Gate Institutional Weekly Insight (Dec 18,2023)

Macro Overview

US Market Records Highs as Fed Signals Rate Cuts; Inflation Optimism Prevails: The U.S. stock market reached record levels with the Dow, S&P 500, and Nasdaq securing their longest winning streak since 2017. Small-caps surged, pulling the Russell 2000 Index out of bear market territory. Investor activity increased, favoring stocks with short interest, while the VIX hit a post-COVID low. Favorable inflation indicators and the Fed’s signal of substantial rate cuts in 2024 bolstered market confidence. Retail sales rose unexpectedly, but manufacturing showed weakness. Long-term Treasury yields dropped below 4%, while corporate bonds rallied after the Fed’s dovish stance.

Eurozone’s Rate Expectations and Economic Woes: A Tale of Market Dynamics: The STOXX Europe 600 climbed 0.92%, anticipating 2024 rate cuts by key central banks. France’s CAC 40 gained; Germany’s DAX and Italy’s FTSE MIB dipped, while the UK’s FTSE 100 edged up 0.29%. The European Central Bank kept its 4.0% deposit rate but lowered 2023 and 2024 growth and inflation projections. Eurozone business activity contracted, with a PMI of 47.0 in December. The Bank of England held its 5.25% benchmark rate, poised for hikes if inflation persists. UK’s economy shrank 0.3% in October after a 0.2% September rise. Norges Bank raised rates to 4.5%, eyeing stability until late 2024. Swiss National Bank maintained a 1.75% rate, adjusting down 2024 and 2025 inflation forecasts.

Deflation Fears Weigh on Chinese Equities Amid Economic Mixed Signals: Chinese stocks faced declines as deflationary concerns gripped the economic landscape. The Shanghai Composite and CSI 300 fell, while the Hang Seng Index in Hong Kong surged amid a global market rally following the Fed’s interest rate stance. China’s consumer price index plunged by 0.5% in November, with lower pork prices contributing, while the producer price index saw a 3% year-on-year drop, raising worries about a deflationary cycle. November’s economic data presented a mixed scenario: industrial production surpassed expectations, retail sales surged but missed forecasts, and fixed asset investment remained weaker than expected. Despite some positive indicators, concerns persisted, leading the People’s Bank of China to inject funds into the banking , maintaining efforts to counter economic challenges. Analysts anticipate further policy support in 2024 as the government aims to boost domestic consumption and investment, addressing ongoing risks like weak consumer confidence and a struggling property sector outlined during the Central Economic Work Conference.

DXY

DXY grapples with instability, teetering above 102.50 after bouncing from a recent low. Short-term US Treasury yields offered some support to the Greenback, yet mixed PMI data for December created uncertainty. While the Services PMI signaled growth, the Manufacturing PMI indicated contraction. Focus now turns to Consumer Confidence and Existing Home Sales Change for further cues.

Dovish remarks from Fed officials, including Atlanta Fed President Raphael Bostic hinting at a potential rate cut in Q3 2024 and Chicago Fed President Austan Goolsbee not dismissing a rate cut in March’s Fed meeting, could exert downward pressure on the USD in the coming sessions.

US10Y

US02Y

The Negative Gap Between US10Y & US02Y

The 2-year US bond yield improved to 4.48% on Friday but trading lower at 4.43% at the time of writing on Monday. While 10-year US yield stands at 3.92%.

Gold

In the Asian session on Monday, gold maintains stability near $2,020 after a turbulent week concluded with a notable pullback on Friday. As the market heads into the pre-Christmas phase, gold price awaits the crucial US inflation report, poised to influence reuation of expectations around US Federal Reserve interest rate cuts for the upcoming year. Despite Friday’s retreat from eight-day highs at $2,048, the prevailing trajectory for gold continues to lean towards upward momentum.

Crypto Markets Overview

1.Bitcoin
Casper Network
Bitcoin Price

Bitcoin Dominance

Bitcoin steadies between $41,500 and $43,000 post-recovery from the recent selloff post-US CPI data. On-chain insights suggest a shift of 5,000 BTC away from exchanges and trading wallets during the weekend, hinting at potential investor strategies. Technical indicators emphasize crucial resistance levels BTC must surpass for bullish momentum to regain strength in the upcoming week.

