Frontier Lab Crypto Market Weekly Report｜W44

Market Overview

Summary of Major Market Trends

1. The Market Enters a Cautious Phase

• The market sentiment index dropped to 14.9%, a notable decline from last week’s 41%, indicating a shift into fear mode.
• BTC showed strong upward movement early in the week but turned volatile due to multiple influencing factors.
• Altcoins underperformed compared to BTC, signaling continued capital concentration towards Bitcoin.

2. Growth in the DeFi Ecosystem

• Total DeFi TVL across the network grew steadily from $33.2 billion to $33.6 billion.
• The stablecoin market expanded, with USDC’s market cap reversing a three-week decline and starting to increase.
• The BTCFi sector saw standout performance, with TVL gains in several projects outpacing BTC’s price growth.

3. Significant Divergence in Sector Performance

• Meme coins led the gains with a weekly return of 13.72%, benefiting mainly from improved market sentiment.
• Layer 2 and GameFi sectors performed the weakest, with weekly returns of -2.53% and -4.01%, respectively.

4. Intensifying Impact of Macroeconomic Factors

• U.S. employment data and inflation metrics fell short of expectations.
• Earnings reports for tech stocks generally missed market expectations.
• With the upcoming U.S. election and the Federal Reserve’s interest rate meeting, market volatility risks are rising.

5. Emerging Trends in Capital Flows

• DeFi projects, especially those related to BTCFi, continued to attract inflows.
• A shift in stablecoin market share was observed, with USDC ending its decline and starting to recover.

Market Sentiment Index Analysis

The market sentiment index has dropped significantly to 14.9% from last week’s 41%, reflecting a retreat into fear. Altcoins did not follow the broader market trend this week. The broader market surged rapidly in the first few days but, following the release of various macroeconomic data and corporate earnings reports mid-week, experienced a downturn. Altcoins failed to mirror the initial upswing of the broader market and subsequently declined sharply after Wednesday, resulting in a weaker performance compared to the main market.

Currently, the market is in a neutral phase, compounded by the approaching U.S. election. This stage poses heightened volatility risks due to external influences. Altcoins are expected to mirror the broader market’s oscillations, awaiting clear directional cues from the main market.

Overall Market Trend Overview

The cryptocurrency market showed a volatile upward trend this week, with the sentiment index in fear territory, signaling a potential reversal at any time. DeFi-related crypto projects performed strongly, indicating sustained market interest in enhancing fundamental returns.

In the DeFi sector, BTCFi projects saw an increase in TVL alongside the broader market’s upward trend, outperforming the main market. This suggests investors hold an optimistic outlook for the future performance of BTCFi projects.

Hot Sectors

DeFi Sector

TVL Growth Rankings

Top 5 projects by TVL growth over the past week (excluding projects with smaller TVLs, with the threshold set at $30 million). Data source: DefiLlama.

Weekly Project Overview

1. Merchant Moe (MOE) (Recommendation: ⭐️⭐️⭐️)

• Project Overview: Merchant Moe is the largest DEX on the Mantle chain and a part of the Trader Joe ecosystem. It aims to revolutionize on-chain trading with its liquidity book protocol, providing a comprehensive and user-friendly DeFi experience for seamless trading, liquidity decentralization, and real yield generation.
• Latest Developments: This week, Mantle launched its token, COOK, which is now available on Merchant Moe with a COOK/MNT liquidity pool. Users trading in this pool can earn additional MOE rewards. Additionally, Merchant Moe held a voting event this week, offering veMOE users an impressive 63% APY to encourage participation, attracting a large user base. With the broader market upswing, on-chain activity has surged, and as the largest DEX on Mantle, Merchant Moe’s trading volume has risen by 198%.

