Grayscale August research report: The market will retest historical highs at the end of the year, and pessimism about Ethereum is unfounded

BlockBeats News: On September 4th, Grayscale Research released its August market research report: The overall stability of the global market in August 2024 masked significant fluctuations during the month. After the weaker than expected employment report on August 2nd, many risky asset prices fell, stock volatility soared, and the CBOE Volatility (VIX) index once exceeded 65%. But subsequent economic data did not show any further signs of danger, with multiple segmented markets rebounding and the VIX index rapidly falling below 20%. At the same time, news of weak labor market conditions may affect the views of Federal Reserve policy makers. On August 23rd, Federal Reserve Chairman Powell stated in his speech at the Jackson Hole Annual Meeting that the "time has come" to cut interest rates, partially reflecting the fact that "the risk of employment decline has increased". Interest rate futures now suggest that the central bank will lower policy rates by 100 basis points (bp) in the remaining three Federal Open Market Committee (FOMC) meetings this year Grayscale Research believes that if the weakness of the US dollar and the decline in interest rates continue, it should be favorable for the valuation of Bitcoin. Lower interest rates in the United States will weaken the competitive advantage of the US dollar and may benefit assets that compete with the dollar, including other fiat currencies, physical gold, and Bitcoin. Ethereum performed significantly poorly during its decline in early August, with an excess of speculative positions leading to a significant pullback in Ethereum prices and limiting the subsequent price recovery. More fundamentally, the Ethereum network is undergoing significant transformation, which may bring uncertainty to some investors about its future. Ethereum plans to achieve a larger scale by transferring more transactions to the Layer 2 network, which will then be periodically settled to the Layer 1 mainnet. The transition of activities to the second layer also leads to a decrease in fee income for the first layer, which in turn has a potential impact on the value of Ethereum. Grayscale Research believes that the current pessimistic sentiment towards Ethereum in the market is unfounded, given that the scaling strategy is clearly working. But market consensus may take some time to become more positive. The Aave protocol is another highlight. The number of active borrowers per week for this agreement has reached a historical high, and its governance token AAVE has risen by 21%. At the same time, a new proposal put forward by the Aave community will deploy a "buy and distribute" model, utilizing Aave's excess revenue to purchase AAVE tokens from the market and distribute them to stakers - similar to the Smart Burn Engine used in the Maker protocol. The proposal is expected to take effect by the end of 2024, but still requires community approval. The market value of stablecoins rose again in August and is now close to the previous historical high. Grayscale Research believes that the selling pressure from the German government, Mt Gox real estate, and other institutions has largely passed, and the improvement in fundamentals should become increasingly apparent. If the US labor market remains stable, the Federal Reserve's interest rate cuts and the political shift around the cryptocurrency industry in the US may cause prices to retest historical highs later this year. The main downside risks of valuation are further increase in unemployment rate and possible economic recession. Therefore, investors should carefully monitor the upcoming labor market data, including the next monthly employment report scheduled for release on September 6th. Grayscale Research believes that the lack of discipline in monetary and fiscal policies is one of the reasons why some investors choose to invest in Bitcoin. Therefore, periods of economic weakness may strengthen Bitcoin's long-term investment argument.