Exploring the Core Narratives and Track Sorting for the Next Stage of the Crypto Market

Recently, both traditional financial markets and the crypto market have shown some positive signals. In July, the U.S. CPI data was lower than expected, recording at 8.5%. This is a decline from the record high of 9.6% a month ago. The market has priced in the expectation that "the data will not get worse", and this judgment appears to be accurate at the moment. However, whether the CPI has truly reached a turning point still needs to be observed.

From the perspective of wealth loss, this year's cryptocurrency bear market is more severe than any previous one. The collapse of Luna directly wiped out $60 billion in market value, triggering a series of chain reactions. The sharp decline in Bitcoin and Ethereum prices led to a crisis for the hedge fund Three Arrows Capital, and in June, the total market value of the crypto market fell by another $10 billion, leading to the bankruptcy of several large CeFi institutions and a severe round of deleveraging in the market.

The positive aspect is that it is unlikely that such a large-scale sell-off will occur again in the short term. Moreover, the bottom formed after such events often becomes strong support in the future. This article seeks to find the next probable direction through subtle clues in the market, and it is not intended as trading guidance.

Macro Financial Market and BTC

This year, cryptocurrencies are highly correlated with traditional financial markets. The traditional market continues to be under pressure amid the Federal Reserve tightening policies and increasing inflation, while the crypto market has been hit hard again by a black swan event at the tail end of a downward trend. However, as the market stabilizes, risk appetite is returning, and there are signs of recovery in the crypto market. It is expected that there will be horizontal fluctuations in the coming period, especially that Bitcoin's rebound may come later than that of altcoins, which may have a clearer narrative.

From a technical perspective, the weekly charts of indices like the S&P 500 and Nasdaq have restored a bullish structure, having broken through the recent high point before the accelerated decline. The current rebound strength and chart performance are better than in April. The daily chart shows prices approaching strong resistance, which may lead to a pullback, but the pullback could provide an opportunity to enter. The S&P 500 has held the 4080 support, and the upward momentum will continue; if this position is lost, this round of rebound is expected to end.

The market expects the Federal Reserve to achieve a "soft landing." The Federal Reserve still faces the challenges of high interest rates, high debt, and high inflation. The recent rebound is attributed to strong employment data and a decline in CPI; as long as these data remain positive, the Federal Reserve can adjust its policies more flexibly. However, risks such as the energy crisis in the Eurozone and geopolitical conflicts still present uncertainties. Overall, most people remain optimistic about the economic situation and do not believe a repeat of the 2008 global financial crisis will occur.

In the next 4-5 weeks, the market may experience a decline followed by an increase, as it digests risk events such as the Ethereum merger and the Federal Reserve's interest rate decisions. If next month's non-farm payroll and CPI data are favorable, the expected pullback will not be too strong. However, the market has been emotional this year, and it is essential to ensure liquidity during periods of high uncertainty. In the near future, clearer signals may be provided, and it is necessary to firmly execute one's judgments.

Ethereum

ETH has recently led the entire crypto market, outperforming Bitcoin and other large-cap coins. Only tokens related to the merge, such as OP, Lido, GMX, etc., can keep up with Ethereum's pace. Layer 2 tokens are more worthy of attention during the merge period because Rollup requires higher activity to help Ethereum achieve a higher valuation. Ethereum is the only liquid asset that big players can bet on during the merge, thus currently having a better narrative than Bitcoin.

The independence of the crypto market is increasing, showing clear differentiation after a recent rebound. Many altcoins have not recovered the peak of the first rebound after the collapse of Luna, while Bitcoin and Ethereum are in relatively better condition. This situation where Bitcoin and Ethereum lead the decline but ultimately only altcoins suffer devastating blows is relatively rare.

From a technical perspective, ETH is worth buying below 1800 USD. If it breaks the 1650 support, one should be cautious about bottom fishing, as it may test the 1000 USD level again. As long as the 1650 support holds, it is almost certain that ETH will break 2000 USD during the merge in mid-September.

DOGE & SHIBA INU

The stabilization of DOGE/BTC indicates that the market is about to enter a new round of choices - either the last wave of rotation for altcoins during a bear market rebound, or a new wave of explosive market trends is about to arrive. Considering the recent market situation, the latter possibility is higher.

DOGE/BTC has always been an indicator for gauging retail investor participation. Recently, due to the rising popularity of retail stocks like AMC, the WallStreetBets community has become active again. The Dogecoin ecosystem has also added Dogechain. Although it lacks support from technological innovation, Dogecoin has always managed to jump ahead before each market rally.

From a technical perspective, DOGE has rebounded after nearing last summer's low, having broken through the upper boundary of the recent consolidation range. A pullback confirmation at the breakout level is crucial in the short term. Google Trends data shows that current interest remains relatively low, with no signs of a reversal in the upward trend.

Solana

As one of the winners in the public chain competition, Solana once led the last market cycle. With Ethereum transitioning to a modular architecture and moving execution to Rollup, Solana will become a representative public chain that directly handles all transactions. Its low network costs are attractive to ordinary users, and the booming NFT ecosystem confirms this. However, it is also frequently abused by bots, leading to downtime. Solana needs to develop DeFi applications for further growth, and currently, Drift and Friktion have achieved some results.

