Welcome back to DV Chain's Weekly Market Commentary! In this edition, we review the August selloff in ETH and BTC following the ETH ETF launch and the broader market's attention to key September catalysts. We also discuss upcoming economic events, including the Fed's rate cut decision, crypto hearings, and important upcoming conferences like Token 2049. Dive in for insights on the latest market trends and potential trade ideas:
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Market Recap

• In August ETH fell 22% following the disappointing launch of the ETH ETF,  while BTC fell 9%
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• September has several catalysts to pay attention to
  • 9/18 Fed cut cycle begins, 30% chance we get 50 bp cut, 70% 25 bps
  • 9/10 first debate between Kamala and Trump, it’s notable since there’s been very little public presence from Kamala thus far, and this will be the first time she gets extended coverage
  • Eigen becomes tradable 9/30, one of the largest and most anticipated airdrops this cycle - historically airdrops have provided wealth effects that drive on chain activity
  • Token 2049, Solana Breakpoint, and Korea Blockchain week
  • Several crypto hearings by the U.S. House of Representatives' financial-services committee
    • 9/10 DeFi hearing
    • 9/18 Enforcement practices of SEC, implications of ‘Pig Butchering’ Scans
    • 9/23 Gary Gensler testifies before committee
  • CZ released from prison 9/29
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• The monthly drop of Ethereum in August is the largest since the Terra collapse in June 2022
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• EF publishes spending report amidst criticism of cex transfer
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• Vitalik says he hasn’t sold ETH since 2018 and cex transfers are usually donations to charities
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• Mark Zuckerberg suggests democratic party wanted him to censor content
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• Brazil bans X, and Brazilians demand impeachment of De Moraes
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• Nonfarm payrolls this Friday
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• Trump promotes World Liberty Financial on twitter, Corey Caplan named as advisor
  • Trump says he will announce plan to make the U.S the crypto capital of the planet
    
    
• BTC ETFS had an outflow of 277m last week
  
  
• ETH ETFs had an outflow of 12.6m last week
  
  
• The SEC warns the FTX estate that it might oppose any attempts to pay creditors back with stablecoins or other digital assets
  
  
• First AI agent to AI agent crypto transaction occurred
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• Matic transitions to POL this week, new Tokenomics
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• Vista launches on Ethereum, essentially pump.fun on Eth
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Upcoming Catalysts / Trade Ideas
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• Rate Cuts, 9/18
  • First cut after unchanged rates in over a year
  • Fed funds rates are expected to be around 3.5% by June of next year, (currently at 5.33%)
  • Lower rates and loose monetary policy is historically bullish for risk assets
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• Eigenlayer
  • wealth effect for ETH ecosystem
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• Nonfarm on Friday, which could move next months rate cut expectations
  • Rates have an implication on DeFi, since DeFi becomes much more attractive as central bank rates approach 0
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• FTX creditor distributions in Q4
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• $ETH
  • ETH dominance keeps falling as ETF flows disappoint, but we believe price and sentiment have overshot to the downside as ETHBTC makes new lows not seen since  2021 while fundamentals remain strong
  • There continues to be many developments made globally of institutional adoption, tokenization, and payments
  • The regulatory environment is expected to loosen up, but the issue is that it’s now tied to the election and becomes a ‘Trump Trade’
  • The launch of the ETF allows easy access and establishes ETH as an investable asset class along with Bitcoin
  • The ETF launch missed expectations, but it’s too early to write it off as a failure, $2B of ETHE has exited
  • Crypto tends to be a reflexive market, and sentiment will improve as price goes up, it’s possible that institutional flows pick up as price goes up
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• $LDO
  • LDO took an outsized selloff from the SEC lawsuit against Consensys alleging Lido and Rocketpool staking pools are securities
    • Hester Pierce made comments that indicate the potential to walk back this lawsuit
  • Recent developments on the regulatory side are looking very bright, with Trump adding crypto support officially to his campaign coupled with his odds of winning surging
  • SEC allegations also seem to lose effect and mean revert over time, $SOL being the best example of this
  • DeFi as a sector is likely to benefit from the ETH ETF as well as the new political climate
  • LDO fundamentally is a very strong project, clipping almost $150m in fees on an annualized basis to its treasury
  • It has maintained majority of market share in the LST/LRT space, despite higher temporary yields in new competitor’s liquidity bootstrapping farms
  • From an institutional standpoint, it is much stronger than competitors in terms of safety and network effects. The Lido Dao’s roadmap prioritizes institutional adoption, which we think is an astute plan, given the recent interest in crypto and tokenization from Wall Street
  • See AAVE and MKR price action for forgotten DeFi tokens that generate earnings, once the value is tapped into by implementing a fee switch
  • World Liberty Financial will draw attention back to DeFi
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• Polymarket is rumored to TGE sometime soon, so it’s probably worth using the platform for an airdrop

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