🔮 Kamala Talks Krypto, GCP ETH Compatibility, SEC Rule Change, SOL Phone, DAO Challenges

The Week In Markets

Nearly a week has passed since the most suspenseful FOMC meeting in a decade, and the Fed didn't hold back—delivering a bold 50bps rate cut with a 10-1 vote. Markets welcomed the move: the S&P 500 climbed about 2%, the Nasdaq rose 3%, and Bitcoin jumped around 6% over the past week.

The pressing question now is whether the U.S. economy is edging toward a recession, especially after a surprisingly weak consumer confidence report. Was the Fed's significant rate cut a proactive measure against a slowing economy, and what might further economic decline mean for the possibility of another substantial reduction?

Economic indicators offer a mixed bag. August retail sales beat expectations, and initial jobless claims came in below forecasts—signs that consumers are still spending. However, the recent PMI report hints at stagflation risks: manufacturing continues to weaken, and while the services sector remains robust, it's starting to show signs of cooling. The Fed's Summary of Economic Projections mirrors this uncertainty, forecasting an unemployment rate of 4.4% by year-end and steady GDP growth at 2% over the next four years—a projection some analysts find overly optimistic.

Globally, liquidity is getting a boost. China's central bank, the PBOC, cut its one-year policy loan rates by a record 30bps to 2%, the largest reduction since 2016. This move is part of a comprehensive stimulus package aimed at boosting confidence in the world's second-largest economy and achieving its 5% growth target.

In crypto, investors are returning to risk-on behavior. Bitcoin is poised to break the critical $64,000 level as it enters a historically strong month, averaging 23% gains since 2013. Altcoins are following suit, breaking out of consolidation and signaling a broader bull trend. Fundamentals have outpaced valuations—a gap that's unlikely to persist.

Adding momentum, the SEC has approved options on BlackRock’s IBIT, a move expected to enhance liquidity and attract larger institutional investors. Eric Balchunas of Bloomberg Intelligence noted that this approval "will attract more liquidity, which will in turn attract more big fish." A wave of new ETF filings is anticipated, potentially introducing products like bitcoin defined-outcome ETFs and covered call funds. With net inflows into U.S. bitcoin funds reaching $397 million last week and the Fed's dovish stance, crypto investing appears poised for significant growth in the coming months.

Top Stories

Google Cloud Releases Ethereum-Compatible RPC Service

Google Cloud has launched a blockchain remote procedure call (RPC) service designed to support Web3 development. This new service allows developers to access blockchain data and functionality through API calls. It is compatible with the Ethereum JSON-RPC standard, making it easy to integrate with existing applications. At launch, the service supports the Ethereum mainnet and its test networks, with plans to expand to additional blockchains next year. Google Cloud aims to cater to a wide range of users, from startups to large enterprises, by providing a free service tier that allows up to 100 requests per second. This positions it as a competitor to existing RPC providers like Infura, Alchemy, and QuickNode. The firm is also continuing to offer other blockchain infrastructure services, such as node hosting and data analytics for blockchains including Ethereum, Solana, and Aptos.

Solana Mobile Unveils New Crypto Smartphone "Seeker" with Strong Presales

Solana Mobile introduced its new crypto smartphone, "Seeker," at TOKEN2049, announcing that presales have exceeded 140,000 units across 57 countries. Initially dubbed "Chapter Two," the device was unveiled stealthily in January as a more affordable successor to the Solana Saga. Demand spiked in April after two cat-themed memecoin airdrops, MANEKI and MEW, were offered to preorder customers, temporarily covering the device's cost. The Seeker's name was inspired by a quote from Alan Watts, reflecting its target audience of curious and adventurous users. The smartphone features the new Seed Vault Wallet, Solana dApp Store, enhanced hardware specifications, and the Seeker Genesis Token—an NFT providing exclusive rewards within the Solana ecosystem. Built in collaboration with hardware firm Fxtec, the Seeker is set to ship in mid-2025, with a current preorder price of $450, increasing to $500 after September 21.

