Weekly Institutional Insights — Crypto’s Meme Season — Sun Pump Challenges Pump.Fun

Aug 26, 2024: Our weekly Institutional Insights explores the latest market developments — market performance, industry news, exchange-traded fund (ETF) flows, trending topics, upcoming events and token unlocks — to help you supercharge your crypto trading.

Enjoy our weekly take on the market!

Macro Overview — Fed Chair Gives Clear Signal of Policy Change

Federal Reserve Chair Jerome Powell signaled that the central bank is poised to begin lowering interest rates, indicating a shift in focus from fighting inflation to protecting the labor market. In a speech at the Federal Reserve Bank of Kansas City's annual conference in Jackson Hole, Wyo., Powell said, "The time has come for policy to adjust," confirming expectations of a rate cut in September.

Despite progress on inflation, Powell acknowledged "unmistakable" signs of slowing in the job market, stating the Fed does not "seek or welcome further cooling in labor market conditions." He affirmed the central bank has the tools to counter a more rapid deterioration, noting the current policy rate provides "ample room to respond to any risks we may face."

Source: Bloomberg

His remarks suggest the Fed is pivoting away from its singular inflation-fighting stance, with one economist noting the "inflation worry has faded into the background." While the path forward remains unclear, Powell emphasized the central bank's objective is to restore price stability while maintaining a strong labor market.

Investors widely anticipate a quarter-point rate cut in September, though questions remain about the pace and size of subsequent cuts. With key economic data still to be released, Powell has opted to preserve optionality, keeping the decision data-dependent.

Weekly Crypto Highlight — Sun Pump Flips Pump.Fun

Pump.Fun is a Solana-based platform that enables users to create and distribute their own tokens, particularly meme coins. Using Pump.Fun, users can quickly launch tradeable tokens with minimal effort and cost. We’ve previously discussed Pump.Fun and how it’s gained traction this year. 

This month, Pump.Fun saw a new challenger emerge in the form of Sun Pump, a project backed by TRON founder Justin Sun. Pump.Fun, once a popular meme token platform, has been gradually losing steam as many of the tokens created on it have failed to gain meaningful traction.

In contrast, the Sun Pump project, with Justin Sun's strong backing, is positioning itself as a new contender in the meme token space. Sun has expressed his unwavering support for the project, believing that it holds an undeniable position in the ongoing development of the cryptocurrency industry.

The arrival of Sun Pump presents a distinct challenge to Pump.Fun's dominance, as investors and speculators, may be drawn to the new platform due to Justin Sun's reputation and the potential for greater momentum. This shift in the meme token landscape could signal a change in the guard as the market seeks newer, more promising opportunities.

Number of token launches and daily revenue on Sun Pump. Source: Dune Analytics @hashed_official

We’ve observed a clear upward trend in the past week from Sun Pump, with a peak in daily created tokens reaching 7,000 and peak daily revenue up to $3.6 million. 

Number of token launches on Pump.Fun. Source: Dune Analytics @gryphsisacademy

Meanwhile, the number of new tokens created daily on Pump.Fun has plunged in the past week, falling below 7,000. Some of the liquidity might have been siphoned by Sun Pump, leading to relative underperformance of Pump.Fun against Sun Pump.

Meme token launchpads are important for mass adoption, as they remove technical barriers for non-tech-savvy users to create their own tokens. However, it needs to be clarified what unique features set the new Sun Pump platform apart from its competitors.

In addition, reports indicate that a staggering 99% of Pump.Fun tokens fail to gain any real traction, while a mere 1.4% of tokens are successfully listed on the Raydium decentralized exchange for trading. These statistics highlight the significant challenge that meme token platforms face in driving both sustainable adoption and value creation. 

Bitcoin Spot ETF Flows 

Total Bitcoin Spot ETF Flows.Source: CoinGlass, as of Aug 23, 2024

Bitcoin Spot ETFs have seen positive inflows for five consecutive days, while Ethereum Spot ETFs have continued to experience slight outflows. This dynamic helps explain Ether's underperformance relative to Bitcoin’s over the past week.

The particularly strong inflows into Bitcoin Spot ETFs on Friday of this week suggest bullish sentiment toward the world’s largest cryptocurrency, following the dovish remarks from the Federal Reserve's Jackson Hole symposium. In contrast, the ongoing outflows from Ethereum Spot ETFs indicate a more cautious approach from investors when it comes to the world’s second-largest cryptocurrency.

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