Liquidity Concerns are Temporarily Lifted, and Public Chain Tokens Lead the Market

After the Jackson Hole meeting, due to the temporary relief of liquidity tightening worries, mainstream cryptos performed well this week. Macroeconomic performance did not have a significant impact on cryptos, while public chain tokens became an important upward driving force within the crypto market this week.

Historical low volatility continued, while implied volatility remained stable at high levels. Market expectations generally improved.

Many countries have joined regulatory actions against trading platforms such as Binance, and the supervision of DeFi has also begun to be implemented, which reveals that regulatory risks still exist.

The end of September will be an important stage to determine the direction of future market changes.

"Taper Alert" Temporarily Lifted, Market Expectations High

At the Jackson Hole meeting, Federal Reserve Chairman Powell's milder speech relieved the market's worries about the liquidity crunch. Affected by this, mainstream cryptos' prices returned to a high level, and the excellent performance of public chain tokens led by SOL and FTM this week brought the market back to its peak. As of 18:00 on September 3, the total market value of the crypto market had reached $2.27T, while the volatility of mainstream cryptos remained low, and the difference of volatility data also showed that the market had not yet experienced significant overheating.

Compared with BTC, ETH performed slightly better due to the lead of the public chain sector, but volatility also increased significantly. From the perspective of futures premium data, the market's optimistic expectations for the two are equal: all futures varieties have a positive premium of more than 10%.

However, judging from the skewness and the term structure of futures premium, the market is still cautious about the expected liquidity contraction that may come in October, and the premium range of forwarding futures is lower than that of near-month futures.

Regulatory Risks Still Exist, Beware of the Risk of Sharp Rise in Volatility

• This week, regulators took action again on trading compliance and opened an investigation into the DeFi trading for the first time.

1. On Friday night, the US Securities and Exchange Commission officially announced an investigation into the crypto exchange Uniswap. This is the first large-scale action by regulators on DeFi-related transactions, which may significantly affect the market's expectations for the development of the crypto market, and the DeFi market is facing an important test.
2. The compliance risk of crypto transactions has increased again, but the preferential treatment for compliant transactions has been clarified. Singapore and South Africa have become new members of the Binance compliance investigation, while Coinpass, a cryptocurrency company, said it had been approved by the UK Financial Conduct Authority to register as a compliant cryptocurrency asset management company. The regulator's "carrot + stick" strategy is beneficial to the accelerated development of crypto compliance, but on the other hand, compliance may also cause some development directions to be limited, especially for high-risk and highly leveraged products.

• Institutions are more optimistic about the future performance of Ethereum because Ethereum has many usage scenarios involving transactions, NFT, and developer activities. Compared with bitcoin at the same stage, the user base of the network is also growing by a larger number.

• Influenced by the good performance of the crypto market, the concept stocks of the blockchain generally rose in the U.S. stock market, and some stocks even fused.

Since liquidity tightening expectations have become clear, and investors are generally psychologically prepared, after the release of non-agricultural data, the future macroeconomic influence on the market will once again decline, and the internal driving force of the market may regain the initiative. It is worth noting that this month is the delivery month for Q3 derivatives. Affected by liquidity expectations, open interests of futures, perpetual contracts, and options have all reached new highs. Investors are placing bets on the future market direction. The end of September will be an important stage for determining the direction of future market changes.