LayerZero to LayerHero?

LayerZero, the cross-chain messaging protocol, is experiencing a significant surge in activity following the announcement of its second airdrop. Daily messages skyrocketed to 98,000 on Saturday, marking a 433% increase from a previous low of 18,400 messages. This uptick reflects renewed interest in the protocol, which had seen a steady decline in activity, with daily messages stagnating around 20,000 for several weeks. The second airdrop's criteria exclude wallets that were inactive after claiming tokens in the first distribution, incentivizing sustained engagement and targeting genuine users over opportunistic "airdrop farmers." This strategy not only boosts short-term interaction but also aims to cultivate a more active and committed user base, potentially leading to organic growth within the ecosystem. With a 30-day claim window for the new airdrop, the protocol’s activity may remain elevated as users strive to meet criteria for future distributions. The key question now is whether this spike in activity will translate into long-term adoption and consistent use of the LayerZero protocol or if it will taper off once the airdrop excitement subsides, as seen with other projects post-token distribution.

Challenges in DAO Governance: Humpty Dumpty Took Over A DAO

Decentralized autonomous organizations (DAOs) promise democratic governance through blockchain and smart contracts but often struggle with centralized control and low voter participation. Voting power is tied to token holdings, allowing “whales” to dominate decisions, especially when few stakeholders vote. This was evident when a whale named Humpy almost pushed through a $25 million allocation at Compound Finance during a low-turnout vote, a scenario seen in other DAOs like Balancer and Sushi. Major DAOs like MakerDAO and smaller ones like Nouns and Aragon have faced similar challenges, with whales thwarting proposals or taking control. Although states like Vermont, Wyoming, and Utah have enacted DAO regulations, most organizations are experimenting with solutions like diluting non-participating token holders’ voting power and delegating votes to improve governance.

Pectra Part One

Ethereum’s upcoming upgrade, Pectra, will be split into at least two parts, with the first scheduled for February 2025. This initial phase includes several key proposals that will significantly impact users and stakers. EIP-7702 introduces “account abstraction,” allowing gas fees to be paid in tokens other than ETH, enhancing user experience. Another proposal, EIP-7251, enables stakers to earn proportional rewards on deposits exceeding 32 ETH, allowing for the consolidation of validators and reducing the number of nodes major stakers need to run. Additionally, EIPs 6110 and 7002 will pave the way for fully automated and permissionless ETH staking pools. The second part of Pectra, expected by 2026, may include proposals like the EVM Object Format for improved smart contract efficiency and PeerDAS, which could further reduce layer-2 gas fees by increasing the number of blobs per block. This upgrade aims to enhance Ethereum's scalability, efficiency, and user experience, continuing the network’s evolution following the successful Dencun upgrade earlier this year.

Regulation

Kamala Harris Backs Innovation in AI and Digital Assets, Promises Consumer Protection

During a fundraiser in Manhattan, U.S. Vice President Kamala Harris expressed her support for emerging technologies like AI and digital assets, stating she would promote innovation while ensuring consumer and investor protection if elected as President. Harris highlighted her vision of an "opportunity economy," which aims to align labor, small businesses, and technological innovators to enhance America's future competitiveness. The event, attended by celebrities such as Anne Hathaway, Whoopi Goldberg, and Billy Porter, had ticket prices ranging from $500 to $1 million. Harris, currently leading in four of six swing states, has a 51% chance of winning the presidency according to Polymarket, compared to Donald Trump's 48%. Meanwhile, Trump has been actively engaging with the crypto community, recently visiting the Bitcoin-themed PubKey bar in Greenwich Village and promoting his son's DeFi project, World Liberty Financial. Harris's campaign is also expected to release new economic policies this week. See similar: Trump Says US Crypto Startups 'Will Be Living in Hell' If He's Not Elected and Donald Trump-backed World Liberty Financial debuts plans to sell WLFI token