Bitcoin Price vs. DXY

Continuing the negative correlation between DXY and Bitcoin Price, DXY increased while BTC dropped in the past week.

2.Ethereum

Ethereum Price

The ETH price continued to be traded around the crucial $2,200 support level. The price dropped below $2,200 here and there, Ethereum needs to avoid a sustained close below the crucial $2,100 support zone. Since last week, the movements demonstrate continued volatility in the ETH market, showing substantial risks and fluctuations in the short term.

Daily ETHBTC

Weekly ETHBTC

Daily ETHBTC ratio continued to be traded around the 0.053-0.055 range.

3.Total Market Cap

Crypto Total Marketcap
This week, the global crypto market cap continued to be traded around 1.51t, a -1.3% decrease to the level of last week.

4.Stablecoin Flows

Total Stablecoins’ Marketcap, Source: Defillama

Major Stablecoins’ Marketcap, Source: Defillama

Over the last week, USDT’s market cap saw another larger increase compared to the past months, and USDC’s market cap experienced a minor drop and then increase. The combined market capitalization of Stablecoins is now around the $129.5b level, similar to the level from last week.

5.Top 30 Crypto Assets Performance

Source: Coingecko and Gate Ventures, as of Dec 18, 2023

In the past 7 days, the top 30 crypto assets have experienced some price surges. Bitcoin price has decreased by -2.8% and Ethereum has decreased by -3.0%. ICP is leading the chart with a growth of 82.9% benefitting from its Internet Computer $ICP initiative airdrops.

The Key Crypto Highlights

1.Highlights

1) Solinions: A Revolutionary Approach to Solana’s Digital Artifacts

Solinions signify a significant departure in the realm of digital artifact creation and sharing specifically designed for the Solana blockchain. These innovative Solinions redefine the landscape of digital artifacts on Solana by leveraging the unique feature known as the “memo,” distinct from its Ethereum counterpart, Ethions.

Solinions operate as an open-source implementation of a protocol that harnesses the power of the Solana memo. This transformative development showcases the evolution of the Solana digital eco.

Solinions function as a cost-efficient protocol, enabling information sharing and computations on Solana Layer 1. They deviate from conventional smart contracts and centralized Layer 2 solutions, offering a budget-friendly alternative. By utilizing the Solana memo, Solinions bypass the need for smart contract storage and ution, uting state changes through deterministic protocol rules. This highlights the efficiency and unique capabilities inherent in Solana’s memo feature.

At its core, Solinions are geared towards democratizing decentralized computations, making blockchain activities accessible to everyday users at an affordable cost.

Presently, Solinions serve as an economical alternative to Non-Fungible Tokens (NFTs) within the Solana eco. Looking ahead, they aim to evolve into a cost-effective alternative to traditional Solana smart contracts, thereby broadening opportunities for users navigating the Solana blockchain landscape.

2) OpenChat Initiates Facial Recognition Authentication for Human Validation

OpenChat, a decentralized chat application utilizing Dfinity’s Internet Computer blockchain and boasting over 100,000 users, is set to trial a face authentication validating users’ humanity, reports The Block. The platform aims to foster more ethical conversations by mandating users to confirm their singular human identity, intending to curb fraudulent activities and promote virtuous discourse on apps.

While verifying humanity remains straightforward, affirming unique human identities poses greater complexity and could deter practices like token farming or airdrops conducted through multiple accounts.

In this initial phase, OpenChat won’t universally enforce the verification process, but future iterations may adopt a different stance. Departing from conventional email addresses and usernames, the platform leverages crypto addresses and NFTs for authentication and incentivizes engagement.

This initiative follows OpenChat’s collaboration with Modclub, a decentralized content moderation service. The partnership shifts moderation responsibility from chat group leaders to Modclub’s moderators, who receive cryptocurrency as compensation, underscoring a shift toward community-driven governance and decentralized content oversight.

