Macro Monthly Outlook(September）

Federal Reserve’s 50 Basis Point Rate Cut Sparks a Market-Wide Rebound

The crypto market started the month of September on a weaker note, with Bitcoin initially falling to as low as $52,700. However, the narrative changed significantly after the much-anticipated announcement of a Federal Reserve rate cut, which spurred a global market rally, including a notable rebound in the crypto space. Post-announcement, Bitcoin surged from the $58,000 level to the recent high at $66,000, and closing the month at $63,300. This upward momentum was mirrored across risk assets, reflecting renewed optimism and easing liquidity concerns. As Bitcoin approaches the critical resistance level of $70,000, we see a constructive outlook for the remainder of 2024 and into 2025. In our view, the macro environment is turning increasingly favorable, driven by a shift toward more accommodative liquidity policies and improving regulatory clarity.

Repricing of Recession Risks

Global markets were closely eyeing central bank policies in September. Aside from the Fed’s relatively surprise 50 basis points rate cut, major central banks like the European Central Bank (ECB) and the Bank of England (BoE) also announced rate cuts, while the Bank of Japan (BoJ) continued its rate hike path initiated earlier this year.

A closer examination of the Fed’s projections from the recent FOMC meeting in comparison to June reveals some insights:

• GDP Growth: The Fed maintained its GDP growth projections at 2% for both 2025 and 2026, signaling confidence in economic resilience despite ongoing policy shifts. This suggests that the Fed is not overly concerned about a potential recession.
• Unemployment Rates: The higher projected unemployment rate for 2024 indicates that labor market conditions may experience some strain, aligning with the Fed’s prioritization of achieving balanced employment.
• Inflation Outlook: The inflation forecast remains within manageable levels, reinforcing the Fed’s stance that inflationary pressures are being effectively controlled.

Source: Federal Reserve

Data as of 18 Sep 2024

USD/JPY - The Key Variable to Watch

In terms of market reaction, both equity and crypto markets responded positively to the rate cut, with sentiment turning notably bullish. In particular, the US 10-year Treasury yield has acutally risen since the announcement, which can also be interpreted as a signal that investors are not factoring in heightened recession risks.

However, a critical variable to watch is the USD/JPY currency pair. The Bank of Japan’s rate hike in August triggered a significant unwinding of carry trades globally, impacting crypto markets as well. While most short-term carry trades have been unwound, there remain sizable medium- and long-term positions. Consequently, any further policy adjustments by the BoJ or movements in the USD/JPY pair could significantly influence global liquidity flows, making it a crucial indicator for market participants to monitor closely.

Fractal Bitcoin Mainnet Launch

A notable development in the Bitcoin ecosystem was the official launch of Fractal Bitcoin on September 9th. Fractal Bitcoin is a unique Layer 2 solution that enhances Bitcoin’s transactional capabilities by utilizing recursive extension layers built on Bitcoin Core code. This architecture not only increases processing capacity and speed but also preserves full compatibility with the Bitcoin mainnet.

Unlike some Layer 2 solutions that compete for attention and liquidity, Fractal complements Bitcoin by enabling developers to experiment with extended features, such as the OP_CAT opcode, in a safe and flexible environment. This allows for new functionalities to be tested and potentially adopted on the mainnet in the future, making Fractal a pioneering platform for Bitcoin innovation.

By the end of September, the combined mining hashrate surpassed 250 EH/s, positioning it among the top three Proof-of-Work (PoW) public chains by hashrate. Supported by the ViaBTC mining pool, CoinEx also became the first exchange to list the FB token.

For detailed analysis of Fractal Bitcoin, do read our latest article “Fractal Bitcoin: The Pioneering Network of Bitcoin - Analysis of Technical Innovation and Challenges”.

Ton Ecosystem Expansion - CATI and HMSTR Token Launches

The Ton ecosystem has gained momentum primarily through the success of gamified mini-applications, which have attracted a substantial user base. In September, two leading projects — Catizen and Hamster Kombat — held their respective token generation events. Despite the hype, both tokens underperformed post-launch, with Catizen and Hamster Kombat recording sharp declines of 55% and 35% from their highs, respectively.

The underwhelming performance raises questions about the sustainability of the “tap-to-earn” economic model. Given that this wave of token launches has likely captured the bulk of Telegram’s user base, new projects with a similar proposition may struggle to compete with these established leaders. This could signal a saturation point in the Ton ecosystem, where only unique value propositions and strong user engagement can sustain long-term growth.

Meme Token Revival - Animal-Themed Craze on Social Media

The Bitcoin rally following the Fed’s rate cut announcement also reignited a new wave of meme token speculation, particularly driven by viral animal-themed narratives on TikTok and YouTube. The trend was kickstarted by Moo Deng (MOODENG), a dwarf hippopotamus from Thailand, which quickly became a meme sensation across social media. The “bouncing hippo” phenomenon sparked a renewed interest in animal-themed meme tokens, resulting in what is now being referred to as the “Hippo Economy.”

In the wake of Moo Deng’s popularity, the market began speculating on other potential viral animal-themed tokens, such as penguins (PESTO), frogs (OMOCI) and more. This surge of interest has notably boosted on-chain trading volumes, particularly on the Solana blockchain, as traders attempt to capture alpha from these short-term meme-driven narratives. In fact, the daily tokens created on Pump.Fun has rebounded to the high levels previously seen this year. Despite the playful nature of these tokens, investors should remain cautious, given the potential for extreme price volatility.

Stablecoin Inflows Slowed but Stayed Robust

In September, stablecoin inflows totaled $2.9 billion, reflecting a slowdown with a monthly growth rate cut by half compared to August. Despite the deceleration, the inflow level remains strong, signaling sustained liquidity in the market. This indicates that investor confidence persists, providing a solid foundation for future market movements. As the uncertainty surrounding the U.S. elections subsides, the capital on the sidelines could potentially ignite the next phase of market activity.

Economic Data & Events to Watch in October 2024

Disclaimer

The content provided in this report is for illustrative purposes only and is intended to offer insights into the cryptocurrency market. It is not, and should not be interpreted as, investment advice or recommendations. The information contained herein is based on sources believed to be reliable; however, we do not guarantee its accuracy, completeness, or suitability for any purpose, and it should not be relied upon as such. Any opinions expressed reflect a judgment at the date of publication and are subject to change without notice. Readers are advised to conduct their own research and due diligence and, where appropriate, seek professional advice before making any investment decisions. The authors and publishers of this report accept no liability for any loss or damage arising from the use of the information provided.

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