Once a week, we will take you through the most noteworthy things in the market. We not only track trends, but also pay attention to the logic and narrative behind them. In the crypto market with explosive information, DA Labs refines opinions for you and leaves you with content that truly affects your decision-making and understanding.
Market
Primary Market Dynamics
This week, there were a number of major project developments in the primary market, reflecting the ecosystem’s continued investment in development and innovation. First, the World Network blockchain project led by Sam Altman successfully completed a private round of financing, raising approximately US$135 million. According to CoinDesk, this round of token sales was led by well-known venture capital institutions Andreessen Horowitz (a16z) and Bain Capital's crypto department.
Such a large-scale financing shows that the project has won the favor of first-class investment institutions and the participation of representative institutions has increased significantly. The huge amount of funds injected will be used for network expansion and technology development, and is expected to accelerate the construction of the World Network ecosystem.
The market generally interprets that this move will not only enhance the market's confidence in the project, but also bring new capital liquidity to the encryption field. Although the private placement sales have significantly increased the issuance of tokens, with well-known endorsements and rigorous usage planning, it is expected that excessive short-term liquidity shocks can be avoided. Instead, it may stimulate the increase in the value of applications and tokens within the ecosystem, bringing further optimism to the market.
Ethos Network also had important developments this week. As a decentralized reputation and rating mechanism platform, the Ethos community released the EIP-3 proposal, suggesting the introduction of a "daily rating activation mechanism" in the rating system. This mechanism will limit the credit score to only one review per day from the same author, preventing users from manipulating the score in a short period of time by using concentrated reviews.
This proposal has received unanimous support from the community, with a current voting rate of 100%. This governance initiative reflects Ethos Network’s emphasis on maintaining fairness and transparency on the platform, helping to curb scoring or malicious behavior.
Further reading: (The era of attention economy is coming! Kaito leads the trend, and the rising star InfoFi competes)
DA Labs’ view:
From the perspective of market impact, improving the stability and credibility of the scoring system will help enhance users’ trust in the project and may also attract a wider range of participants to pay attention to this technologically innovative project. Although the proposal itself has not yet been directly linked to the scale of funds, its long-term impact includes improving the quality of community governance, consolidating the platform ecology, and bringing more robust capital liquidity and value realization in the mature stage.
Secondary Market Dynamics
Bitcoin (BTC) continued its strong upward momentum this week, breaking through its all-time high in the early trading of May 22, reaching a new high of $111,875. CoinDesk analysis pointed out that this round of growth was mainly driven by strong institutional demand: in the past 24 hours, Bitcoin rose by about 3.8%, and the overall crypto index also rose simultaneously, reflecting the market's enthusiasm and confidence in crypto assets.
At the same time, data showed that U.S.-listed Bitcoin spot ETFs saw net inflows of approximately $1.6 billion this week, with cumulative net inflows reaching $4.24 billion in May, a record high. These massive inflows of funds indicate that institutional investors are actively returning to the Bitcoin market, significantly improving the market's capital liquidity and depth. The continued upward prices and abundant liquidity confirm each other, further boosting overall market confidence.
DA Labs Viewpoint
Bitcoin's record highs indicate further bullish market sentiment. From a technical perspective, factors such as the previous halving event in April and the regulatory approval of multiple spot Bitcoin ETFs have provided support for Bitcoin at the supply and demand level. As the scale of ETFs continues to expand, Bitcoin assets are becoming "digital gold" that is closely linked to traditional capital.
The high proportion of institutional capital inflows not only brings considerable market confidence, but also puts forward new requirements for the maturity of the crypto industry. If there is a sharp correction in the short term in the future, it may reflect more of a healthy trend correction rather than a collapse of confidence, because the overall capital chain remains sound.
In summary, the changes in Bitcoin prices and capital flows this week will, from a positive perspective, consolidate the market's bullish trend and attract more investors; but it also means that the market is under certain risk pressure at a new high, and we need to pay attention to the risk of adjustments after overheated prices.
Project area
BIP-177 sparked heated discussions in the Bitcoin community
BIP-177 is an improvement proposal to change the way Bitcoin is represented. It advocates redefining the basic unit of Bitcoin and using integers rather than decimals as the standard of measurement, so that users can more intuitively understand the meaning of the numbers. Currently, the smallest unit of Bitcoin is "Satoshi", and 1 Bitcoin is equal to 100 million Satoshi. BIP-177 advocates removing the concept of the smallest unit "Satoshi" and calculating it with a new basic unit. That is to say, if BIP-177 is passed, 1 bitcoin held by the user will become 100 million bitcoins, but this is only a different way of display, and its total value has not changed.
