Employment Gains, Inflation Worries, and WLF’s DeFi Push
Ryze Roundup
Market Commentary
Last Friday’s Non-Farm Payrolls (NFP) report surprised markets with a robust gain of +254K, the largest increase in six months, pushing the unemployment rate down to 4.1%. This fueled optimism as the S&P 500 continued to hit all-time highs. However, Thursday’s Consumer Price Index (CPI) report came in hotter than expected at 2.4% YoY, underscoring the persistence of inflationary pressures. As a result, expectations for aggressive rate cuts have moderated. Markets have now fully priced out the possibility of a 50bps rate cut at the upcoming November FOMC meeting, with the likelihood of a 25bps cut now standing at 89.4%.
Additionally, on Tuesday, the U.S. Supreme Court denied an appeal concerning the ownership of 69,370 Bitcoin seized from the Silk Road marketplace. This ruling clears the path for the U.S. government to auction off the approximately $4.4 billion worth of BTC, potentially leading to significant supply pressure in the near term.
In Asia, China’s equity rally stalled on Tuesday after a lackluster briefing that fell short of offering concrete economic stimulus measures. Markets are now eagerly awaiting Saturday’s fiscal briefing for more detailed guidance. We view this as a critical event that could either bolster or temper global liquidity prospects in the coming weeks.
“Bitcoin’s early days were dominated by endogenous factors. Now that Bitcoin has birthed an entire crypto industry it’s increasingly correlated to macro factors. Bitcoin Maxis are famously known for being armchair Austrian economists, maybe in retrospect it was inevitable that we would become an industry of self-taught macroeconomists!” – Matthew Graham, managing partner.
Key News & Events
PIPEs: The New Contender in Bitcoin Scaling
The Bitcoin ecosystem continues to capture the attention of developers, with a growing focus on scaling solutions. Recently, we've seen buzz around BitVM and the reintroduction of OP_CAT. Now, a new player has entered the arena: Bitcoin PIPEs (Polynomial Inner Product Encryption).
What makes PIPEs stand out is their ability to enable zero-knowledge proofs and covenants on Bitcoin L1, all without requiring a soft fork. Bitcoin PIPEs utilize Function-Hiding Multi-Input Functional Encryption (FH-MIPE), which allows for application-specific covenants and verification of proof systems like Placeholder. This innovation uses functional encryption, enabling message decryption while simultaneously computing a function of the message. Essentially, this approach allows the creation of Bitcoin UTXOs that are only spendable under predefined conditions, effectively implementing covenants without adding new opcodes.
“The death rattles of BCH and BSV created an explosion of Bitcoin innovation, especially in Asia, as developers from these erstwhile competitors eventually threw up their hands and began innovating on BTC instead. But it remains to be seen which of their innovations, if any, will find broadbased mainstream appeal. It’s hard to make the case for Built on Bitcoin when more suitable ecosystems exist.” – Matthew Graham, managing partner.
However, the form of functional encryption required for PIPEs is complex and demanding. Like all cutting-edge technologies in our space, Bitcoin PIPEs need thorough peer review and extensive scrutiny from the cryptographic community. While the potential for advancing Bitcoin’s programmability and functionality is significant, its security and feasibility must be rigorously validated before it can be widely adopted.
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World Liberty Financial Proposes Aave V3 Integration with 20% Revenue Share and $WLFI Token Allocation
World Liberty Financial (WLF), a DeFi lending platform linked to Donald Trump and his sons, has submitted a proposal to launch an Aave V3 instance on Ethereum. The proposal outlines plans to provide liquidity for Ethereum, Wrapped Bitcoin, and stablecoins like USDC and Tether, aiming to expand Aave’s liquidity and user base. Approval from both AaveDAO and the WLF community is required.
The Aave V3 instance would allow users to deposit ETH, WBTC, and stablecoins as collateral for borrowing and lending. WLF has offered AaveDAO 20% of protocol fees, along with 7% of WLF’s governance token supply ($WLFI) for governance, liquidity mining, and decentralization. This revenue share would be handled via a trustless smart contract, aligned with Aave’s main reserve factor system for risk management.
The proposal includes stablecoin liquidity support, a focus on growing Aave’s user base, and dynamic adjustments to ETH and WBTC supply caps. WLF also envisions future expansions into assets not yet supported on Ethereum, leveraging relationships with institutional investors. A consensus vote in Aave’s governance system will move the proposal forward through the approval stages, culminating in a final vote via the AIP process.
“Knowledgeable and thoughtful pro-innovation politicians are healthy for tech. Politicians with rampant conflicts of interest and their own skin in the game are not helpful in even the best of circumstances, which these are not.” – Matthew Graham, managing partner.
Initially, WLF will allow deposits in USDC, USDT, ETH, and WBTC, with Aave’s E-Mode disabled but potentially enabled later via WLF governance. Risk management will involve dynamic supply cap adjustments for ETH and WBTC. WLF also plans future expansion to Ethereum’s layer 2 network Scroll.
WLF, launched in September 2024, is part of Donald Trump’s broader strategy to embrace cryptocurrency and position the U.S. as a leader in digital finance. The platform focuses on mass adoption of stablecoins and user-friendly DeFi services. Accredited investors in the U.S. and abroad can now join the whitelist, with mandatory KYC verification for all participants.