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Weekly Market Highlights (Aug 5, 2022)

Binance Research
2022-08-05 09:03
Happy Friday! The Weekly Market Highlights is an initiative from the Binance Research team to round up the week, summarizing key market events and views from the team.

🔎 Macro / Tradfi

  • The latest US Institute for Supply Management (ISM) Services Prices Paid Index, which represents a gauge of prices paid by services industries for inputs, declined from 80.1 in June to 72.3 in July. This indicates slowing inflation and is the lowest reading since February 2021. The upcoming CPI release on 10 August will be a widely-watched event as investors look for signs of softening inflation data that could support a pivot in the Fed’s monetary policy to be more dovish. That said, remarks by different Federal Reserve presidents this week remain hawkish.
  • The Bank of England (BOE) unleashed its single biggest interest rate hike since 1995, raising rates by 0.5% to 1.75%. Interest rates are now at their highest level since December 2008. Officials predict that recession will begin in the fourth quarter, and last all the way through next year.

🔎 Crypto

  • As the Ethereum merge draws closer, there have been increasing discussions about a potential proof-of-work (PoW) fork. If this happens, the Ethereum network will be split into two forks - a proof-of-stake (PoS) chain supported by validators and developers, and a PoW chain run by miners. While two forks can technically co-exist, forking the network may not preserve the network effects of Ethereum today given that it does not necessarily bring along with it the ecosystem of apps, developers, and users that are currently on the mainnet. For example, the Chief Technology Officer of Tether has expressed that he would support the PoS chain over a possible PoW chain. Additionally, the core team at Frax has also submitted a proposal to commit Frax DAO to select PoS Ethereum mainnet in place of any PoW alternative fork after the merge. The merge will be a key event to watch and we will provide relevant updates in the coming weeks.
  • There were several notable exploits this week, highlighting the importance of instituting robust security measures in the face of continued threats. Firstly, the Nomad bridge was exploited for $190M, bringing to fore the potential vulnerability of cross-chain bridges. While bridge designs vary, bridges generally work by locking up assets on one chain and issuing a wrapped version of the token on another chain. If the assets get drained in an attack, then the wrapped tokens will not be fully collateralized and can be rendered worthless. According to an analysis by Chainalysis, attacks on cross-chain bridges account for 69% of total funds stolen so far this year. Separately, over 7,000 wallets have been exploited on the Solana network. While the investigation is still ongoing, initial findings attribute the likely root cause to the use of the Slope wallet. Hardware wallets were not affected. This serves as a good reminder to consider getting a hardware wallet to add an additional layer of security in protecting one’s assets.

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Binance Research

About Binance Research: Binance Research is the research arm of Binance, the world's leading cryptocurrency exchange. The team is committed to delivering objective, independent, and comprehensive analysis and aims to be the thought leader in the crypto space. Our analysts publish insightful thought pieces regularly on topics related but not limited to, the crypto ecosystem, blockchain technologies, and the latest market themes.
General Disclosure: This material is prepared by Binance Research and is not intended to be relied upon as a forecast or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities, cryptocurrencies or to adopt any investment strategy. The opinions expressed are as of the date shown above and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by Binance Research to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Binance. This material may contain ’forward looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. This material is intended for information purposes only and does not constitute investment advice or an offer or solicitation to purchase or sell in any securities, cryptocurrencies or any investment strategy nor shall any securities or cryptocurrency be offered or sold to any person in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the laws of such jurisdiction. Investment involves risks.
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