According to BlockBeats, on September 4, Grayscale Research released its August market research report: The overall stability of global markets in August 2024 masked the sharp fluctuations during the month. After the weaker-than-expected employment report on August 2, many risky asset prices fell, stock volatility soared, and the CBOE Volatility (VIX) Index once exceeded 65%. However, subsequent economic data did not show further signs of danger, and multiple market segments rebounded, and the VIX index quickly fell back below 20%. At the same time, news of weak labor market conditions may have influenced the views of Federal Reserve policymakers. On August 23, Federal Reserve Chairman Powell said in a speech at the Jackson Hole annual meeting that the “time has come” for a rate cut, partly reflecting the fact that “downside risks to employment have increased.” Interest rate futures now suggest that the central bank will cut the policy rate by 100 basis points (bp) at the remaining three Federal Open Market Committee (FOMC) meetings this year.
Grayscale Research believes that a weaker dollar and lower interest rates, if sustained, should be good for Bitcoin’s valuation. Lower U.S. interest rates will weaken the dollar’s competitive advantage and could benefit assets that compete with the dollar, including other fiat currencies, physical gold, and Bitcoin. Ethereum performed significantly poorly in the early August decline, and an excess of speculative positions led to a sharp correction in Ethereum prices and limited the recovery of prices since then. More fundamentally, the Ethereum network is undergoing a major transition, which may cause uncertainty about its future for some investors. Ethereum intends to achieve greater scale by moving more transactions to the Layer 2 network, which will then be settled regularly to the Layer 1 mainnet. The transition of activity to Layer 2 also leads to lower fee income on Layer 1, which in turn has a potential impact on the value of Ethereum. Grayscale Research believes that the current market pessimism about Ethereum is unfounded, given that the expansion strategy is clearly working. But it may take some time for the market consensus to become more positive.
Aave Protocol was another highlight. The protocol’s weekly active borrowers hit an all-time high, and its governance token AAVE rose 21%. Meanwhile, a new proposal from the Aave community would deploy a “buy and distribute” model, using Aave’s excess revenue to buy AAVE tokens from the market and distribute them to stakers – similar to the Smart Burn Engine used by the Maker Protocol. The proposal is expected to take effect by the end of 2024, but still requires community approval.
Stablecoin market capitalization has risen again in August and is now close to its previous all-time high. Grayscale Research believes that selling pressure from the German government, the Mt Gox estate, and others has largely passed, and improving fundamentals should become increasingly evident. If the U.S. labor market remains stable, the Federal Reserve’s rate cuts and U.S. political shifts around the crypto industry could allow prices to retest all-time highs later this year. The main downside risk to valuations is a further increase in unemployment and a possible recession. Therefore, investors should pay close attention to upcoming labor market data, including the next monthly employment report, which is scheduled for release on September 6. Grayscale Research believes that the lack of discipline in monetary and fiscal policy is one of the reasons why some investors choose to invest in Bitcoin. Therefore, periods of economic weakness may strengthen the long-term investment thesis for Bitcoin.
