The Market
Historically, October has often been a positive month for the cryptocurrency market, with many traders dubbing it "Uptober" due to its tendency to see upward price movements. However, this year’s “Uptober” hasn’t been off to a great start. On October 1, 2024, Iran launched a massive missile attack on Israel in retaliation for Israel's assassination of key Hezbollah and Hamas leaders. Although the damage was limited due to Israel’s missile defense system, the conflict is expected to persist following Israel’s retaliatory strike in Lebanon. A full-scale war may still be avoided, given the US’s hesitance to support such a politically risky escalation with only one month left until the election.
Compared to Iran’s previous attack in April, the market reaction has been milder. The equity market ended the week slightly up, with the S&P 500 rising by 0.31%. The crypto market, which had paused its strong uptrend from late September, still managed to show gains, with BTC up approximately 1% and altcoins up 1.23%. Oil (USOIL) prices saw the most significant impact, increasing by around 9.45% this week. This contrasts with the situation in April, when oil prices dropped by about 3% one week after the attack. At that time, oil prices had peaked at a YTD high of $87 before the attack, anticipating further escalation. Currently, oil prices have recovered from a YTD low of $66 to $74, reflecting the market’s anticipation of a continued conflict.
The September jobs report exceeded expectations. Nonfarm payrolls increase by 254,000, well above the Dow Jones consensus forecast of 150,000. The unemployment rate also improved, falling from 4.2% to 4.1%. With the economy showing resilience, the likelihood of a 50bps rate cut in November has dropped from 53.3% just a week ago to 0%. The market is now pricing in a 97.4% probability of a 25bps cut, with a small chance of no rate cut at all.
Despite these positive signs, the economic outlook is not entirely rosy. US manufacturing has contracted for six consecutive months, and manufacturers have reported the weakest employment growth in this sector. As a result, the market is still pricing in an over 80% chance of a full 1% rate cut by year end.
From a technical perspective, this October selloff is the first time BTC has posted higher highs and lower lows since the Q2 downturn. There are reasons for optimism regarding the price trajectory ahead. First, the global liquidity injection has just begun, spurred by the US rate cut and China’s stimulus. Mounting global debt requires liquidity for refinancing. Second, US policy towards Bitcoin turned more favorable with Bipartisan support growing for the BTC reserve. The Lummis bill, if passed, would authorize the purchase of 1 million BTC into the US strategic reserve. Additionally, crypto is becoming a key geopolitical tool, as China’s former vice finance minister has called for a renewed focus on crypto, just as the US has embraced more crypto friendly policies, including the approval of BTC and ETH ETFs.
Crypto adoption is also deepening beyond ETFs. According to the most recent stablecoin survey of six emerging markets, access to dollars (47%), yield generation (39%), and transactional purposes are popular use cases second only to trading. In fact, the number of stablecoin sending addresses has steadily increased, regardless of fluctuations in exchange volumes.
DeFi Updates
Solana has made significant strides in this cycle, particularly in user and application growth. Although investors often focus on trading volume growth driven by memes, Solana is making real progress on the institutional adoption front.
Expansion of Solana’s Payment Ecosystem
Most of the Web2 payment giants, such as VISA, Paypal, Shopify and Stripe, which have integrated Ethereum, have also incorporated Solana into their payment system. Stablecoin issuance on Solana grew by 151% YOY. Paypal’s stablecoin, PYUSD, has achieved a market share on Solana comparable to that on Ethereum, despite being issued later. According to the aforementioned stablecoin survey, Solana ranks third behind Ethereum and BNB chain in user preference among the EM countries surveyed.
In addition to its advantages in speed and cost, Solana is forming strong partnerships with distribution channels to facilitate fiat on- and off-ramp, which we believe is key to winning the payment war. For example, Sling Money, a payment app supporting Solana, enables instant fiat on- and off-ramps in 76 countries. Multiple teams are also launching debit cards backed by Solana stablecoins to enable direct spending.
Tokenization is Rising on the Solana Network
Solana is now ranked as the third-largest blockchain for tokenized assets. At the recent breakpoint conference, the two largest tokenized treasury products both announced plans to issue on Solana.
Solana as the Leading Hub for Depin Applications
Solana hosts more DePin (decentralized physical infrastructure networks) applications than any other chain, and probably most of the successful ones as well. Helium, the largest DePin project by market cap on Solana, has experienced strong demand growth since its carrier offload program went live in August. This program involves three Web2 mobile carriers paying hotspot owners for data offloading.
Solana’s Liquidity Attraction
Solana has been ranked as the top chain attracting net flows in the past three months, pulling liquidity from the Ethereum network. Solana wallet Phantom and DEX Raydium have both announced support for cross-chain trading between Ethereum and Solana, making liquidity transfers between these two chains more user friendly.
We believe Solana's mainstream adoption has only just begun. Institutional partnerships, real-world applications, and the upcoming Solana mobile launch will act as catalysts for future growth, moving the platform beyond just a meme-driven ecosystem.
Top 100 MCAP Winners
FTX Token (+89.87%)
Popcat (+31.80%)
Wormhole (+13.72%)
MANTRA (+9.99%)
Aptos (+8.12%)
Top 100 MCAP Losers
FLOKI (-22.37%)
Notcoin (-21.63%)
Lido (-21.54%)
Ethena (21.27%)
Gala (-19.49%)
About Decentral Park
Decentral Park is a founder-led cryptoasset investment firm comprised of team members who’ve honed their skills as technology entrepreneurs, operators, venture capitalists, researchers, and advisors.
Decentral Park applies a principled digital asset investment strategy and partners with founders to enable their token-based decentralized networks to scale globally.
The information above does not constitute an offer to sell digital assets or a solicitation of an offer to buy digital assets. None of the information here is a recommendation to invest in any securities.
About the Author
Kelly is Portfolio Manager and Head of Research at Decentral Park Capital. Investing across sectors with a thesis driven, deep research approach.
Prior to this, Kelly has led research and product efforts at CoinDesk Indices and Fidelity Digital Asset Management. Kelly has been a TradFi investor for 15 years before joining the crypto space.
You can follow Kelly on Twitter and LinkedIn for more frequent analysis and updates.