The proposal suggests that displaying Bitcoin in the form of pure integers can reduce potential confusion and operational errors and ensure a consistent measurement standard, making Bitcoin more convenient for payments in daily life. At the same time, this proposal will not change the original consensus rules and operating mechanisms of Bitcoin, it is only different in form. For example, once the proposal is passed, the "0.0001 BTC" originally displayed in the account will be changed to "10,000 bitcoins", the original smallest unit "sat" will be abandoned and replaced by "bitcoins", and the original currency code BTC will not be affected and will be expressed as 100 million smallest basic units.
But some critics believe that "sats" have formed a unique culture in the Bitcoin community, and redefining it as "bitcoin" only complicates it. Furthermore, changes in display units will have limited impact on promoting Bitcoin adoption, and more emphasis should be placed on optimizing the network’s transaction fees, reducing block times, etc., rather than changing the unit name.
Currently, BIP-177 is still in the draft stage and has not yet been officially adopted by the network. It is under active community discussion.
DA Labs Viewpoint
Compared with other Bitcoin improvement proposals, BIP-177 does not modify the technical logic of Bitcoin itself, but only makes corrections in the display method. For developers, it may only be necessary to update the API and user interface; and for users, the assets themselves have not shrunk, but they just need to adapt to the new basic unit and display method. It seems to be a rather useless improvement proposal.
However, with the passage of the Bitcoin ETF and the growing interest of major institutions in Bitcoin, Bitcoin has increasingly come into the public eye. If the BIP-177 proposal can make it easier for people to understand and accept Bitcoin, and then accept the entire blockchain industry, it will also be helpful for the large-scale adoption of Web3.
Cetus was hacked, with approximately $223 million in assets stolen, and subsequent handling caused controversy in the community
On the afternoon of May 22, Cetus Protocol, the largest DEX and liquidity protocol on Sui, was hacked and about US$223 million in assets were stolen. The liquidity pools of multiple token pairs were emptied, causing prices to fall sharply.
Cetus officials initially claimed that there was an error in the front-end interface display, but later confirmed that abnormal activities were detected, and immediately terminated the operation of the smart contract. They also cooperated with the Sui Foundation, other DeFi protocols and validators to freeze $160 million of the assets. However, according to Lookonchain's monitoring, $60 million in assets were still converted into USDC by hackers and transferred across the chain to Ethereum.
However, some communities have questioned that as a "decentralized" blockchain, Sui officials should not have the power to freeze any assets and transactions on the chain, which is obviously contrary to the blockchain's anti-censorship characteristics.
But according to Sui's official post, the way it freezes assets is to identify the addresses stolen by hackers and then work with most validators to ignore transaction requests from these addresses. Therefore, hackers cannot perform any operations on the stolen funds, which does not essentially violate the operating principles of blockchain. In addition, the authorities can only freeze these assets, but there is no way to directly return the funds to Cetus. It is still necessary to explore how to retrieve these funds from the hackers.
DA Labs Viewpoint
First of all, it is worth praising that Sui officials handled this matter very quickly and froze most of the hacker's funds in a short period of time. Although some of the funds have already flowed out of Sui, at least it is not like the Bybit hack of 1.5 billion US dollars a while ago, where almost all of the funds were not recovered. At least there is still a chance to negotiate with the hacker and return the funds.
In terms of the method of freezing assets, the authorities did not violate the original consensus principle, but the main reason for the community's concern is that the Sui network currently has 114 validators, and what proportion of them are controlled by the authorities? The speed at which the authorities froze the assets this time is so fast. Does this indirectly prove that as long as the authorities need to, they can control the consensus of the network in a short period of time, and decentralization is just an appearance.
But in terms of results, the market would certainly be happy to see this hacker attack brought under control immediately, and Sui’s official quick stop to the bleeding would also be a shot in the arm for other protocols and users within the ecosystem. As for the subsequent controversy over centralization, the author believes that the Web3 industry is still in its early stages of development. "Complete decentralization" may be the ultimate goal of this industry, but sacrificing a little decentralization in the development process in exchange for a healthier and more sustainable development of the industry may not be a bad thing.
Moreover, with significant progress in regulatory norms, it is still unknown whether blockchain can be completely decentralized in the future. Perhaps it will eventually be a variant of the fusion of the two, retaining some decentralized characteristics but also complying with certain centralized norms.