2. DeSyn Protocol (DSN) (Recommendation: ⭐️⭐️)

• Project Overview: Built on Ethereum, DeSyn Protocol is a decentralized asset management platform offering a suite of financial products to maximize investors’ capital potential. Its offerings include synthetic derivatives, leveraged staking ETFs, yield-earning funds, RWA funds, and custom strategies, all powered by smart contracts.
• Latest Developments: Recently, DeSyn Protocol established partnerships with multiple public chains, including Core and AILayer, to expand its ecosystem and enhance accessibility. It also optimized and deployed Restaking products with integrated reward points and automatic airdrop allocation. This week, DeSyn Protocol launched a joint mining S3 event with Bitlayer, where users staking a minimum of 0.000076 wBTC daily can earn up to 25 BTR boxes and share $500,000 in DSN rewards.

3. Bedrock (Token Not Issued) (Recommendation: ⭐️⭐️⭐️⭐️)

• Project Overview: Bedrock is a multi-asset liquidity restaking protocol that offers native token rewards through restaking while providing security to the ecosystem. Bedrock supports various assets for restaking, powered by a non-custodial solution designed in partnership with RockX. The protocol uses a universal standard to maximize token liquidity and value.
• Latest Developments: This week, Bedrock launched its Epoch staking event, increasing the uniBTC cap on Ethereum, BNB Chain, Arbitrum, and Optimism, and offering high rewards, including 84 Bedrock Diamonds, Babylon points, and 1.5x Epoch points for users on these chains. Bedrock also introduced a referral-based restaking incentive, granting users a 30% share of diamonds generated by their referrals. Additionally, new users receive a 30% boost, and with BTC’s strong performance this week, user participation has been high.

4. Aera (Token Not Issued) (Recommendation: ⭐️⭐️⭐️)

• Project Overview: Aera is a vault management protocol that allows DAOs to implement fund management strategies with market-driven growth and downside risk. Developed by the team behind Gauntlet, Aera enables DAOs to efficiently manage long-term financial strategies without governance complexity, with transparent on-chain reporting tailored to the unique needs of non-custodial DAO vaults.
• Latest Developments: This week, Puffer Finance leveraged Aera’s compounding strategies through the Eigenlayer program, where Aera vaults deployed a hybrid TWAP strategy to increase user returns. Compound also voted to expand the use of its Compound Reserve Aera vault, targeting risk-adjusted returns by utilizing idle reserve tokens (WETH, DAI, and USDC) in the Compound v3 market to grow TVL.

5. Pell Network (Token Not Issued) (Recommendation: ⭐️⭐️⭐️)

• Project Overview: Pell Network is the first project to provide crypto-economic security for all AVS through BTC restaking. It offers a decentralized token economic security rental platform primarily catering to Bitcoin holders by aggregating BTC and its liquid staking derivatives distributed across various Layer 2 networks.
• Latest Developments: Pell Network recently raised $3 million in a seed round led by Halo Capital, Mirana Ventures, and Paper Ventures. This week, Pell Network partnered with BitBoy to bring classic games to BTC-related chains.

Summary: This week, the projects with the fastest-growing TVL are primarily focused in the BTCFi and DeFi sectors.

In-Depth Analysis

• Stablecoin Market Cap Growth: The market cap of USDT rose from $125.6 billion last week to $125.9 billion, and USDC increased from $34.4 billion to $34.9 billion, representing growth rates of 0.23% and 1.45%, respectively. The overall stablecoin supply remained steady, with USDC, predominantly U.S.-market-focused, reversing its previous three-week decline and trending upward.
• Liquidity Gradually Increasing: As traditional market risk-free arbitrage rates continue to decline with ongoing rate cuts, arbitrage opportunities in on-chain DeFi projects have increased due to the rising value of crypto assets, making DeFi an attractive option for investors looking for returns.
• New Growth Drivers: In addition to traditional DeFi projects such as lending and DEXs, two powerful new engines are emerging: LSD (Liquid Staking Derivatives) and Restaking projects for BTC and ETH.

DeFi Sector TVL(Data Source: DefiLlama)

Capital Inflows: The TVL of DeFi projects has risen from $33.2 billion last week to $33.6 billion this week, showing sustained growth over recent weeks, indicating continuous capital inflow into DeFi projects.

