Market funds are shifting towards Ethereum and small coins, with accelerated progress in stablecoin regulation and asset tokenization.

A. Market Overview

1. Macroeconomic Liquidity

Recently, currency liquidity has shown signs of improvement. The Federal Reserve has maintained interest rates unchanged for five consecutive meetings, keeping the federal funds rate target range at 4.25% to 4.50%. The Fed Chair did not provide clear signals about a rate cut in September, emphasizing that inflation risks remain and pointing out the stability of the employment situation, which has somewhat suppressed market expectations for a rate cut within the year. The U.S. dollar index has risen to a two-month high, and U.S. stocks continue to hit new highs. In contrast, the cryptocurrency market has slightly underperformed compared to U.S. stocks.

2. Market Overview

This week, Bitcoin has been fluctuating at a high level, while other cryptocurrencies are showing weak performance, and related stocks have fallen sharply. The market's main focus is on the Ethereum ecosystem.

The top five cryptocurrencies with the largest gains among the top 300 by market capitalization are: LOKA (300%), ZORA (60%), ZBCN (50%), KTA (40%), and REKT (40%). The top five cryptocurrencies with the largest losses are: TKX (60%), FARTCOIN (30%), M (30%), VIRTUAL (20%), and GRASS (20%).

It is worth noting that ZORA, as a social finance project, collaborates with Base chain applications and has the support of a well-known cryptocurrency exchange foundation, rising 10 times from its low point. The ENA project’s two stablecoins, USDE and USDTB, continue to generate profits and have established an entity similar to a listed company that continuously buys cryptocurrencies. In addition, ENA has also partnered with a lending platform to release USDE revolving loans. CFX, as a compliant public chain project, benefits from the news that Hong Kong plans to issue stablecoin licenses in September.

3. On-chain Data

Bitcoin liquidity is facing challenges. An early whale sold over 80,000 Bitcoins through over-the-counter trades, with a total transaction amount approaching $10 billion. Nevertheless, the market effectively absorbed this selling pressure, and 97% of the circulating supply remains in profit.

The supply of stablecoins increased slightly by 1%.

Institutional funds continue to flow in net. Ethereum has led a substantial inflow of funds, with the amount of inflow from the beginning of this year exceeding the total for last year.

The long-term trend indicator MVRV-Z Score reflects the overall profitability of the market. When this indicator is greater than 6, it indicates that the market is in the top range; when it is less than 2, it indicates that it is in the bottom range. Currently, this indicator is at 2.6, close to a moderate level.

4. Futures Market

The futures funding rate remains at a normal level of 0.01% this week. Generally, a rate between 0.05-0.1% indicates high long leverage, which may suggest a short-term market top; a rate between -0.1-0% indicates high short leverage, which may suggest a short-term market bottom.

This week, the open interest in Bitcoin futures has shown a declining trend.

The futures long-short ratio is 1.1, indicating that market sentiment is at a neutral level. Generally speaking, retail sentiment tends to be a contrarian indicator, with a long-short ratio below 0.7 indicating market panic and above 2.0 indicating excessive optimism in the market. It is important to note that the long-short ratio data can be quite volatile, so its reference value is limited.

5. Spot Market

This week, the price of Bitcoin has fallen, while the exchange rate of Ethereum against Bitcoin remains strong, with a few small-cap cryptocurrencies related to the stablecoin concept leading the charge. Market funds are gradually shifting from Bitcoin to Ethereum and other small-cap cryptocurrencies, and it is expected that market risks may gradually accumulate in the future.

B. Stablecoins and the Tokenization of Physical Assets

1. Stablecoin Sector

A financial regulatory agency has stated that the first batch of stablecoin issuance licenses may be issued early next year. In the initial stage, holders of compliant stablecoins in Hong Kong will need to undergo real-name verification.

The vice president of the agency stated at the technical briefing on the regulatory system for stablecoin issuers that the number of licenses for the first batch of stablecoin issuers has not yet been determined and depends on the quality of the materials submitted by the applying institutions. He predicts that the first license will be issued early next year and emphasizes that the threshold for obtaining a license is high. Entering the "sandbox testing" phase does not necessarily mean that a license will be granted. The vice president also stated that the regulatory agency has an open attitude towards fiat currency types, and stablecoin issuers can apply for licenses linked to a single fiat currency or a basket of fiat currencies, with the key being to clearly specify the fiat currency type when applying.

The regulatory authority will open the first batch of stablecoin issuer license applications from August 1 to September 30, 2025, marking the official implementation of stablecoin regulation in Hong Kong. All compliant stablecoin holders in Hong Kong must have their identities verified, equivalent to a real-name system, to enhance the fight against money laundering and financial crime risks. The assistant vice president of the authority stated that this arrangement is stricter than the "white list" system in the previous anti-money laundering consultation document, but requirements may be relaxed in the future if technology matures.

A blockchain company under a certain e-commerce giant has registered the names "JCOIN" and "JOYCOIN", leading to speculation in the market that these may be the names of its stablecoins. The registration details indicate that the related services include electronic fund transfers and cryptocurrency financial transactions through blockchain technology. The company is one of the participants in a financial regulator's stablecoin issuer sandbox program and had previously collaborated with a certain bank last July to test a stablecoin-based enterprise cross-border payment solution.

