What We See in the Markets: Monetary Policy, Lively Price Action, and PYUSD to $1b Supply

Keep up with the latest in crypto research as we share the insights from leading institutional research players.

In this edition, Cumberland dives into Bitcoin's breakout, L1/L2 sector surges, Telegram CEO's arrest impact, and PYUSD's milestone, all against the backdrop of Powell's dovish comments at Jackson Hole.

Good Morning and Happy Monday from Cumberland APAC! The past week has brought an abundance of headlines that has taken BTC out of the range in which it traded for most of August. The most significant headline of the week (and in some ways, the year) were dovish comments from Jerome Powell at Jackson Hole. While the market had been looking for a first rate cut in September, Powell added some certainty, saying “The time has come to adjust… the pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.” In many ways, Fed policy has been the primary driver of crypto prices in the past several years; the bull market in 2021 was cooled in 2022 by the Fed’s tightening cycle, and prices didn’t recover until the Fed became more accommodating with the BTFP program. BTC has rallied sharply since Powell’s comments, up more than 6%, on the hopes that an easing cycle will lift all risk assets, though it is notable that crypto has reacted much more strongly than equity markets.

In the L1/L2 sector, AVAX has been the best performer, up 35% over the past ten days. Avalanche had a pair of positive headlines last week; Franklin Templeton’s Tokenized Money Fund will be coming to Avalanche, and Grayscale launched a dedicated AVAX trust. Other names in the space performed almost as well during the same timeframe, with MATIC up 32%, and NEAR, OP, SUI, and APT all up more than 20%. It’s interesting that Beta is working on this particular rally (ETH, like BTC, is only up 6% over the timeframe). Beta has been working poorly for alts for most of the year, but it does make sense that it would come back for a rally driven by expectations of a more accommodative Fed, as low rates are typically a good driver of traders willing to move further down the risk curve.

Pavel Durov, the CEO of Telegram, was arrested in France this weekend, on a complaint related to Telegram’s lack of moderation and cooperation with law enforcement. TON sold off 22% on the headline, though it has since bounced 8%. This is shaping up to be a story with high attention even outside the crypto space; it touches on a key principle touted by Tech companies, including Meta, that they are merely a tech platform and therefore not responsible for what takes place on the platform. TON has been a breakout performer this year, breaking into the top 10 in market cap and still up 160% on the year, even after the selloff this weekend. This story does not seem as if it will resolve quickly, and will bear monitoring over the coming months.

Finally, PYUSD cracked 1b in market cap this weekend, the first centralized reserve-backed stablecoin to cross the threshold since FDUSD took an active role on Binance. In the two months since PYUSD launched on Solana, it has more than tripled its supply; our flow on PYUSD on the OTC desk has upticked significantly as well, as it becomes more of a mainstream stablecoin.

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