3) Polygon Labs’ Shift: From Polygon Edge to ZK-Powered Polygon CDK

Polygon Labs, pivotal in Ethereum’s scaling networks, has transitioned away from “Polygon Edge” to “Polygon CDK,” a blockchain development kit using zero-knowledge cryptography. This move denotes the discontinuation of support for Polygon Edge, previously employed by Dogechain in an unofficial bid to establish a Dogecoin-centric smart contract network.

While Dogechain sought to use Polygon Edge for Dogecoin transactions, this endeavor lacked official Dogecoin project backing. Polygon Labs has now ceased contributions to Polygon Edge, redirecting their support to Polygon CDK. Emphasizing their commitment, the developer highlights CDK’s role in creating layer-2 blockchains utilizing zero-knowledge cryptography, a technology gaining traction across crypto projects.

In a blog post, Polygon Labs unveiled their strategic shift, emphasizing the advancement within the Polygon eco. This transition underscores their focus on Polygon CDK, a framework enabling developers to build layer-2 networks modeled after zero-knowledge technology, a pivotal move indicating their shift away from Polygon Edge.

2.Key Venture Deals
1) Bitcoin protocol, bitSmiley, raised from OKX and ABCDE

bitSmiley, advancing Bitcoin’s potential, kicks off a new round with alpha investment co-led by OKX Ventures and ABCDE Labs. The collaboration aims to elevate BTC’s mission by expanding bitSmiley, a protocol thriving within the Bitcoin blockchain. bitSmiley pioneers a decentralized Stablecoin, trustless lending, and derivatives under the Fintegra framework. The flagship product, bitUSD, champions stability and transparency within the Bitcoin blockchain. bitLending for peer-to-peer lending and a Credit Default Swaps (CDS) segment further enrich the Bitcoin DeFi landscape.

2) Farcana, a PC-based arena shooting game, raised $10m from Animoca, Polygon, etc.

Farcana, the PC arena shooter integrating a Web3 economy, secures $10m in Seed funding from Animoca Brands, Polygon Ventures, and others. Farcana Studio, based in the UAE, introduces a team-based shooter emphasizing strategic gameplay and a Bitcoin prize . Developed on Unreal Engine 5, it offers innovative features like “Free Mint” Bitcoin ordinals within AAA Web3 gaming. Competitive tournaments, a Mars-set battle royale, and a deflationary Play-to-Hash model are part of Farcana’s immersive experience.

3) Andalusia Labs raised $48m from Lightspeed, Mubadala, etc.

Andalusia Labs (formerly Risk Harbor), a digital assets risk management provider, raises $48m in Series A led by Lightspeed, with Mubadala Capital and other major backers. Offering solutions like the Karak layer-2 blockchain and the Subsea crypto risk management marketplace, Andalusia Labs aims to set security standards and integrate blockchain into global financial services.

4) LINE NEXT secured $140m led by private equity firm Crescendo
LINE NEXT (DOSI), a global NFT platform, secures $140m led by Crescendo Equity Partners. DOSI aims to bridge Web3 and existing web features. Offering user-friendly payment methods and unique PFP NFTs, DOSI citizens engage in an NFT-based membership program, fostering a vibrant eco for creators and companies worldwide.

The number of deals closed in the previous week was 33, with Infra leading the way with 18 deals, representing 55% of the total number of deals. The sector with the least number of deals is GameFi with 3 deals funded representing 9% of the total number of deals last week.

Weekly Venture Deal Summary, Source: Cryptorank and Gate Ventures, as of Dec 18, 2023

The total amount of funding raised in the previous week was $314.2m with the Social sector leading the way with $141.3m, representing 45% of overall funding. The sector with the least amount of funding in the previous week was DeFi with $7.3m raised, representing 2% of overall funding last week respectively.

Weekly Venture Deal Summary, Source: Cryptorank and Gate Ventures, as of Dec 18, 2023

Although fundraising values have seen a significant decline since August due to various key macro events, a positive momentum has been coming back since the end of November. Total weekly fundraising value has increased to $305.9m for the first three weeks in December.

See you next week!