🔮 Fastest Digital Asset Growth is..., Project Pax, Polygon Migration, OpenSea v. SEC, Trump and DeFi

The Week In Markets

Crypto markets have continued their seasonal funk, hitting the summer lull right on schedule. September, always Bitcoin's least favorite month with an average drop of -4.8%, has run exactly on schedule - Bitcoin is down -6.3% so far on the month, dropping -10.6% at its lowest point. The good news, if you're a believer in seasonality, is that October is historically Bitcoin's best month, with an average return of 22.9%.

October has plenty of rocket fuel to live up to historical expectations, with short positions coming under increasing pressure, evidenced by a 2x spike in short liquidations over the past 24 hours. With neutralized funding rates, the stage seems set for more potential short squeezes to come.

In broader markets, the focus has remained on the Fed's rate policy and the economic data points that drive policy decisions. The U.S. jobs report for August came in weaker than expected, with 142,000 jobs added against an anticipated 160,000, and July’s numbers were revised even lower. The unemployment rate ticked down from 4.3% to 4.2%, but that wasn't enough to calm the markets. The S&P 500 and Nasdaq Composite both slid at the open on Friday, dragging BTC and ETH down with them, each losing around 5.8% before finding some footing. Yet, crypto insiders like Zach Pandl from Grayscale are cautiously optimistic, arguing that this slowdown might just give the Fed the breathing room it needs to cut rates without triggering recession fears. With a favorable macro backdrop and more institutional crypto adoption through spot ETPs, there might still be reasons to feel upbeat.

Zooming back in on crypto, we’re in a classic consolidation phase, with Bitcoin and other assets holding onto long-term support. Solana (SOL) and altcoins, represented by OTHERS (crypto assets outside the top 10 by marketcap) in the chart below, are catching a bid off support levels established late last year.

This is all coming off low sentiment, with most assets printing a 30 or lower out of 100 on the fear and greed index, and climbing global liquidity which now stands at highs since April 2022. Crypto liquidity is trending up as well, with stablecoin supplies continuing to break away positively from total crypto market cap. This divergence isn't just a random blip; stablecoin supply often serves as a reliable gauge for ecosystem growth, largely driven by the risk premia embedded in broader markets.

We're also noticing other positive divergences across the crypto ecosystem. Total blockchain addresses have reached new all-time highs, now sitting at 16.5 million, indicating that more participants are entering the space despite the cautious market sentiment. Historically, active addresses have closely tracked global market cap movements, suggesting that where there’s activity, there's usually growth.

Yet here we are, in a market steeped in fear due to seasonality, witnessing rising global liquidity, rising stablecoin supply, and the fastest growth in active addresses we've seen in months. It's a curious juxtaposition — a jittery market environment set against clear signals of underlying expansion, hinting that beneath the surface, the foundation for a broader market recovery may already be taking shape.

Top Stories

Ethereum Foundation to Release Financial Report Amid Community Concerns

The Ethereum Foundation plans to release a financial report soon to address growing community concerns about its spending, according to researcher Justin Drake. In a recent AMA on the r/ethereum subreddit, Drake mentioned that the foundation spends around $100 million annually and currently holds about $650 million in its main Ethereum wallet, providing a financial runway of approximately 10 years. Co-founder Vitalik Buterin added that the foundation's budget strategy is to spend 15% of its funds each year, allowing it to operate indefinitely while gradually shrinking in influence. Recent unexplained ether transfers, including 35,000 ETH to Kraken, have drawn criticism from community members demanding greater transparency. Aya Miyaguchi, the foundation's Executive Director, stated that future sales of ether would be gradual and tied to ongoing budget management for grants and salaries. See more: Ethereum Clocks Worst Month in Over Two Years

Solana's Pump.fun Becomes Fastest Growing Crypto App in History, Reaches $100 Million in Revenue

Pump.fun, a memecoin launchpad built on Solana, has generated $100 million in revenue in just 217 days, making it the fastest-growing protocol by revenue in the cryptocurrency industry. This record-breaking growth outpaced other top protocols such as ENA, CVX, and CAKE, driven largely by retail speculators attracted to the platform’s high fees and rapid token creation capabilities. At its peak, Pump.fun facilitated the creation of over 500,000 tokens in a single month and surpassed Ethereum’s daily revenue in early July. However, recent activity on the platform has slowed significantly, with daily token launches down 73% from its July highs and daily revenue dropping to just 20% of its all-time high. Despite the slowdown, Pump.fun remains a significant player, though it now faces competition from Justin Sun’s SunPump, a rival memecoin launchpad launched on the Tron network in mid-August. The platform's growth illustrates the volatile yet dynamic nature of the memecoin and DeFi sectors.

Source: X (Formerly Twitter)

Polygon Migrates from MATIC to POL

Polygon Labs is transitioning from its MATIC token to POL as part of the Polygon 2.0 roadmap, set to be completed on September 4. POL will replace MATIC as the network's native token, used for gas fees, staking, and securing other chains in the Polygon ecosystem. The upgrade is designed to enhance interoperability and security across Polygon's expanding zero-knowledge Ethereum Virtual Machine (zkEVM) system. MATIC holders on Polygon’s proof-of-stake chain will see their tokens automatically converted to POL, while those holding MATIC on Ethereum or zkEVM may need to manually migrate. Though there is no immediate deadline for conversion, one could be established by the Polygon community in the future.

