Summary
Macro: Interest rate cuts expected in September
BTC prices ranges as the ETFs, the U.S. presidential race, miner profitability, and
more all create a muddy picture
ETH price lags as L1 onchain revenue trends to new lows while activity on L2
trends towards all-time highs
A look into the hottest LST on Solana, Sanctum
With the Scroll airdrop looking likely in September, we turn our attention to another
Ethereum rollup with airdrop potential, Linea
Bitcoin Performance Tracking
The Bitcoin market has experienced notable shifts in recent weeks, driven by significant
outflows from the Grayscale Bitcoin Trust (GBTC) and the emergence of new U.S. ETFs.
While these ETFs have shown growth, it hasn't been enough to fully counterbalance the
decline in GBTC. However, the tides are turning as we enter Q4, setting the stage for
potential positive net flows in the Bitcoin market.
Notably, 2024 is significant for the cryptocurrency market due to the Bitcoin halving event.
Historically, Bitcoin has performed strongly in the fourth quarter of halving years. However,
this year stands out as Bitcoin reached a new all-time high in March, propelled by the
launch of Bitcoin exchange-traded funds in the U.S. The fourth quarter of this year is
anticipated to be particularly dynamic, fueled by the upcoming U.S. presidential elections
and potential shifts in global liquidity.
FED and Bitcoin
In his Jackson Hole speech, Fed Chair Jerome Powell signaled that a rate cut could be on
the horizon, provided inflation continues to trend downward. The Fed’s preferred inflation
measure, the Personal Consumption Expenditure (PCE), rose by 0.2% in July, indicating
gradual improvement but also highlighting that inflationary pressures have not fully
subsided.
As the Federal Open Market Committee (FOMC) meeting approaches on September 18,
several key economic data points will influence the Fed’s decision. The unemployment
rate, set to be released on September 6, is particularly crucial; if it remains at 4.2% or
lower, it could help alleviate recession fears that have weighed on risk-on assets.
A rate cut typically benefits risk-on assets, as lower borrowing costs tend to increase
investor appetite. Historical precedents, such as the rate cuts during the pandemic in
March 2020, show a significant positive impact on the crypto market. Although the
expected rate cut in September may be more modest at 25 basis points, the broader
macroeconomic context suggests a continued sensitivity of cryptocurrencies to such policy
shifts.
The correlation between Bitcoin price movements and fund flows has become increasingly
evident. Bitcoin, once driven by on-chain adoption narratives, is now heavily influenced by
capital inflows. As the market stabilizes, supported by steady net inflows, Bitcoin appears
poised to reach new price highs.
For comparison's sake, let's check in on Ethereum's ETF flows. The volume is been far
more muted. Grayscale's ETH product, ETHE, has experienced tremendous selling
pressure (as expected), but the appetite for the other products has been below
expectations. However, this also coincides with a general malaise in the entire crypto
industry as onchain volumes, the memecoin trading frenzy, and general speculation has
been waning.
Positive Political Developments Bolster Bitcoin
Recent U.S. political developments have provided a boost to Bitcoin’s recovery. Federal
Reserve Chairman Jerome Powell announced the beginning of a monetary easing cycle
starting in September. At the Kansas City Fed’s Jackson Hole Symposium, Powell
expressed growing confidence that inflation is on track to return to the 2% target, noting
that the labor market has cooled from its previously overheated state.
The high interest rates, which have been rising since March 2022 to combat inflation and
a hot labor market, have slowed economic growth and dampened borrowing demand.
Powell’s acknowledgment that inflation risks have diminished and that employment risks
are increasing suggests a shift towards more investor-friendly policies, which could further
support Bitcoin's bullish momentum.
Adding to this positive sentiment, independent crypto-friendly Presidential Candidate
Robert F. Kennedy Jr. recently withdrew from the race, throwing his support behind
Republican Donald Trump. Both Kennedy and Trump have expressed more favorable
views towards the crypto sector compared to the current administration. Trump's
endorsement has already impacted prediction markets, boosting his chances of winning
the election. Trump has indicated that, if elected, he would replace SEC Chairman Gary
Gensler, whose strict regulatory approach has been a point of contention within the crypto
community.These developments signal a potentially favorable environment for Bitcoin as political and
economic conditions align to support the cryptocurrency's growth.
Bitcoin Mining Down
Bitcoin miners experienced their lowest revenue month since September 2023, with
August seeing a significant drop in the number of mined BTC. This recent dip marks the
worst revenue month for miners since the $727.79 million recorded in September 2023,
when Bitcoin's price hovered around $25,000.