In-Depth Analysis

Driving Forces Behind the Rise

This week, the entire market experienced an upswing, with Altcoins following the upward trend. However, the DeFi sector outperformed Altcoins, continuing to offer users attractive APY yields. This is largely due to investor optimism about the future price trajectories of BTC and ETH, two fundamental assets. With BTC consistently rising in price recently, investor returns have increased, prompting more participation in various DeFi projects to enhance returns on their holdings.

Leading Growth Sectors

For DeFi projects, TVL growth is a clear indicator of performance. This week, both fundamental assets showed upward momentum, and DeFi projects experienced greater TVL growth than the price increases in underlying assets, signaling continued capital inflow into DeFi. Analysis of the top-growing projects in terms of TVL this week reveals that BTCFi projects in the DeFi sector were the major gainers. BTCFi projects aim to attract deposits by guiding users to protocols offering the highest returns, effectively channeling these deposits to various underlying protocols with optimal yields.Therefore, investors should focus on BTCFi projects that issue LRT (liquid re-staking tokens) based on BTC as a valuable investment choice in the current market.

BTCFi Sector Overview

Sector Overview

This week, the BTCFi sector saw notable growth, driven by rising market prices. Among BTCFi projects, liquidity staking protocols that mint wrapped assets (LST) through BTC staking performed exceptionally well. Across the board, TVL increased to varying degrees, with many projects’ TVL growth rates significantly outpacing BTC’s own price increase. This confirms that liquidity staking remains a dominant sub-sector within BTCFi.

Current Sector Situation

• BTC Price and Project Growth: BTC rose by 3.36% this week, and after adjusting for BTC’s price change, several BTCFi projects showed impressive TVL growth. Specifically, Bedrock, Lombard, Lorenzo, Pell Network, PumpBTC, Solv Protocol, and Stakestone saw respective TVL increases of 58.53%, 7.85%, 46.26%, 42.32%, 4.11%, 8.81%, and 1.02%.
• Bedrock: Bedrock supports wBTC staking for uniBTC, offering base rewards. This week, Bedrock launched Epoch staking, expanding uniBTC staking limits on Ethereum, BNB Chain, Arbitrum, and Optimism. High rewards were offered, including Bedrock diamonds, Babylon points, and 1.5x Epoch points. Additionally, Bedrock introduced a referral program where users can earn 30% of diamonds generated by those they invite, and new users receive a 30% reward boost.
• Lombard: Through Babylon, Lombard allows Bitcoin staking while handling re-staking processes. The platform introduced the Luminary program, which doubles points for all newly staked BTC. In collaboration with DeFi Vault, Lombard offers a 6% APY on LBTC. Lombard also teamed up with Hourglass for joint mining, allowing users to earn up to 162x Lombard points through PYT purchases.
• Solv Protocol: Following the release of SAL, Solv Protocol has pursued partnerships with various ecosystems and DeFi projects to enhance liquidity. This week, Solv Protocol joined Venus Protocol’s core mining pool and launched the second round of SolvBTC.CORE with Core, capped at 500 BTC. The project also partnered with Bera Chain to launch Bera Fren, a protocol supporting PoL (Proof of Liquidity) infrastructure.
• Lorenzo Protocol: Lorenzo collaborated with OKX Web3 to launch a staking initiative, rewarding OKX Web3 wallet users with 2 million Lorenzo points and offering a 20% multiplier on base points. It also partnered with Bitlayer for a Mining Gala with 1 million Lorenzo points in rewards, and worked with Cygnus Finance to integrate stBTC into Cygnus’ cross-chain liquidity validation system.
• PumpBTC: This week, PumpBTC completed a $10 million seed funding round led by SevenX Ventures and Mirana Ventures, with participation from UTXO, Mantle Ecosystem Fund, Quantstamp, and Veda, among others.
• Pell Network: Pell Network recently secured $3 million in seed funding from Halo Capital, Mirana Ventures, and Paper Ventures. This week, Pell Network announced a collaboration with BitBoy to bring classic games to BTC-related chains.
• Stakestone: Stakestone plans to implement a model similar to ETH-STONE, where users stake native BTC to Babylon and mint yield-generating STONEBTC for cross-chain liquidity. This week, Stakestone announced a partnership with Bitget Wallet.