Lido releases RFC for V3 whitepaper draft
Lido released the RFC for its V3 white paper draft on May 20, publicly soliciting community suggestions for improvements, and plans to complete the draft by mid-summer this year. Lido introduced a new isolated staking vault stVault in V3. Different from the shared staking pool Core Pool of Lido V2, which is controlled by Lido and automatically distributes deposited ETH to multiple node operators, stVault allows users to establish customized staking pools according to their needs, including the selection of node operators, fee terms, MEV and infrastructure, etc. Its funds will also be isolated from the Core Pool and other stVaults, so that users can maintain a certain degree of control over the pledged assets while retaining liquidity.
Through stVault, Lido is able to support a wider range of staking use cases, including:
Delegated liquidity staking: Node operators launch their own stVault, turning staking into a free competition market and directly serving the staking needs of specific users.
Customized staking strategies: Users can spread their funds across different stVaults, thereby implementing diversified staking strategies and diversifying risks, such as Symbiotic’s re-staking, Mellow’s ability to package stVaults, and so on.
Institutional staking: Allows institutional participants (such as ETFs, ETPs, and custodians) full control over staking, meets regulatory requirements through custom functions, and is able to mint and redeem stETH in the secondary market at any time without reserving idle liquidity as a buffer.
In summary, the introduction of stVault makes Lido's staking system more flexible and diversified. Whether individuals, institutions or node operators, they can design suitable staking strategies according to their own needs. In terms of security, in addition to being independent of other staking pools, each stVault will reserve a portion of ETH as collateral and will not participate in the minting of stETH, thereby strengthening the risk isolation and responsibility attribution of each stVault and providing better security for users.
DA Labs Viewpoint
The stVault launched by Lido V3 will have two main impacts. The first is to prepare for the staking of future Ethereum ETFs. According to the original design of the Core Pool in V2, the staking pool is centrally managed by Lido, and then ETH will be distributed to different validators for staking.
For institutional participants, if they use Core Pool for staking, their assets will be mixed with the ETH of other general users. They will not be able to adjust the infrastructure of the staking pool or choose a trusted node service provider. Not only will they be unable to meet relevant compliance requirements, but they will also have to bear uncontrollable systemic risks. In terms of exiting liquidity, they will also have to wait for unstaking like other users, which limits their operations.
The design of stVault allows institutional participants to set up their own staking vaults and work with trusted node operators while isolating them from other funds, adding considerable flexibility. In the past, the market generally believed that even if the staking of Ethereum ETFs was allowed, institutions might not choose Lido for staking because the centralized management of Lido V2 could not meet their needs. However, the future launch of stVault will likely reverse this situation and bring in a large number of institutional-level participants into Lido.
The second impact is that stVault turns staking into a free market, where users can configure diverse staking combinations through different stVaults to obtain different types of returns, such as Symbiotic and Mellow mentioned in the white paper.
The diversified staking combinations also help participants to operate more flexibly on revenue-splitting platforms such as Pendle. Whether it is to lock in profits in advance or leverage expected returns, more ways to play can be derived for users to participate.
In summary, Lido V3 not only paves the way for institutional entry in advance, but also unlocks more staking income combinations for users. But it is worth noting that Lido itself already accounts for about 30% of the total value staked on the Ethereum mainnet. The launch of Lido V3 may further lead to more ETH inflows, especially when institutions are willing to enter. This may cause concerns about over-centralization and deserves continued attention.
Other News
Vitalik proposes that Ethereum L1 expansion should increase the operability of personal local nodes
Circle Seeks Acquisition Offers from Coinbase and Ripple, Expects Valuation of at Least $5 Billion
Kamino Finance is planning to bring ACRED, a tokenized fund managed by Apollo Global, to Solana
Circle Payment Network CPN Mainnet is now live
PayFi Project Huma Finance Announces HUMA Token Economics, 5% to be Used for Initial Airdrop
General
Moody's downgrades US credit rating, US bond yields gradually rise, raising concerns about US fiscal sustainability
Events
After the market closed on Friday, May 16, Moody’s downgraded the U.S. sovereign credit rating from Aaa to Aa1 and upgraded the outlook from negative to stable, as the market was concerned about the future expansion of the fiscal deficit and the tax cut bill, which put pressure on U.S. debt. The total outstanding federal government debt has reached $36 trillion, and an additional $22 trillion in debt is expected over the next decade.
This event caused U.S. Treasury yields to soar, with 30-year bonds rising by more than 5%; the 20-year Treasury bid-to-cover ratio fell to 2.46, below average, and the winning rate was 1.2 bp higher than expected. The slope of the yield curve after the auction was steep, reflecting market concerns about the long-term fiscal situation of the United States.
