcoin market this week was influenced by multiple factors. Externally, the disappointing U.S. macroeconomic data triggered renewed concerns of an economic recession, leading to widespread market declines. Internally, the crypto industry lacked any significant hotspots or innovation at this stage, preventing new narratives from emerging. Additionally, users in the market exhibited a lack of confidence in the future, leading to a decrease in purchasing power and heavy selling pressure.

Overview of Public Chain TVL Growth

The following are the top 5 public chains in terms of TVL (Total Value Locked) growth over the past week (excluding public chains with smaller TVL), with data sourced from Defilama.

CORE: Core is an innovative blockchain that is compatible with EVM. Recently, it launched LstBTC, an ERC-20 liquid staking token pegged 1:1 with Bitcoin. While holding LstBTC ensures Bitcoin liquidity, holders also earn CORE tokens as rewards daily, adding another income stream for BTC holders. Furthermore, Binance recently announced an investment in Core, reigniting interest in the BTCFi sector. Given the current weak market conditions, investors are leaning more towards BTC, seeking to increase their income while holding BTC. As a result, Core’s TVL (Total Value Locked) has been rising rapidly.

BSquared: Recently, the BTC ecosystem has regained market attention, and as a leading project in the BTC-L2 sector, BSquared has taken the opportunity to accelerate its development. BSquared recently announced a strategic partnership with Aptos, expanding BTCFi into the Aptos ecosystem. Through the Echo Protocol, cross-chain BTC can earn an annual yield of 12%, and BSquared has also partnered with KryptosConnect.

dYdX: Recently, dYdX has been adding more token trading pairs, such as OSMO and XTZ, through community voting. This move has increased the number of token market makers, resulting in a recent rise in dYdX’s TVL.

Sei: This week, Sei integrated with Biconomy, allowing users to utilize the account abstraction infrastructure stack. Sei has also been promoting its Game Week initiative, pushing GameFi projects and offering SEI token rewards to users, which has increased user participation on-chain.

Starknet: Recently, the market has begun discussing Ethereum’s Pectra upgrade, expected early next year. The upgrade is highly favorable for the ZK industry’s development, making Starknet, a leader in the ZK space within the crypto sector, gain renewed market attention this week.

Overview of Project TVL Growth

Top 5 Projects with the Highest TVL Growth in the Past Week(Excluding projects with smaller TVL, the standard being over $30 million)

Data Source: DefiLlama

Colend Protocol:

Project Overview: Colend is a lending protocol built on the Core chain. Its main collateral consists of BTC’s LST tokens, aiming to advance the Bitcoin-Fi sector.
Latest Developments: This week, Core launched LstBTC, an ERC-20 liquid staking token pegged 1:1 with Bitcoin. Holding LstBTC ensures Bitcoin liquidity while earning CORE tokens as daily rewards. This has led to a sharp increase in TVL on the Core chain. To release LstBTC’s liquidity, users are opting to use Colend Protocol on the Core chain, leading to a rapid increase in Colend Protocol’s TVL this week.

Maple Finance:

Project Overview: Maple Finance is a lending protocol operating across multiple chains.
Latest Developments: Maple Finance supports BTC-collateralized loans and offers lenders an APY of at least 7%. Given the market’s current instability, users have begun to prefer holding BTC, which has boosted the BTCFi sector. Maple Finance has announced plans to launch the SKRUP token in Q4, converting 1 MPL into 100 SKRUP tokens.

Spiko:

Project Overview: Spiko is a Real-World Asset (RWA) project focused on tokenizing Eurozone government bonds. Its TVL has been growing rapidly, benefiting from the ongoing decline of the U.S. dollar against the Euro.
Latest Developments: Spiko is now expanding its business to include U.S. Treasury RWA, contributing to its rapid on-chain TVL growth.

Yei Finance:

Project Overview: Yei Finance is a lending protocol built on the Sei chain, offering a more comprehensive range of tokens compared to other lending projects.
Latest Developments: This week, Yei Finance entered into a partnership with OKX, where OKX encourages users to deposit into Yei Finance, offering an additional 2.6 million SEI in rewards. As the most successful lending project on Sei without a native token yet, Yei Finance has been running weekly events, where participants can earn points, sparking speculation of a potential token airdrop.