TON Network Activity Surges Despite Founder’s Arrest, But Token Price Struggles

Since the arrest of Telegram founder Pavel Durov on August 24, 2024, the TON network has witnessed an extraordinary surge in activity, marked by record-breaking transaction volumes and active addresses. The 7-day moving average (7DMA) of daily transactions reached a new peak of 10 million on September 6, up over 160% since Durov's detention, with the network setting a single-day record of 8.68 million transactions on August 31. Similarly, active addresses have grown to ~701.8K, a 6% increase compared to the previous week, following a doubling of this figure since the arrest. Despite these network milestones, the TON token’s price has taken a steep hit, falling over 30% since the news broke. Market conditions may have contributed to this decline, but the immediate 20% drop within three hours of the arrest highlights the significant impact the event had on investor sentiment, overshadowing the network’s operational success.

Source: TonStat

Regulation

Japan’s Major Banks to Test Cross-Border Stablecoin Platform "Project Pax"

Japan’s top banks—MUFG, SMBC, and Mizuho—are launching a trial for "Project Pax," a stablecoin platform aimed at streamlining cross-border transfers for businesses using blockchain technology. Backed by blockchain firms Progmat, Datachain, and TOKI, the project will enable faster international settlements through stablecoins issued via Progmat, supported by SBI Holdings and Japan Exchange Group. Integrating SWIFT's API framework, the platform will allow banks to settle transactions on blockchain networks while addressing compliance issues like anti-money laundering. The project aims for full commercialization by 2025, offering stablecoins in JPY, USD, and EUR for domestic and international use. Project Pax could revolutionize cross-border transactions by combining speed, security, and regulatory compliance, with global banks expected to join as it develops.

OpenSea Faces SEC Scrutiny Amid NFT Market Decline

Last week, the U.S. SEC issued a Wells notice to OpenSea, alleging that NFTs sold on its marketplace are securities, marking a significant new challenge for the platform. This follows a rough period for OpenSea and the broader NFT market, which has struggled with falling prices and sales volumes since the crypto boom of 2021. OpenSea's meteoric rise saw it raise $300 million in early 2022, valuing the company at over $13 billion, but as the NFT market collapsed from $6 billion in January 2022 to $1 billion by June, its revenue plummeted to $32 million. Competition from platforms like Magic Eden, Tensor, and Blur—along with the rise of meme coins—has further eroded its dominance. Meme coins have become a more liquid alternative to NFTs, compounding the challenges as NFT sales hit a 2024 low of $374 million in August. Despite these headwinds, OpenSea remains committed to fighting the SEC's potential enforcement action, though the future of the platform and the NFT market remains uncertain.

Source: Crypto Slam

Trump Family Collaborates with Aave on DeFi Project

The Trump family is partnering with Aave, the largest decentralized finance (DeFi) money market protocol, on a web3 venture called World Liberty Financial (WLFI). Announced on Sept. 4, WLFI aims to drive mass adoption of stablecoins and decentralized finance through a stablecoin-focused lending platform. The project claims to set new standards for DeFi and ensure the U.S.-pegged stablecoins remain a dominant settlement layer for the next century. WLFI's security has been audited by firms such as Zokyo, Fuzzland, PeckShield, and BlockSec. The collaboration marks a significant shift for Donald Trump, who previously criticized cryptocurrency but has since embraced web3 and crypto-related projects, including four NFT collections and pledging pro-crypto policies if re-elected. Meanwhile, the Democratic Party, represented by Kamala Harris, has also started accepting crypto donations, signaling the increasing political significance of digital assets.

Other Domestic Regulation Updates

• US spot Bitcoin ETFs saw $211 million in net outflows, extending negative streak
• CFTC Orders Cease and Desist Against Uniswap Labs
• U.S. SEC Commisioner Uyeda Calls for Specialized S-1s For Digital Assets
• Robinhood Settles With California for $3.9 Million Over Crypto Withdrawal Violations
• Galois Capital Settles With the SEC Over Alleged Custody Failures

Other International Regulation Updates

• 'This Is Fcked Up': Detained Binance Exec Protests Treatment by Nigerian Court
• Forty-Plus Nations Gather for Seminar on Ending North Korean Crypto Crime 
• Nigerian SEC Approves Two Crypto Exchanges in Principle

Pain & Gain

Pain

• Matter Labs Lays Off Staff for the First Time Since Inception
• Pendle Pauses Contracts After Yield Protocol Penpie Suffers $27 Million Exploit
• VanEck Will Shutter Ethereum Futures ETF as Spot Funds Struggle

Gain

• Aave and Sky Set Differences Aside For USDS Incentives Proposal
• Bloomberg Terminal Integrates Polymarket Election Data