Macro Update

Bitcoin traded lower this week as the macro backdrop turned more volatile. The softer CPI print initially fuelled dovish expectations, before a much hotter-than-expected PPI print (0.9% vs 0.2% expected) flipped the narrative and reset rate-cut pricing,  pushing the probability of a September cut down from 97% to 84.5% and lifting implied year-end rates to 3.78%.

With Jackson Hole now the key macro catalyst, BTC’s pullback from ~$124k looks more like a healthy reset than a trend reversal, the hot PPI print was arguably digested too quickly. Looking ahead, the broader uptrend remains intact, supported by a steady stream of positive narrative and adoption headlines. Notably, Bitcoin’s market cap has now surpassed Google’s, making it the fifth-largest asset globally, a clear reminder of the structural bid underpinning the asset class.

Ethereum has been the clear outperformer within digital assets despite selling pressure over the weekend. A record $1B+ of daily net inflows into Ethereum ETFs and tighter float dynamics (671k ETH in the unstaking queue, with a ~12-day wait), have pushed ETH close to its ATH level of ~$4,890.

Despite the weaker price action, trading activity stayed elevated. Intraweek, daily total perp volume reached a new YTD high, with perps trading at >8x the volume of spot and ETH option volumes hitting new all-time highs at $17B across exchanges on Friday. Hyperliquid also reported a record $29B ($104B on the week) in 24-hour onchain perp trading volume across all pairs.

Index performance this week shows a notable loss of momentum and a clear dispersion across sectors. The GMCI-30 slipped -2.0%, with only two verticals finishing in positive territory. Layer 2 led with a strong +6.3%, driven primarily by outsized gains in Mantle (MNT) and Arbitrum (ARB) as MNT rallied on the back of its recent token overhaul (covered later in this weekly), while ARB acted as a high-beta proxy to ETH’s move higher. Layer 1 posted a modest +1.2% as investors rotated back into higher-quality large caps. All other sectors declined.

Derivative markets are turning more defensive. BTC and ETH 3-month basis have eased and recent options flow shows a clear bias toward downside protection. BTC is now trading around $115k, with collars and premium selling last week, while fresh put interest down to ~100k reflects growing caution. Into year-end, traders are overwriting upside and adding deep OTM puts, signalling capped upside and increased tail-risk hedging. ETH options tell a similar story — modest downside hedging and elevated call overwriting at $5–8k point to a more controlled view on the upside.

Looking ahead, macro remains firmly in the driver’s seat. The rates narrative flipped mid-week and markets will now look to Powell’s speech at Jackson Hole on Friday (22/08) to determine whether the broader risk rally can resume or if we enter a period of consolidation into September. Geopolitical risks are easing for now, with an extension of the US-China tariff truce and de-escalation in Ukraine helping to keep the bid in equities and risk assets more broadly.

Our take:

“Macro volatility returns as Jackson Hole takes centre stage.”

A hotter-than-expected PPI print snapped last week’s dovish momentum and reset rate-cut expectations, with September odds falling sharply and year-end rates being revised higher. BTC’s pullback to ~$115k looks more like a healthy reset than a trend reversal, however, with structural adoption tailwinds, including record institutional ETH flows, keeping the broader digital asset bid intact.With CPI/PPI now behind us, focus shifts squarely to Powell’s speech at Jackson Hole on Friday, which will dictate whether risk assets can resume their grind higher or transition into a period of consolidation into September.

Notable Headlines

It’s been a while since we’ve seen meaningful M&A bids but LayerZero Foundation proposes acquisition of Stargate (STG) to consolidate cross-chain infrastructure and streamline liquidity.

Pendle’s TVL surged ~70% over the past month to $9.2B, primarily driven by growth on Ethereum, and now tops $0.5B on HyperEVM, making it the third-largest protocol on the network.

Avalanche partners with Dinari to launch a new Layer-1 network focused on tokenized U.S. equities and compliant capital markets infrastructure as the “internet capital markets” narrative continues to gain attention.

Safety Shot acquires a $25M BONK treasury stake and revenue share in Bonk.fun, aligning itself directly with the broader BONK ecosystem on Solana.

Fintechs are planning build their own purpose-built blockchains vs deploying on existing permissionless systems:

• Stripe launches “Tempo”, a high-performance Layer-1 (developed with Paradigm) tailored for real-time payment settlement across its client network.