U.S. stocks fell first and then rose on Monday. The room for rating downgrades was seen as an attractive entry opportunity; however, the U.S. dollar, abnormally, fell in tandem with bond prices (usually rising bond yields will attract foreign investors to hold U.S. bonds, and the U.S. dollar should rise). The reason behind this is that concerns about de-dollarization far outweigh the force that attracts foreign funds.
DA Labs Viewpoint
The United States' position as a reserve force may be difficult to shake and there is no need to worry about default, but it still needs to pay attention to the risk of expanding fiscal deficits and understand market sentiment to avoid a stampede of selling.
The severity of Moody’s downgrade can be compared with the past two experiences of S&P and Fitch downgrades. In the past, downgrades were not necessarily equated with a bear market in the bond market. For example, S&P’s downgrade triggered risk aversion, and funds flowed into the bond market, causing the yield to fall from 3% to a low of 1.7%.
In the long run, most yields will still return to the neutral interest rate trend, which is one of the reasons why the U.S. stock market did not reflect significantly on Monday. In addition, the high uncertainty in stocks, currencies and bonds during Trump's term has also caused the neutral interest rate to continue to rise.
However, in addition to the impact of the downgrade on stock, foreign exchange and bond trends, the focus should also be on the reasons for the downgrade, which implies the risk of further expansion of the fiscal deficit. Based on past experience, the approach used to save soaring yields is to inject liquidity into the market, but the expansion of the fiscal deficit is more likely to exacerbate the loss of investor confidence in U.S. debt.
Immediate solutions include lowering the reverse repurchase rate (RRP) to alleviate liquidity problems. As for the possibility of interest rate cuts, Federal Reserve Board Governor Waller mentioned that if Trump can stabilize tariffs at around 10% before July, interest rates will be cut in the second half of the year.
In order to save the bond market, which is currently starting to loosen, in addition to the aforementioned injection of liquidity into the market, Deutsche Bank analysts and Goldman Sachs trading department heads have mentioned ways to save it, such as cutting fiscal spending, making major revisions to the tax cut bill, and the Federal Reserve or the Treasury Department controlling the depreciation of the US dollar.
The above three solutions are not easy to implement and have some side effects, and none of them support the strengthening of the US dollar. In this context, cryptocurrencies and gold, as safe-haven assets, will be more likely to have funds flowing into the cryptocurrency market when the fiat currency depreciates, and there will be room for growth.
The US "Big and Beautiful" tax reform bill passed narrowly, and debt risks may suppress US stock evaluation
Event Occurrence:
On May 22, 2025, the U.S. House of Representatives passed the "One Big Beautiful Bill Act" promoted by President Trump with a very narrow margin of 215 votes in favor and 214 votes against. The bill extends the 2017 tax cuts and adds new tax exemptions for tips, overtime pay and Social Security benefits, while cutting spending on social benefits such as Medicaid and food stamps. The Congressional Budget Office estimates that the bill will increase the federal deficit by about $3.8 trillion over the next decade.
The market reacted strongly to this, with long-term U.S. Treasury yields soaring and the 30-year U.S. Treasury yield breaking through 5%, hitting an 18-year high. In addition, the Trump administration announced that it would impose a 50% tariff on European imports starting June 1, and may impose a 25% tariff on iPhones sold in the United States, further exacerbating market unrest.
DA Labs’ view:
Trump's tax cuts will increase the federal deficit by about $3.8 trillion over the next decade, or about 10% of GDP. Although the government claims that it can generate $2.7 trillion in revenue by imposing cumulative tariffs of about 10-25% on imports from China, Canada, Mexico and other countries to partially offset the deficit, independent organizations such as the Yale University Budget Lab have pointed out that the actual amount of tariffs collected is often lower than official estimates. In addition, tariffs will also lead to trade frictions that will drag down GDP growth, and the effect of improving fiscal balance will be discounted.
After observing that core PCE inflation is still above the 2% target and consumption momentum is slowing, the Federal Reserve finds it difficult to cut interest rates on a large scale in the short term. Based on the current $36 trillion in outstanding debt, even if the interest rate is lowered by one basis point, it can only reduce interest expenses by about $90 billion each year. The huge debt has caused yields to soar and also hit highly valued technology stocks, causing market sentiment to become cautious.
References: Bloomberg, JP Morgan, KGI Securities, Yuanta Securities
Image caption: The four major indices fell on May 21 and 23
This report is for information sharing purposes only and its content does not constitute any form of investment advice or decision-making basis. The data, analysis and opinions cited in this article are based on the author’s research and public sources and may be uncertain or change at any time. Readers should make prudent investment decisions based on their own circumstances and risk tolerance. If further guidance is required, it is recommended to seek professional advice.