The recently upgraded Quic/Qos/localized fee market implemented by Solana helps alleviate network congestion and enhance user experience. This upgrade is referred to as Solana 2.0. The localized fee market is similar to the Ethereum fee market, but the fees only affect specific parts rather than the entire network. These improvements have been launched on the mainnet, and their impact on network performance will be observed in the coming months.

In terms of technical analysis, breaking through $48.5 will quickly open up space above. A pullback to the 40-42 support zone without breaking is an ideal buying point. A drop below $39.15 requires caution for a new round of downside risk.

Chilliz

Chilliz is one of the most successful encryption teams in realizing consumer markets in the real world. They provide fintech services for sports and entertainment companies, with partners including Barcelona, Juventus, UFC, and more. Many clubs have CHZ-related tokens through the Socios.com app, allowing fans to interact with teams. The app will soon be launched in the United States.

Chilliz recently announced a partnership with Barcelona, investing $100 million to support its NFT and metaverse initiatives. CHZ has performed strongly since the beginning of August, outperforming most ERC20 tokens.

Chilliz plans to launch its own public chain, Chilliz 2.0, by the end of the year, as a one-stop platform for team and fan interaction. If successful in replicating this in the US market, it is expected to monopolize the NFT x fans x sports market.

CHZ has recently rebounded strongly, breaking through the resistance of the downward trend line that has lasted for nearly a year. The strong resistance above is around $0.30. As long as it maintains the support zone of $0.15-0.17, there is no concern for the upward momentum.

XMON

Sudoswap is known as the Uniswap of the NFT market, attempting to enhance NFT liquidity. Over the past year, NFTs have been the best choice for newcomers, but sustaining success has been difficult. Sudoswap allows users to trade NFTs more efficiently, creating different pools and dedicated curves. It is a completely decentralized and free platform that offers users a simpler way to buy and sell.

The main obstacle is whether liquidity can be transferred. In the past month, the platform's data has grown well, with sales reaching one-tenth of OpenSea after 30 days of launch. Once market enthusiasm returns, especially with more game item NFTs entering circulation, Sudoswap's future growth potential remains considerable.

Market Outlook

The worst period of the market may have passed, and it is unlikely that new lows will appear before the Ethereum merger. However, risk hedging is still necessary; Bitcoin, which has performed poorly recently, may be the best short hedging asset. The macroeconomic situation remains unsatisfactory, but once recession anxieties diminish, liquidity will return quickly.

When the market is favorable, the best choices to follow may be Dogecoin, on-chain options, and MEME coins. Chilliz is also worth paying attention to, as it offers fans the opportunity to connect with their teams. The metaverse sector still has potential, so it's worth keeping an eye on new projects.

Cryptocurrencies related to the merge, such as Lido, OP, GMX, have performed well, but they may collectively pull back after the merge is completed. The restart of Arbitrum Odyssey in September is worth paying attention to. LINK and SNX seem to have passed the most difficult phase of the bear market. Buying ETH in spot markets may be a low-risk option, while a safer approach is to interact on Layer 2 and wait for new projects to issue tokens.

The upcoming Jackson Hole annual meeting may provide clearer interpretations of economic data for the market, signaling potential adjustments in Federal Reserve policy, which should be closely monitored.

Focus on mainstream assets: ETH, SOL Focus on MEME:SHIB, DOGE High potential asset: CHZ Medium potential asset: XMON Risk hedging options: BTC, APE Watchlist: SNX, LINK, LDO, FOLD, GMX, SYN, SCRT, UNI, AAVE, IMX, OSMO, DPX, MATIC, BTRFLY

Future Outlook

The current focus of the market is on the Ethereum merger in Q4, but we should broaden our thinking. Given the uncertainty in the macro financial market, it is difficult to predict the trend of the US stock market. There is no need to guess the specific CPI value, but we can analyze the possible reactions and decisions of the Federal Reserve.

If we really welcome a bull market or a large-scale rebound, the sector rotation will be completely different from that in 2021. Once the trend changes, it is necessary to quickly find new hot tracks that truly have long-term potential.

Narratives worth paying attention to in the future:

• Sol 2.0 and localized account fee market
• Optimistic Rollups v2: Arbitrum Nitro and Optimism Bedrock
• privDeFi: Aztec Connect, Secret Network, Penumbra, Mina + zkApps
• sudoSwap & The Graph
• Cross-chain security
• Interoperability of accounts between application chains
• The Rise of On-Chain Options
• zkEVMs: Scroll vs zkSync vs Starknet vs Polygon Hermez
• New Public Chains: Aptos & Sui
• xApps & Cross-Chain Communication: CCIP vs StarGate vs Synapse Chain vs Connext vs Wormhole vs IBC
• Celestia & Sovereign Rollups
• dyMension and RollApps vs Rollups
• Modular execution rollups / FuelVM
• Blockchain games: Aurory, Illuvium, Treeverse, Strange Clans
• EIP 4844

Overall, we are in a good window period. The market may remain in good shape for about the next month. Once the macro environment improves further, we must seize these new narrative opportunities in a timely manner.

![Exploring the core narrative and track of the next stage in the crypto market