Welcome back to DV Chain's Weekly Market Commentary! In this edition, we review how risk assets traded last week amid mixed economic data and fluctuating rate cut expectations. With CPI data coming this Wednesday and several key crypto events in September, the market might be bracing for more volatility. We also highlight upcoming catalysts like the Eigen airdrop, the Solana Breakpoint conference, and several important upcoming crypto hearings. Dive in for insights on the latest market trends and potential trade ideas:

Market Recap
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• Risk assets traded heavy last week on mixed economic data flowing in
  • Rate cut expectations flip flopped several times between 25 and 50 bps in September, with 25 bps looking more likely at the moment (75%)
  • CPI this Wednesday could further swing rate cut expectations
    
    
• Eigen announces season 2 airdrop
  
  
• ETH gives up gains YTD
  
  
• LDO delegate voting live through 9/18, some delegates have voiced fee switch, so it’s worth monitoring governance boards as we saw value unlocked this way through other DeFi tokens such as MKR
  
  
• Stablecoin supply steadily increasing

• L2 active addresses continues to climb, led by Base
  

• Apple event today should highlight the new iPhone 16 and AI features
  
  
• The presidential debate is tomorrow, 9/10 at 9PM ET
  • Kamala Harris’ first extended live appearance
  • Expect some movement in election odds, and crypto prices as well if odds move enough
    
    
• Eigen becomes tradable 9/30, one of the largest and most anticipated airdrops this cycle - historically airdrops have provided wealth effects that drive on chain activity
  
  
• Solana Breakpoint is 9/20-9/21
  • An update on Firedancer (a more performant and highly anticipated validator client) will be given
    
    
• Several crypto hearings by the U.S. House of Representatives' financial-services committee
  • 9/10 DeFi hearing
  • 9/18 Enforcement practices of SEC, implications of ‘Pig Butchering’ Scans
  • 9/23 Gary Gensler testifies before committee
    
    
• CZ released from prison 9/29
  
  
• BTC ETFS had an outflow of 706mm last week
  
  
• ETH ETFs had an outflow of 91mm last week

Upcoming Catalysts / Trade Ideas

• APT Unlock, 9/8
  • 11.3m tokens unlocked, ~$70mm
    
    
• STRK Unlock, 9/15
  • 64m tokens unlocked, ~$26mm
    
    
• POL/STRK
  • POL – Binance to list Polygon's new token on 9/13
  • $Strk pumping into an unlock
    • historically sold coin on vesting
  • Given the catalysts, longing POL and shorting STRK against it appears to be a good pair trade
  • Matic trading weak into pol migration as derivatives delisted everywhere and oi closing into that
  • Period where liquidity is lightened and margin is more expensive before POL perps are re-listed
  • new token, new chart and attention
  • New token is the gas and staking token on Polygon POS, where Polymarket lives
    
    
• Rate Cuts, 9/18
  • First cut after unchanged rates in over a year
  • Fed funds rates are expected to be around 3.5% by June of next year, (currently at 5.33%)
  • Lower rates and loose monetary policy is historically bullish for risk assets
    
    
• Eigenlayer, 9/30
  • wealth effect for ETH ecosystem
    
    
• FTX creditor distributions in Q4
  
  
• $ETH
  • ETH dominance keeps falling as ETF flows disappoint, but we believe price and sentiment have overshot to the downside as ETHBTC makes new lows not seen since  2021 while fundamentals remain strong
  • There continue to be many developments made globally of institutional adoption, tokenization, and payments
  • The regulatory environment is expected to loosen up, but the issue is that it’s now tied to the election and becomes a ‘Trump Trade’
  • The launch of the ETF allows easy access and establishes ETH as an investable asset class along with Bitcoin
  • The ETF launch missed expectations, but it’s too early to write it off as a failure, $2B of ETHE has exited
  • Crypto tends to be a reflexive market, and sentiment will improve as price goes up, it’s possible that institutional flows pick up as price goes up
    
    
• $LDO
  • LDO took an outsized selloff from the SEC lawsuit against Consensys alleging Lido and Rocketpool staking pools are securities
    • Hester Pierce made comments that indicate the potential to walk back this lawsuit
  • Recent developments on the regulatory side are looking very bright, with Trump adding crypto support officially to his campaign coupled with his odds of winning surging
  • SEC allegations also seem to lose effect and mean revert over time, $SOL being the best example of this
  • DeFi as a sector is likely to benefit from the ETH ETF as well as the new political climate
  • LDO fundamentally is a very strong project, clipping almost $150m in fees on an annualized basis to its treasury
  • It has maintained majority of market share in the LST/LRT space, despite higher temporary yields in new competitor’s liquidity bootstrapping farms
  • From an institutional standpoint, it is much stronger than competitors in terms of safety and network effects. The Lido Dao’s roadmap prioritizes institutional adoption, which we think is an astute plan, given the recent interest in crypto and tokenization from Wall Street
  • See AAVE and MKR price action for forgotten DeFi tokens that generate earnings, once the value is tapped into by implementing a fee switch
  • World Liberty Financial will draw attention back to DeFi
    
    
• Polymarket is rumored to TGE sometime soon, so it’s probably worth using the platform for an airdrop

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