Cellana Finance:

Project Overview: Cellana Finance is a DEX on the Aptos chain that uses the Ve (3,3) model. The largest pool in its liquidity pools is amAPT/APT, comprising nearly one-third of the total and yielding 6.11%. Other main pools involve stablecoin swaps with an APY of around 17%. The CELL tokenomics model follows the Ve model, similar to Curve, providing staking, voting, and profit-sharing functionalities. The staking yield for one year reaches 50%.
Latest Developments: Recently, Cellana Finance partnered with Meso Finance, a lending protocol, to support CELL staking for loans. This collaboration has attracted more users interested in leveraging their participation in Cellana Finance, leading to a rapid increase in TVL.

Top Performers of the Week

Top 5 Gainers in the Market Over the Past Week (Excluding tokens with low trading volume and meme coins, data source: Coinmarketcap)

This Week’s Gainers List Did Not Show “Sector Concentration” CharacteristicsThe tokens that increased this week came from various sectors, including lending, BTC-L2, IoT, mining, and Depin.

RDNT: Radiant Capital is a cross-chain borrowing and lending protocol built on LayerZero. Recently, the leading project in the lending sector, AAVE, has remained strong, continuing to rise even in a declining market. This has drawn some attention and capital to the lending sector. Additionally, this week Radiant Capital expanded its operations to the Base chain, making borrowing and lending more convenient for users.
MERL: Due to last week’s internal disagreements within the Ethereum ecosystem regarding its future direction, and the lack of new hotspots in the market this week, capital has shifted towards the BTCFi sector. Merlin Chain is considered a leading project in the BTC-L2 sector.
STMX: Most of its trading volume is on the Korean exchange Upbit, where STMX’s trading volume is currently second only to BTC and ETH. Its volume has suddenly surged, and StormX is set to initiate a community vote on its merger plan in September.
GOMINING: There has been no significant news or positive developments for the project this week.
HNT: Some market discussion has shifted to the Depin sector this week, and HNT, as a prominent project within Depin, performed relatively strongly. However, there were no specific positive developments for the project this week.

The gains of these five tokens were significantly lower than last week’s, with the market experiencing a gradual decline throughout most of the week. It is expected that after the U.S. The unemployment rate is announced on Friday. The market will see another drop, followed by continued volatility next week.

Meme Token Leaderboard

After last week’s strong rebound, the meme coin sector performed very weakly this week. As the overall market has been on a downward trend, and market sentiment has entered an extreme fear phase, investors have become more cautious and reduced their investments in the cryptocurrency space, with the meme coin sector being hit the hardest. We can see that very few meme coins have made it into the gainers list, reflecting the fragile state of market sentiment. Additionally, the risks within the meme coin sector are steadily rising.

Social Media Hotspots

Based on data from LunarCrush’s top five daily growth and Scopechat’s top five AI scores, here is the summary for the week (August 31 — September 5):

The most frequently featured theme was Layer 1 blockchains. The tokens that made the list (excluding tokens with very low trading volume and meme coins) show that Layer 1 blockchain projects that garnered the most attention on social media this week generally experienced a downward trend. This was mainly due to the overall market’s volatility and downturn. Additionally, after internal disagreements regarding Ethereum’s development direction last week, market attention has gradually shifted toward other Layer 1 projects. However, due to the broader market’s weak performance, these blockchain projects were unable to establish independent upward trends.

Topic Tracking

Based on weekly returns, the NFT sector performed the best, while the GameFi sector performed the worst.

NFT Sector: Recently, the crypto market has lacked significant hotspots, combined with the pessimistic sentiment among investors, leading to poor liquidity across the market. Capital has not concentrated in any particular area but is instead scattered. The NFT market has been lukewarm since the last bull market, and in this cycle, it has been overshadowed by inscriptions and meme tokens, which have gradually reduced the scale and popularity of the NFT market. Due to its relatively small capital size, even a slight inflow of funds can drive prices up, leading to an upward trend this week.
GameFi Sector: Last week, the GameFi sector was supported by the rise of IMX, which helped it perform better than other sectors. However, this week, most projects in the GameFi sector followed the overall market downturn. IMX, the leading token in the sector, dropped nearly 10% this week, resulting in a further correction for the GameFi sector, making it the worst-performing sector of the week.