Key Insights

The projects issuing LST based on BTC led the BTCFi sector this week. TVL serves as a key indicator of BTCFi project success, and the data shows that BTCFi TVL grew alongside BTC’s price increase. Investors remain optimistic about BTC’s long-term prospects and prefer to hold BTC. By staking BTC in protocols and minting wrapped tokens (LST), investors can earn additional yields, leveraging LST tokens to earn more rewards across other projects. This “one asset, multiple yields” approach supports the long-term growth potential of BTC, which in turn fuels the BTCFi sector’s development. The BTCFi sector presents a compelling opportunity for investors.

Other Sector Performance

Public Chains

Top 5 Public Chains by TVL Growth Over the Past Week (Data Source: DefiLlama)

BSquared

This week, BSquared forged several strategic partnerships to enhance BTC-L2 capabilities and expand its ecosystem. In collaboration with Native Network, BSquared aims to boost BTC-L2 capabilities by implementing trust-minimized bridging and fast finality, aggregating liquidity across the BTC ecosystem. Additionally, BSquared secured a strategic partnership with Chainlink’s CCIP, positioning it as the cross-chain infrastructure for the platform. In partnership with Up Network, BSquared leveraged Android forks to attract more Web 2 users, broadening its reach and user engagement.

Mantle

Mantle launched its governance token, COOK, this week. Previously, MNT served as the gas token on Mantle’s network, while COOK now functions as the governance token. COOK’s launch quickly led to listings on various centralized and decentralized exchanges, drawing significant market attention. Alongside this, Mantle announced the release of a new LRT, cmETH, which follows mETH and offers permissionless, composable staking options, enhancing potential returns for investors. Mantle also collaborated with OKX Web3 to host a Telegram mini-game, further boosting on-chain engagement.

Core

This week, Core launched the second round of SolvBTC.CORE, capped at 500 BTC. Investors can earn a 4% APY on liquidity provision, and deposits in Core’s dApps also receive 4x points. Core’s active users reached 900,000 this week, reflecting a significant increase in trading activity and user engagement on the chain.

dydx

Riding the recent market uptrend fueled by BTC’s price increase, trading volumes on dydx, a top-ranking DEX, rose sharply. dydx took inspiration from Polymarket and introduced a prediction market for the upcoming U.S. election, specifically allowing users to trade on Trump’s win probability. As election interest surged, the popularity of these prediction markets on dydx significantly boosted its TVL. Moreover, dydx’s founder re-assumed the role of CEO this week, announcing a 35% staff reduction as part of a renewed growth strategy, sparking positive investor sentiment for the platform’s future.

Polygon

Polygon’s prediction project, Polymarket, has seen immense traction in anticipation of the upcoming U.S. presidential election. With more than $2 billion currently staked in predictions on the platform, Polymarket has generated considerable market attention, driving up Polygon’s TVL and attracting users keen to participate in election-related betting.

Top 5 Tokens by Growth in the Past Week

(Excluding tokens with low trading volume and meme coins. Data Source: CoinMarketCap)

This week’s top-performing tokens exhibited a diversified sector presence without a dominant sector cluster, spanning across SocialFi, DePIN, Layer 1, AI, and decentralized sequencers. Here’s an overview of notable projects:

• MASK: Mask Network aims to bridge centralized internet platforms with decentralized tools, empowering users with privacy and control over personal data. The platform gained significant traction this week as the high interest surrounding the U.S. The presidential election sparked widespread discussions online, driving up on-chain interactions for Mask.
• NOS: Nosana, a decentralized GPU cloud computing platform on Solana, focuses on accessible and affordable AI processing. Through its NOS token, Nosana enables users to monetize idle hardware, thereby addressing GPU shortages and enhancing AI execution processes in crypto space. Nosana had no major news this week.
• PAAL: Paal AI integrates AI and machine learning to simplify tasks that usually require human insight, particularly in navigating crypto and blockchain. Paal AI launched its latest product, PaalX, an AI-powered automated DEX, marking the first instance of AI integration in the DEX industry.
• KAIA: Kaia is the newly launched mainnet resulting from the merger of Klaytn and Finschia, designed as an open-source, permissionless blockchain supporting EVM smart contracts with one-second block times for near-instant finality. Kaia released Portal V1.2 this week, introducing incentives for core DeFi pools and rebranding its token from KLAY to KAIA.
• LQTY: Liquity is a decentralized stablecoin lending protocol known for its zero-interest loans and stablecoin management. No significant updates were announced for Liquity this week.