This move is closely related to the "Stablecoin Regulation" that Hong Kong is set to implement on August 1. The company has participated in a stablecoin regulatory sandbox launched by a financial regulatory body and is actively testing trading scenarios based on Hong Kong dollars. Analysts believe that the issuance of stablecoins by the company could significantly reduce cross-border payment costs, increase settlement speed, and help it gain an advantage in the international supply chain and retail payment sectors.

The company's trademark registration action demonstrates its determination in the layout of the blockchain financial field and reflects Hong Kong's attractiveness as a digital asset financial center. In the future, the actual implementation and application of this stablecoin will further promote traditional e-commerce companies to advance into the Web3 era.

A major payment giant has announced the launch of a new payment feature in the U.S. market, allowing small merchants to accept payments in over 100 different cryptocurrencies, including mainstream coins like Bitcoin and Ethereum. This move significantly expands the company's service offerings in the cryptocurrency payment space, encouraging more merchants to engage in digital currency transactions.

The company plans to focus on small and medium-sized merchants this time, aiming to lower the threshold for merchants to use crypto assets and enhance their flexibility and operational innovation capabilities. With more and more merchants starting cryptocurrency payment services, it is expected to promote the popularization and implementation of crypto assets in everyday business scenarios.

The open payment network created by the company is expected to become a bridge connecting traditional finance with the cryptocurrency ecosystem, providing merchants with new revenue channels and offering practical support for the usability of cryptocurrencies. At the same time, this strategy enhances the company's competitive advantage in its transformation towards financial technology.

A certain investment institution will strategically invest 10 million USD in a synthetic dollar stablecoin project.

Users can use stablecoins (such as USDT, USDC, DAI, etc.) or mainstream cryptocurrencies (such as ETH, BTC, SOL, XRP, etc., which are among the top 100 by market cap and typically require an over-collateralization rate of more than 100%) or certain tokenized US Treasury bonds as collateral to mint USDf. Currently, the circulation of USDf has exceeded 1 billion USD.

Several reasons for the rapid growth of USDf include:

1. Strong asset access capability: supports multiple types of assets such as stablecoins, ETH/BTC, and tokenization of physical assets as collateral.
2. Earnings Mechanism: USDf holders can stake to receive sUSDF and participate in on-chain earnings distribution (sources include interest rate arbitrage, exchange funding rates, tokenization of physical asset returns, etc.), attracting a large number of user conversions.
3. Points and Airdrop Expectations

2. Tokenization of Physical Assets

A government working group in the United States has released an important policy report, which is the first public direction on cryptocurrency regulations since taking office. The working group includes several key officials such as the Secretary of the Treasury, the Director of the Office of Management and Budget, and the Chairman of the Securities and Exchange Commission, aiming to implement the executive order signed by the President at the beginning of the year and to advance a unified, innovation-friendly cryptocurrency policy framework.

The report提出了多项核心建议，包括：

1. It is required that relevant regulatory authorities swiftly clarify regulatory rules regarding the registration, custody, and trading of crypto assets using their existing powers.
2. Promote the Congress to pass relevant bills, clarifying the responsibilities of regulatory agencies and the regulation of stablecoins;
3. Support the tokenization of securities on the blockchain, oppose the issuance of central bank digital currency by the United States, and promote the integration of cryptographic technology into traditional financial infrastructure.

The Hong Kong government recently mentioned in the Q&A document released during the Legislative Council meeting that the "2025 Digital Asset Policy Statement" has officially been issued, confirming Hong Kong's commitment to building a global digital asset innovation center. This is also an upgraded version following the first policy statement in 2022, which clearly supports the sustainable development of the virtual asset ecosystem.

Hong Kong launched a virtual asset trading platform licensing system in June 2023, which will implement stablecoin regulations on August 1, 2025. In addition, the government is advancing the draft for virtual asset trading and custody licenses, aiming to issue more licenses to institutions within three years. Regulatory authorities have also established a regulatory sandbox mechanism to encourage the testing of innovative technologies such as blockchain, AI, and tokenized assets in a controlled environment.

Hong Kong is actively strengthening its cooperation with international anti-money laundering organizations, mainland China, and other regions to jointly promote the establishment of regulatory standards for digital assets and cross-border anti-money laundering mechanisms. At the same time, the Hong Kong Monetary Authority and the Securities and Futures Commission are also implementing related projects to explore the application of traditional asset tokenization and promote the launch of actual products such as tokenized bonds and funds.

A major Japanese bank has acquired a high-rise office building in Osaka for over 100 billion yen (approximately 680 million USD), planning to tokenize the asset through blockchain technology and issue digital securities. Institutional investors mainly participate through a private REIT, while ordinary retail investors can also purchase tokenized shares for fractional ownership through a certain platform.

This initiative has narrowed the gap between retail investors and high-quality commercial real estate, significantly lowering the entry barrier and enabling ordinary users to realize their investment potential. The bank’s token issuance caters to both institutions and retail investors, integrating traditional REIT structures with new digital securities, greatly enhancing asset liquidity and market transparency.

The bank holds a 42% stake in a certain platform, which is an important infrastructure for the partner's continued token issuance. Although the partner has established its own trust company, it still continues to use the platform, reflecting an ecosystem alliance where competition and cooperation coexist. This case marks Japan's gradual transition to a new stage in the asset tokenization market, where institutional dominance and retail integration are combined.