However, placing this in a broader context reveals a more positive trend. The average
monthly revenue for Bitcoin miners in 2024 stands at $1.199 billion, surpassing the
averages of both 2023 ($811 million) and 2022 ($784 million). This year's revenue is only
8.9% lower than the peak average of $1.311 billion seen in 2021.
With four months remaining in 2024, the total revenue generated by miners is on track to
nearly match, if not exceed, the figures for 2023 and 2022. Despite recent setbacks, the
overall performance of Bitcoin miners this year remains robust, reflecting the resilience
and continued growth of the mining sector.
ETH and L2s: A Match NOT Made in Heaven?
The ongoing development of Ethereum's Layer 2 (L2) solutions has sparked significant
discussion, particularly around the recent EIP-4844, commonly referred to as "blobs." This
proposal introduces a method for L2s to submit temporary data to Ethereum's Layer 1 (L1)
for a week, but concerns have arisen over the minimum fee associated with this process.
The fee is considered so low that it disrupts the price discovery mechanism within the
protocol, as costs can stagnate due to the inability to subdivide 1 wei further, potentially
leading to inefficiencies in the system.
Despite these concerns, Ethereum's native token, ETH, remains the primary gas token
across most L2 networks. As L2s continue to evolve, ETH solidifies its position as the
most secure asset for value storage on these layers. A key advantage of using ETH on
L2s is the ability to transfer it back to the mainnet in emergency situations, leveraging
mechanisms like the "escape hatch" detailed by L2beat.
The expansion of ETH into more markets is a positive development, as it facilitates
broader accessibility of the Ethereum ecosystem. This increased accessibility allows for
greater computational resources and transaction volume to shift to L2s, alleviating some
of the pressure on the mainne
However, a critical structural question remains: how will interoperability among L2s be
managed? There are two primary approaches: native interoperability within the L2s
themselves or through application-layer solutions such as routers, intents, and
aggregators. Native interoperability could minimize rent-seeking behaviors and reduce
liquidity fragmentation, while application-layer solutions might increase rent-seeking by
charging premiums for access to fragmented liquidity. Over time, if interoperability
becomes more standardized, these premiums could diminish, potentially leading to a more
seamless ecosystem.
Recent data on Optimism and Arbitrum, two prominent L2 solutions, highlights the impact
of these developments. Following the implementation of blobs, the single sequencers for
these L2s managed to reduce direct user costs, though this came at the expense of lower
overall revenue. Interestingly, the share of revenue margins for these sequencers still
increased, in some cases reaching 95-99%. This is because even though L2 transaction
fees went down substantially, the cost imposed on L2s to submit data to the Ethereum
mainnet went down even more.
In conclusion, while Ethereum's L1 and its expanding L2 ecosystem are navigating a
complex relationship, the ongoing innovations and adjustments suggest a dynamic and
evolving landscape. As L2 solutions mature and interoperability becomes more refined,
the balance between cost efficiency, security, and accessibility will likely define the future
of Ethereum's broader network.
LSTs and Sanctum
Liquid Staking Tokens (LSTs) are emerging as a significant factor in the DeFi landscape,
offering a novel approach to unlocking liquidity and enhancing capital efficiency on
blockchain networks. One of the innovative platforms at the forefront of this movement is
Sanctum, which is making significant strides in the Solana ecosystem with its unique liquid
staking solutions.
Traditionally, staking involves locking up a cryptocurrency to support the operation and
security of a blockchain network, with stakers being rewarded in return. However, staked
assets typically become illiquid, rendering them unusable for other DeFi activities. Liquid
staking, as pioneered by platforms like Sanctum, seeks to address this by issuing LSTs
against staked assets, thereby maintaining liquidity while still earning staking rewards.
Sanctum’s approach to liquid staking on Solana introduces a dynamic where staked
assets can be transformed into LSTs without sacrificing the utility of the underlying tokens.
This enables users to engage in DeFi activities like lending, borrowing, and trading, using
their staked tokens as collateral. Moreover, Sanctum’s infrastructure supports a seamless
transition between different forms of staked tokens, enhancing the fluidity and efficiency of
the staking process.
A key innovation by Sanctum is its development of a unified liquidity layer, which
addresses common challenges such as fragmented liquidity and complex token swaps in
the DeFi space. Their platform includes tools like the Reserve Pool, Router, and Infinity
Pool, each designed to optimize the liquidity and interchangeability of LSTs across the
Solana network.