Altcoins overall faced headwinds this week, displaying weaker trends and largely missing out on the upward momentum driven by BTC. BTC’s bullish performance contributed to a liquidity drain for many altcoins, as capital flowed into BTC rather than supporting a broad altcoin rally.

Meme Token Gains Ranking

Data Source: coinmarketcap.com

This week, the overall market showed an upward trend, with tokens across various sectors also experiencing gains. The performance of Meme projects outpaced the broader market, particularly those on the Solana and Ethereum blockchains, which saw significant price increases, creating a wealth effect.

Social Media Hot Topics

Based on the statistics from LunarCrush’s top five daily growth and Scopechat’s top five AI scores for the week of October 26 to November 1, the most frequently mentioned theme is Layer 1 (L1) blockchains. The tokens that made the list are as follows (excluding tokens with very low trading volumes and meme coins):

Data Sources: Lunarcrush and Scopechat

According to the data analysis, this week, the most attention on social media was focused on Layer 1 blockchain projects, which did not generally follow the broader market’s upward trend. However, in the context of Bitcoin’s isolated rise, major public chains often performed better than other sectors. Notably, Ethereum’s current performance has drawn dissatisfaction from market users, leading to a quicker withdrawal of funds from Ethereum in favor of new public chains. This phenomenon reflects a relatively stable confidence among investors in infrastructure-related projects in the current market environment.

Overall Market Themes Overview

Data Sources: Lunarcrush and Scopechat

According to weekly return statistics, the Meme sector performed the best, while the GameFi sector performed the worst.

• Meme Sector: This week, Meme coin projects experienced a significant surge, fueled by the buzz surrounding the U.S. elections and the overall optimistic sentiment in the market. This led to a notable wealth effect, with market users returning to the Meme sector for speculation. DOGE and SHIB accounted for a large share within the Meme coin sector, at 50.71% and 22.43%, respectively. This week, DOGE and SHIB rose by 11.13% and 7.32%, respectively, further amplifying the gains in the entire Meme coin sector. Additionally, Elon Musk’s renewed promotion of DOGE attracted considerable attention to the Meme sector.
• GameFi Sector: Throughout this market cycle, the GameFi sector has not garnered much attention, resulting in a lack of funding and traffic. Consequently, the GameFi sector has missed out on the wealth effects seen in the past, leading to decreasing interest. Within this sector, IMX, BEAM, GAL, and AXS collectively accounted for a significant 62.96%. However, this week, these tokens showed a downward trend, contributing to the GameFi sector’s poor performance.

Upcoming Major Crypto Events

• Tuesday (November 5): U.S. Presidential Election 2024
• Wednesday (November 6): Thailand Summit
• Thursday (November 7): Bank of England Interest Rate Decision
• Friday (November 8): Federal Reserve Chair Jerome Powell’s Monetary Policy Press Conference; Federal Reserve Interest Rate Decision (Upper Limit)

Outlook for Next Week

This week, the U.S. ADP employment numbers and the core PCE price index were disappointing, indicating persistent inflation and a robust U.S. economy. Additionally, tech earnings reports were underwhelming, compounded by poor financial results from Coinbase and MicroStrategy. Furthermore, fluctuations in Trump’s election prospects led to a shift in market sentiment, with the strong upward trend at the start of the week giving way to volatility and declines by the weekend.

Next week, the U.S. Presidential Election results will be announced, and the Federal Reserve will also release its interest rate decision, which is expected to cause significant market volatility. After the election results, the market may initially react in a certain direction, so investors should adopt a cautious strategy to avoid potential extreme short-term movements.