• Circle introduces “Arc”, a Layer-1 focused on stablecoin-based finance, using USDC as native gas and integrating a built-in FX engine (private testnet coming soon).

Google Store bans all crypto wallets in the US and EU unless they obtain the relevant federal licenses, sparking widespread criticism from the industry.

Our take: Placeholder

Ethereum’s L2 Ecosystem

Ethereum’s renewed focus on scaling its base layer, alongside Base’s rapid rise, is starting to squeeze most general-purpose Layer 2s between a cheaper mainnet and a shrinking share of on-chain activity. Revenues are down across the stack, usage dispersion is widening, and token valuations still imply growth trajectories that current data simply doesn’t justify.

Below shows how Base is eating into the L2 market share while the Ethereum avg transaction fees keep falling, further pressuring L2s.

Despite this pressure, we’ve seen two interesting headlines come out of the Ethereum L2 ecosystem this week:

• Mantle outlined a roadmap focused on RWA-aligned infrastructure and deeper Bybit integrations (MNT for fees, VIP tiers, launchpool participation and eventual token burns).

• Ronin announced its transition into an Ethereum-aligned gaming L2, positioning itself as the network’s gamification layer.

Our take:

“Despite the view that it’s crowded, the Ethereum L2 ecosystem still has meaningful white space, with future winners likely to be specialised rollups focused on specific high-value verticals (e.g., RWA, gaming, social) rather than general-purpose chains.”

While the L2 arena is becoming crowded, Ethereum’s scaling ecosystem is still far from mature. To understand which parts of the economic stack are being captured by which chains, we take a closer look at on-chain GDP.

“Onchain GDP is the total $ value of assets settled or transacted on the network, which serves as a proxy  for real economic activity.”

ETH vs L2s: Who captures the GDP?

The below shows the latest relative share of GDP across Ethereum and its major L2s (as of 18/08/25; Mantle and Starknet excluded due to insufficient granularity).

Unsurprisingly, Ethereum still accounts for the bulk of economic activity, responsible for the majority of GDP within its own ecosystem. Even after adjusting for stablecoins (~58% of ETH GDP), ETH still captures the lion’s share, with Ethereum, Base and Arbitrum together accounting for ~99% of all activity across the stack.

Different Chains, Different Use Cases

The below compares sector-level GDP between Ethereum and the aggregate L2 stack.

While Ethereum remains the default venue for value-heavy use cases (stablecoins, lending, liquid staking), the L2s are increasingly specialised in volume-heavy, high-frequency transactions.

More than 50% of combined L2 GDP now comes from DEX trading, with additional contributions from infrastructure services (~7%) and derivative exchanges (~9%).

By contrast, NFTs, RWAs and liquid staking are still almost exclusively L1-driven.

This suggests a clear line of division: L2s are taking over the “volume” part of the stack, L1 still owns the “value” part.

Specialisation within the L2 stack

Drilling into the top three chains (Base, Arbitrum One and OP Mainnet) in the next exhibit, the specialization becomes even more pronounced:

• Base is a pure transactional chain, with ~71% of GDP coming from DEX activity, and almost no diversification beyond basic swaps.

• Arbitrum has the most balanced profile, combining swaps with meaningful exposure to derivatives (16.5%) and infrastructure (14.5%), effectively acting as the “general-purpose” rollup.

• OP Mainnet is emerging as the leverage layer of the L2 stack, with the highest share of derivative activity (31%) and strong lending activity (15.5%).

Conclusion

At a surface level, the L2 landscape looks crowded and increasingly winner-takes-all,  Base is consolidating transactional flows and Ethereum itself is becoming cheaper and more scalable. But once you drill down into the composition of on-chain GDP, a different picture emerges: many high-value verticals still have no clear winner…yet.

Verticals like RWA, gaming, and social account for only a small fraction of economic, onchain activity (GDP) today, which is precisely what makes the recent Mantle and Ronin announcements so interesting. These chains are not competing in the general-purpose rollup race, they are trying to own a specific narrative within the Ethereum ecosystem.

In our view, there is far more white space left in the L2 market than most appreciate, but only for chains that stay laser-focused on a single use case.Once a rollup starts drifting away from its core narrative, it loses its edge, and that’s ultimately what kills it.

As the stack continues to mature and becomes capable of hosting more non-financial, high-spec applications (gaming, social, RWA, etc.), we should expect more L2s to position themselves as specialists, rather than generalists.