Crypto Market Weekly Report: Macroeconomic Data May Determine Market Direction, Aave Releases V4 Upgrade Plan

Recently, due to the lack of a clear macro direction, Bitcoin and other crypto assets have continued to decline. The current market remains highly focused on the macroeconomic situation, with reduced inflows into US spot ETFs, and the market is beginning to look for new catalysts. Although the European Central Bank and others have reiterated plans for interest rate cuts in the summer, the higher-than-expected US inflation data has raised market concerns about the Federal Reserve delaying interest rate cuts. This has led to a strengthening of the US dollar, which in turn has put pressure on the crypto market.

Although the U.S. employment data is weak, we believe that the Federal Reserve will still prioritize inflation indicators. The PPI and CPI data to be released on May 14 and 15 could become important macro catalysts, especially if the data is higher than expected.

After a certain Bitcoin trust fund transformed into an open-end fund, it saw its first inflow of funds. Although its management fees are relatively high, this marks the completion of the structural capital rotation. In the future, we expect that the data on fund flows will not show structural distortions.

A well-known lending protocol recently announced its fourth-generation protocol (V4) plan, as part of its long-term roadmap for 2030. V4 includes several architectural improvements, such as a unified liquidity layer, blurred interest rates, and liquidity premiums. The protocol also focuses on enhancing the use of its stablecoins and improving functions such as risk management. Although the mainnet is scheduled to launch in the second quarter of 2025, this demonstrates the progress of mature DeFi protocols in core functionalities.

DeFi protocol expansion faces technical challenges, often requiring the deployment of new versions and incentivizing user migration. This process can be relatively slow; for example, the V3 version of the protocol surpassed V2 in TVL nearly two years after its launch. This highlights the importance of the Lindy effect in the crypto market, where market time is more critical than new features.

The 2030 roadmap of the protocol seems to compete with another large DeFi protocol, especially in the area of stablecoins. Both propose similar visions, including dedicated networks, cross-chain liquidity, and more. Although the market share of decentralized stablecoins has shrunk, the protocol still focuses on this area. While these long-term plans are promising, the market may still remain focused on the macro environment in the short term.

In the coming week, the market will focus on U.S. inflation data and the speech by the Federal Reserve Chairman. Unless there are significant surprises, volatility may continue to contract. The correlation between crypto assets and traditional markets may rise. The deadline for institutional investors to declare their positions is approaching, making it worth paying attention to how large institutions are allocating in Bitcoin ETFs. Ethereum may continue to underperform as the market has low expectations for its ETF approval.

Overall, the market is looking for new catalysts. In the absence of a clear direction, crypto assets may continue to follow the fluctuations of the US stock market. In the short term, macroeconomic data will remain the focus of the market.