TGIF! Market volatility and asset correlations are continuing to trend lower, settling into a much calmer regime. This leaves the market with just one missing ingredient for a renewed bull run. Meanwhile, onchain gacha logged its first monthly pullback since February, suggesting some speculative capital might be rotating back into memecoins. Let's dive in!

Over the last 24 hours, the 2025 Crypto Equity Cohort led the market with a 2.6% gain and was the only sector to finish meaningfully higher. The move was concentrated in Galaxy (+3.6%) and Circle (+3.1%) following their Q2 earnings, with Circle benefiting from a much lower bar after Morgan Stanley cut its price target by 64% to $38 ahead of the quarter. The strength was narrow, however. Bullish (-1.5%) and Gemini (-0.6%) both closed lower, while the broader Crypto Equities index fell -1.1%. This suggests the move was driven by company-specific earnings reactions rather than a broader rerating of the sector. 

Outside that cohort, the read was negative. With equities consolidating just below this week's record highs, BTC traded down -0.4%, roughly in line with gold (‑0.4%) and the S&P 500 (‑0.3%). The downside resilience BTC shows against equity drawdowns once again failed to convert into upside participation. Relative strength was instead a within-crypto story. BTC sat near the top of the digital-asset complex as the long tail sold off, led lower by Meme (‑5.0%), Solana Eco (‑3.4%) and AI (‑2.7%).

As mentioned in yesterday’s issue, we know that crypto ETF flows have been anemic. Increasingly, BTC and ETH ETF flows are moving in sync. Their 60-day rolling correlation has climbed to +0.67, near the top of its range. ETF demand is behaving more like a single crypto allocation, but this is not surprising, as this tends to happen in down markets.

Fortunately, overall correlation has been trending down since March 2026. This has led to weaker market-wide co-movement and a more differentiated trading environment.

Similarly, market volatility has fallen from above 60 in March to the mid-30s by August. The decline points to a calmer market regime, with readings now comfortably below the risk threshold.

With decreasing market volatility and correlations, the only piece left for a renewed bull is for a sustainable rise in BTC price action.

— Marc

The Gacha Cooldown

Onchain gacha has been one of the hottest sectors in crypto throughout 2026, yet July marked its first monthly pullback since February.

Onchain gacha spend totaled $290.3 million in July, the second-highest monthly total ever, trailing only June’s record of $354.8 million. For the fifth straight month, Collector Crypt was the top gacha platform, generating $154.9 million in spend and accounting for 53% of the July total. However, Collector Crypt’s monthly spend fell 26% MoM from $209.5 million in June.

Courtyard had its best month on record in July, reaching an all-time high of $85.3 million, a 7% MoM increase. Courtyard’s performance is particularly notable because it likely has the least crypto-native user base among the major platforms. Its continued growth is a good sign that onchain gacha is a product category that resonates with users beyond the existing onchain user base. Courtyard accounted for 29% of gacha spend in July. 

There was also a shake-up in the platform rankings, as Monster overtook Phygitals and Beezie to become the third-largest gacha platform in July. Monster generated $14.3 million in volume, up 15% MoM, and released a series of updates aimed at improving the user experience:

• Lucky Boost - Opening a pack and receiving a common card increases the EV of the next pack by 0.1%.

• Dupe Shield - Pulling the same card in consecutive packs grants the user a free pack.

The updates went live on July 17 and July 23, respectively. From the launch of Lucky Boost through the end of the month, Monster generated $9.7 million in volume, representing 68% of its July total. 

Phygitals ($13.4 million, down 34% MoM) and Beezie ($12.9 million, down 30% MoM) both had down months despite rolling out important product updates. Phygitals launched its mobile app at the end of the month, while Beezie expanded to Solana on July 23. Altogether, the five largest gacha platforms (Collector Crypt, Courtyard, Monster, Phygitals, and Beezie) accounted for 97% of onchain gacha spend in July.

Zooming out from just onchain gachas, secondary volumes for trading cards remained essentially at all-time highs at $694.7 million, compared to $695.6 million in June. Weakening demand for trading cards was not the cause of the decline for onchain gachas in July.

It is also possible that there may simply not be much to read into one down month. Onchain gacha spend grew at a torrid pace throughout the first half of 2026, making some level of pullback inevitable. However, another possible explanation is that onchain gacha faced renewed competition for the attention and capital of crypto-native traders.

Throughout July, Collector Crypt spend declined as Pumpfun volume increased. Collector Crypt’s average daily spend fell from $5.6 million during the first seven days of July to $3.4 million during the final seven days, a 39% decline. Over the same period, Pump.fun’s average daily volume increased from $320.6 million to $388.5 million, a 21% increase. This relationship does not necessarily imply causation, but it makes intuitive sense. A meaningful portion of Collector Crypt’s user base consists of active onchain traders who rotate toward whichever sector is hot. When memecoins regain momentum, some of the capital and attention flowing into onchain gacha may simply move elsewhere, even if demand for trading cards remains strong.

Courtyard’s performance further supports this possibility. While most crypto-native gacha platforms experienced a pullback, Courtyard reached a new all-time high in July. As mentioned earlier, Courtyard likely has the least crypto-native user base of the major platforms, meaning its users may be less inclined to rotate back into memecoins when speculative activity picks up.

For now, July’s decline looks more like a natural pullback, potentially amplified by renewed memecoin activity, than evidence of a broader slowdown in the trading card market.

—  AJC

Ethereum Block Building

This series analyzes the evolving demand side of orderflow and priority fees since 2024. The research reveals that MEV-related flow now drives up to 80% of weekly priority fee spending, largely overtaking the retail-facing Telegram bots that previously dominated the space. While specific MEV strategies like statistical arbitrage and sandwiching have historically been monopolized by heavyweights like Wintermute and jaredfromsubway, new entrants are now fueling fierce competition across the board. Meanwhile, on the retail front, user preference is shifting away from traditional DEX frontends toward wallet-native swaps (such as MetaMask), alongside a recent resurgence in specialized Telegram bots led by GMGN, highlighting a highly dynamic and rapidly maturing market for Ethereum blockspace priority.

Who is Actually Buying RWAs?

In an analysis tracking $91.3B in onchain acquisitions across ten tokenized dollar-yield products, Arrakis reveals that demand for tokenized RWAs is driven almost entirely by crypto-native entities rather than TradFi institutions. Of the attributed capital, two-thirds originates from protocol and DAO treasuries, with zero dollars directly traced to traditional banks, pension funds, or asset managers. The market exhibits extreme capital concentration: institutional wallets deploying $1M or more account for just 4% of total buyers but command 93% of all capital, predominantly acquiring assets through primary subscriptions in USDC (80%) during European and Asian business hours. Furthermore, these allocators primarily keep assets in spot positions rather than utilizing DeFi leverage, with tokenized private credit and treasury assets demonstrating the highest long-term capital retention.