Beyond technical solutions, Sanctum is driven by a vision to democratize finance through
blockchain technology. Their model not only facilitates increased participation in staking
but also broadens the scope of liquid staking applications, making it accessible for various
stakeholders in the ecosystem, from individual investors to large institutions.
As the DeFi sector continues to evolve, the role of liquid staking and platforms like
Sanctum is becoming increasingly pivotal. By enhancing the liquidity and utility of staked
assets, they are not only promoting greater inclusivity and flexibility in digital finance but
also paving the way for more robust and resilient financial systems on blockchain
platforms.
Airdrop Alpha
Linea, developed by Consensys, represents a significant advancement in Ethereum's
scaling capabilities, focusing on enhancing transaction processing without sacrificing
security or decentralization. As a Layer-2 solution, Linea is engineered to address some of
Ethereum's most pressing challenges, such as high transaction costs and network
congestion, while maintaining the integrity of its decentralized framework.
One of Linea’s core strengths is its ability to scale Ethereum’s transaction throughput
effectively. By offloading computations from the main chain and batching multiple
transactions into a single proof submitted to Ethereum’s mainnet, Linea reduces network
congestion. This method not only accelerates transaction speeds but also substantiallylowers gas fees—an essential feature for broader user adoption. The system’s
architecture supports high throughput, making it suitable for various practical applications
while keeping transaction costs minimal, thereby fostering an environment conducive to
innovation and user engagement.
Linea stands out in its ease of use for developers. The platform is designed to allow the
seamless deployment of existing Ethereum applications onto its Layer-2 environment
without requiring any code modifications. This is achieved through Linea’s ability to
generate zero-knowledge proofs directly from Solidity bytecode, the programming
language used for Ethereum smart contracts. By eliminating the need for code
adjustments, Linea lowers the entry barrier for developers, enabling them to leverage their
existing skills and tools. This continuity ensures that the security properties of existing
contracts are maintained, making the transition to Linea not only efficient but also secure.
This feature is particularly significant as it represents a substantial step forward in making
zero-knowledge rollup technology more accessible. Developers seeking to scale their
applications without compromising on user experience or security can find in Linea a
robust solution that simplifies the process while enhancing performance.
Linea's Potential Airdrop: A Strategic Move?
Consensys, the developer behind Linea, announced the launch of Linea’s Mainnet Alpha
on July 11, 2023. During this phase, Linea has been onboarding partners and users,
monitoring system performance, supporting developers, and initiating a bug bounty
program. Given Consensys’ valuation of approximately $7 billion and its successful
fundraising efforts, which have amassed $726 million, Linea’s potential for growth is
significant. This potential is underscored by comparisons to other Layer-2 projects like
Arbitrum and Optimism, both of which have issued governance tokens to foster
community participation and network growth. Linea may follow a similar path, possibly
issuing tokens as a means to boost adoption and incentivize user engagement.
For those speculating on the possibility of a Linea airdrop, insights can be drawn from the
strategies used in previous airdrops, such as Arbitrum’s. To maximize the likelihood of
receiving an airdrop, users should focus on several key activities:
1. Volume: Engaging in significant trading or bridging activities on the Linea network
can increase visibility. The more assets you trade and the more liquidity you
provide, the higher the chances of being noticed.
2. Consistency: Regular interaction with the Linea network, particularly on a weekly
basis, demonstrates genuine interest and consistent usage. Setting reminders to
engage with various dApps on the Linea Mainnet can help establish this pattern.
3. Diverse Dapp Interaction: Expanding your interactions across multiple dApps within
the Linea ecosystem can enhance your footprint on the network. Bridging to Linea
and consistently providing liquidity across various platforms can offer a more
comprehensive experience, increasing the likelihood of qualifying for an airdrop.
Our TakeAt Event Horizon Capital (EHC), we believe select cryptoassets will outperform all other
asset classes over the next five, ten, and possibly even twenty years due to their superior
qualities as new money/assets for the internet age. Because of this, we seek the best risk-
adjusted exposure to protocols that personify the blockchain benefits outlined above. With
crypto markets being one of the world’s most dynamic markets, our agile and active
management provides the flexibility required for swift, decisive action while also never
compromising on security.
EHC’s multi-strategy approach is built upon:
Qualitative fundamental research,
Quantitative tools and valuation metrics
Narrative and sentiment-driven market swing
Access Data Room: Use Code "EHC2024
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