As August has come to an end, the Web3 space has experienced a mix of challenges and exciting developments. Despite a sharp market downturn at the start of the month, the industry continues to build on the success of this year with multiple advancements in institutional adoption. The Core Fund has navigated these market conditions with care, maintaining steady performance as we continue to take advantage of the opportunities in this ever-changing market. In this month’s update, let’s take a closer look at the key market movements, important institutional actions, and new advancements that shaped the Web3 industry in August.
Market Update: Volatility and Q4 outlook
In early August, market turbulence was triggered by growing recession fears due to various factors. The sell-off on August 5, 2024, was caused by a weaker-than-expected U.S. jobs report and worries of a possible recession. This uncertainty was made worse by a global market slump, starting with sharp drops in Asia. This was especially the case in Japan, where the Bank of Japan’s unexpected rate hike forced Yen carry traders to sell off their positions. This led to a significant hit on the Nikkei index, the Japanese benchmark index, marking its worst day since the Black Monday crash of 1987. The sell-off shook investor confidence, pushing the VIX, a measure of volatility, to levels not seen since before the COVID-19 pandemic.
This turbulence pushed Bitcoin to a six-month low, falling below $50,000. This decline was part of a broader sell-off in the web3 market, wiping out over $500 billion in market value within just three days. However, by mid-August, market conditions began to stabilize when the U.S. Federal Reserve hinted at a potential shift in monetary policy. Fed Chair Jerome Powell suggested the possibility of cutting interest rates, noting that inflation was nearing the Fed’s target. Lowering interest rates typically makes borrowing cheaper, which can stimulate economic activity and increase liquidity in the financial system. 
Looking at the Global Liquidity Index, the Fed’s consideration of interest rate cuts aligns with the current upward trend in the global liquidity cycle. The Index indicates that the global financial system is in a recovery phase, suggesting increased liquidity in the coming year. This could create a supportive environment for the web3 market, as greater liquidity becomes available.
Goldman Sachs invests $419 million in Bitcoin ETFs
In a clear sign of growing interest from the largest financial institutions, Goldman Sachs has revealed a major investment of $419 million in Bitcoin ETFs. This news comes from their latest quarterly 13F filing and highlights the increasing confidence in digital assets, even though some leaders within the company have previously expressed doubts. Just a few months ago, Goldman Sachs’ Chief Investment Officer of Wealth Management, Sharmin Mossavar-Rahmani, publicly stated that she did not see digital assets as a true investment class, comparing the excitement around them to the tulip mania of the 1600s. From expressing doubt to allocating hundreds of millions into Bitcoin, the change in perspective shows how views on the Web3 market are evolving, with more and more established financial institutions starting to see the potential and value of digital assets.
Franklin Templeton Launches Tokenized Money Market Fund
Franklin Templeton, a well-known name in global asset management, has taken another big step in its blockchain journey by launching its U.S. Government Money Fund (FOBXX) on the public Avalanche blockchain. This move is part of Franklin Templeton’s strategy to make its tokenized financial products more accessible and functional. Originally launched on the Stellar blockchain in 2021, the FOBXX fund has grown significantly, now managing $402 million in assets. Franklin Templeton’s tokenized money market fund allows both institutional and retail investors to hold shares as tokens, which can be traded peer-to-peer with minimal restrictions. This development, alongside initiatives like BlackRock’s $500m BUIDL fund, signals that major financial institutions are growing confidence in launching traditional investment vehicles on public blockchains.
Sony Enters Web3 with Soneium
Sony has taken a step into the Web3 space with the launch of Soneium, a new blockchain that will operate as an Ethereum Layer 2. This initiative is part of Sony’s larger strategy to engage with Web3 technologies and expand its offerings across multiple sectors, including entertainment, gaming, and finance. To spearhead this initiative, Sony has established a new division called Sony Block Solutions Labs (Sony SBL), which will oversee all of the company’s blockchain and Web3 activities. Sony envisions Soneium as a hub for continued Web3 use cases, such as; enhancing fan interaction and protecting creators rights. This commitment from Sony demonstrates that major corporations are increasingly betting on Web3 to be a key component of the future of innovation for their business.
Conclusion
August has been a month of ups and downs, with market volatility testing investor confidence, followed by a stabilization of markets and significant institutional moves. The Core Fund has managed these developments well, positioning itself to benefit from the changing market conditions.
As we look forward to September, the possibility of further interest rate cuts by the Federal Reserve, combined with ongoing institutional investments and technological innovations, suggests a promising end to the third quarter. Developments like Franklin Templeton’s tokenized MMF and Sony’s Soneium launch are clear signs of the growing acceptance and integration of Web3 technologies into the mainstream.
Now is a great time to get involved in the Web3 space, and the Core Fund is here to help you take advantage of these exciting opportunities.
Feel free to reach out through our contact page or schedule a consultation to explore how you can benefit from these developments.