SEC Approves Nasdaq Listing for Options on BlackRock's Bitcoin ETF

The U.S. SEC has approved a rule change allowing Nasdaq’s International Securities Exchange to list and trade options on BlackRock’s iShares Bitcoin Trust (IBIT). This approval marks a significant expansion of Bitcoin-related financial products, offering investors additional tools for managing Bitcoin exposure. BlackRock had been seeking this approval since March, following the launch of several Bitcoin ETFs in the U.S. The SEC's decision comes after Nasdaq addressed concerns over market manipulation and excessive risk-taking by setting position and exercise limits at 25,000 contracts. The options will be physically settled and follow an American-style exercise format. Despite concerns over the risks of crypto derivatives, the SEC deemed Nasdaq's surveillance mechanisms sufficient to ensure market stability and prevent manipulation.

Worldcoin Testing Facial Recognition for Enhanced Security in World App

Worldcoin, a proof-of-humanity project, is piloting facial recognition technology for its World App, which will initially be tested in select locations. The new feature aims to enhance security by ensuring that only verified users can access the app, which supports online purchases, financial transactions, and secure sign-ins. This step comes as Worldcoin seeks to improve its image amid regulatory scrutiny over its use of biometric data. Despite controversies, the World App is used by nearly 15 million people, with 6.7 million users verified through iris-scanning orbs. Worldcoin’s developer, Tools For Humanity, co-founded by OpenAI CEO Sam Altman, has introduced this measure to address concerns while expanding its presence in countries like Poland, Austria, and Malaysia.

SEC Considers Tailored S-1 Form for Crypto Amid Growing Regulatory Tensions

As of June 2024, the U.S. SEC has classified sixty-nine cryptocurrencies as securities, necessitating registration via an S-1 form under the Securities Act of 1933. However, many crypto firms have resisted, arguing that the current registration requirements, suited to traditional industries, are outdated and irrelevant to digital assets. SEC Commissioner Mark Uyeda proposed a novel solution: a new S-1 form tailored specifically for digital assets, addressing unique factors such as code structure, security audits, and token distribution. This approach aims to strike a balance between regulatory clarity and innovation, potentially benefiting both consumers and compliant crypto firms. However, while the standard S-1 filing fee is relatively low, the comprehensive legal and compliance costs could be substantial. Developing this new framework could take up to two years and may provoke legal challenges, suggesting that a legislative solution could be more effective in achieving long-term regulatory clarity for the crypto industry.

Other Domestic Regulation Updates

• Consensys Lawsuit Against SEC Over Ethereum Gets Tossed Out
• BlackRock's IBIT clocks first daily net inflows in three weeks as spot Bitcoin ETFs attract $12.8 million
• Anthony Scaramucci says crypto advocates are working to move Harris away from Gensler
• Silvergate executive says 'sudden regulatory shift' led to bank's shutdown in bankruptcy filing

Other International Regulation Updates

• Former Celsius CEO Mashinsky seeks testimony from six witnesses as he faces 115-year prison sentence
• UK Parliament to Consider Bill Defining Crypto as Personal Property
• USDC Stablecoin Now Offered by Central Bank Payment Systems in Brazil, Mexico
• Commerzbank to offer Bitcoin and Ether trading through Crypto Finance
• EToro Settles With SEC for $1.5MM, Agrees to Stop Trading Most Cryptos

Pain & Gain

Pain

• Banana Gun users report wallets being drained, Telegram bot goes offline
• DeltaPrime’s TVL Crashes 40% After $6M Exploit
• Cathedra Will Stop Mining, Start Buying BTC
• Aave Community Opposes Offboarding WBTC Despite Looming Restructure

Gain

• WalletConnect Launches WCT Token on Optimism with Airdrop Plans
• MicroStrategy Bought Another $458 Million in Bitcoin This Week
• Bitget, Foresight Ventures invest $30 million in TON blockchain
• Starknet Community Approves Dynamic Staking
• Token2049 Roundup