This Week’s Market Discussion Trends

Ethereum’s Future Development and ChallengesVitalik’s previous tweet about not supporting DeFi projects sparked discussions about Ethereum’s future direction and the current challenges it faces. The focus was on the idea that Layer-2 solutions are draining Ethereum’s value without contributing meaningfully and may even reduce Ethereum’s revenue. There were also debates about the factors driving Ethereum’s future growth and the upcoming Ethereum Pectra upgrade.

Although both Vitalik and Justin responded to concerns about Ethereum’s infrastructure and Layer-2 challenges, the market did not seem convinced by their answers. The general consensus is that Ethereum’s current infrastructure is sufficient for its development, and the focus should shift toward fostering applications within the Ethereum ecosystem to create a new focal point for the next bull market. Interestingly, the market did not pay much attention to the upcoming Pectra upgrade, with only sectors closely related to ZK and smart contract accounts showing some reaction.

Reflection on the Restaking Sector After Penpie’s AttackAttackers created a fake market on Pendle and forged SY tokens. While Pendle itself was not harmed, Penpie failed to consider such malicious scenarios, allowing the attackers to execute a reentrancy attack, resulting in the theft of $27 million worth of rswETH, wstETH, agETH, and sUSDe tokens.

This incident sparked reflection on the restaking sector. While restaking projects offer additional rewards for stakers, they often neglect to properly assess the security risks, particularly the smart contract vulnerabilities. Depositing LP tokens into another smart contract introduces significant additional risks that must be carefully evaluated. In many cases, the potential returns do not justify these risks. Thus, market participants are increasingly prioritizing security over high yields when engaging with restaking projects.

The Revival of BTCFiDue to internal disagreements within the Ethereum ecosystem regarding its development direction, many on-chain users have become less optimistic about Ethereum’s future, shifting their attention to the larger BTC ecosystem. Although the BTC ecosystem experienced a brief period of popularity driven by inscriptions, it later faced criticism for mimicking Ethereum’s development path, causing the market to temporarily overlook the sector.

Following Ethereum’s internal divisions, more on-chain users are now turning to the BTC ecosystem, seeking to build projects that Ethereum may not support. As a result, many DeFi infrastructure projects in the BTC ecosystem, such as lending and staking, have begun to gain traction this week. If Ethereum continues to focus primarily on infrastructure development without adjusting its strategy, more users may leave Ethereum for other ecosystems. Given BTC’s central role in the crypto industry, its ecosystem has a natural advantage for future growth.

Next Week’s Crypto Events

Tuesday (September 10): Trump and Harris First Debate
Wednesday (September 11): U.S. August End-of-Month CPI Yearly Rate; Permissionless
Friday (September 13): IBC 2024

Outlook for Next Week

Bitcoin: Currently, Bitcoin lacks favorable factors of its own and is in a consolidation phase. Its price fluctuations are mainly influenced by market news and macroeconomic data. This week, Bitcoin dropped due to macroeconomic data impacting the market, with trading focused on economic recession fears. The upcoming U.S. August unemployment rate and August End-of-Month CPI Yearly Rate are the primary data points to watch, as they may influence the Federal Reserve’s rate cut decision in September. The current consensus is for a 25 basis point cut, but if the data falls short of expectations, it could be adjusted to 50 basis points, heightening recession concerns. It is expected that Bitcoin will continue to follow macroeconomic data trends next week. Despite ongoing recession fears, actual recession has not occurred yet, so Bitcoin may rebound after two weeks of decline.

Ethereum: This week, Ethereum faced not only external macroeconomic influences but also internal uncertainties about its development direction. Vitalik mentioned at the Tokyo DevCon that “Ethereum will enter an application-centric era,” but the 12th Ethereum Foundation AMA this week did not reach a consensus, with ongoing disagreements between continuing infrastructure development and strongly supporting specific application projects. Until the Ethereum Foundation and market participants reach an agreement, Ethereum’s ecosystem development will face significant challenges. Therefore, ETH is expected to perform worse than BTC next week.

Altcoin: Currently, the crypto market lacks hotspots and innovation, leading to no concentrated breakout direction for Altcoin projects. With the upcoming interest rate decisions and elections, the market is expected to remain volatile and oscillate. Coupled with a lack of confidence among traders in future developments, Altcoins will likely continue to be closely tied to the overall market trends without establishing independent trajectories.