SVET Reports
SVET Markets Weekly Update (August 27 — September 2, 2023)
On week 35, we have an increased optimism setting in due to expectations that the Fed is less likely to raise rates. Nasdaq was rising sharply at the start of the week, but corrected at the end by reaching key resistance levels. On the other hand, BTC first rose due to optimism regarding the Grayscale ruling, only to then fall due to profit taking.
On Monday The Fed Dallas Manufacturing Index improved, but it remained in negative territory. The Nasdaq closed a bit higher on technicals, as traders largely remained undecided ahead of a batch of economic data. In other news, Binance is considering withdrawing from Russia.
Manufacturing activity in Texas improved slightly in August, but still pointed to challenging conditions. Production, new orders, shipments, capacity utilization, and capital expenditures all declined. Labor market measures suggested slower growth in employment and shorter workweeks. Price pressures remained subdued, while wage growth accelerated. Expectations for future manufacturing activity were mixed.
Crypto
Binance is considering withdrawing from Russia due to legal risks. The exchange has already removed five sanctioned Russian lenders from its peer-to-peer service.
On Tuesday, Job openings fell and the Nasdaq rose sharply, boosted by expectations that the Fed will pause interest rate hikes in September. Tesla and Nvidia were among the top gainers. BTC surged on Grayscale’s win against the SEC.
Details
Job openings (JOLTs) in the US fell to a 22-month low in July 2023, as the labor market cooled after months of Fed tightening. The decline was widespread, with openings down in most major sectors and regions. However, there were some pockets of strength, such as in information and transportation.
On Wednesday, GDP increased less than expected but the Nasdaq index was volatile. HP shares tumbled more than 10% after the company lowered its profit outlook. Investors are likely to exercise caution ahead of the release of the monthly jobs data on Friday. BTC corrected sharply on a short-term holders’ profit-taking spree. In other news, Uniswap pool was declared not to be an “investment contract.”
Details
GDP grew at a slower pace in the second quarter, with growth driven by consumer spending and government spending. However, exports declined and residential fixed investment slumped.
Crypto
Uniswap won a legal battle against allegations that it violated certain provisions of the Securities Act. The judge ruled that Uniswap’s liquidity pools did not meet the definition of an investment contract and that Uniswap was not a “statutory seller” under the Securities Act.
On Thursday, the Nasdaq rose slightly for the fifth consecutive day, as investors awaited the release of the US jobs report on Friday. The core PCE price index rose 0.2% in July, but job cuts surged by more than 200% from the previous month. Salesforce stocks rose, while the dollar fell. BTC had a day of a deep correction as traders rushed to take profits from a previous run.
Details
Core PCE inflation in the US rose 0.2% in July, matching market expectations. The annual rate of inflation rose to 4.2%, still above the Fed’s target of 2%.
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.
Details
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
Comment
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.