Friday's Markets Update (September 1, 2023)

04 Sep 2023 by rate3

On Friday, The Nasdaq declined by 0.2% on Friday, despite job data showing that the labor market is cooling, giving the Fed room to pause the tightening cycle. Technicals were again in play, as traders took profits from the key resistance zone of 14–14.1K. BTC went sideways all day.

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The unemployment rate rose to 3.8% in August 2023, the highest since February 2022. The number of unemployed people increased by 514,000 and employment levels rose by 222,000

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I attended Stanford Blockchain Week (SBW) all week long, so my comments will focus on that event, not on the general state of the economy and cryptocurrency, as I did in previous posts.

The Ethereum ecosystem is rapidly evolving after converting from PoW to PoS. Here are some of the key developments, as I observed it on the SBW:

ZK-rollups are a promising scaling solution that is gaining popularity. They work by running computations off-chain and submitting them on-chain via a validity proof. This allows for much higher throughput and lower gas fees than is possible on the main Ethereum chain. ZK-Rollups have the potential to produce blocks in under a minute and increase throughput to as high as 2,000 tps. Unlike optimistic rollups, ZK-Rollups take a “guilty until proven innocent” approach to validation. This means that all transactions in a ZK-Rollup batch are initially considered invalid until the validity proof is verified. This makes ZK-Rollups more secure, but also slightly slower than optimistic rollups.
New generation of Layer2–3 developers: There is a new generation of Layer2–3 developers who are rapidly getting ahead of the previous L1 coders. These developers are building new and innovative ways to scale Ethereum and make it more user-friendly.
Absence of VC appetite for Web3.0: After the excitement around Web3.0 in 2022, there is now a notable absence of VC appetite for that in 2023. However, there are a number of new funds that are orientated on expanding infrastructure rather than on getting wider adaption.
Here are some additional thoughts on the state of the Ethereum ecosystem:

The Merge, the transition of Ethereum from PoW to PoS, was completed on June 8, 2022. This is a major milestone for the Ethereum ecosystem and is expected to improve its scalability, security, and sustainability. At the same time, it rose the questions on the regulatory side and might also lead to significant concentration of power over the network in the hands of few “stakers”.
The development of Layer2 and Layer3 scaling solutions is accelerating. These solutions are essential for making Ethereum more scalable and user-friendly.
There is a growing interest in decentralized finance (DeFi) on Ethereum. These applications are driving demand for Ethereum and are helping to grow the ecosystem.
Overall, the Ethereum ecosystem is in a strong position. It has a growing community, a vibrant developer ecosystem, and a number of promising developments that will help Ethereum to stay the leading platform for decentralized applications in a medium-term, at least.

In week 36, economic data releases will focus on services PMI, factory orders, and foreign trade data in the US. Interest rate decisions will be announced in Australia and Canada. Inflation rates will be monitored in Turkey, South Korea, the Philippines, Mexico, and Russia. GDP growth figures will be released for Australia, South Africa, and Switzerland. Services PMI readings will be assessed for China, Spain, Italy, and Brazil.