Author: Marc Arjoon & Jake Koch-Gallup, Blockworks

Translation: Shen Chao TechFlow

Shen Chao Guide: On-chain capsule toys experienced their first monthly pullback since February, with July's transaction volume dropping from June's $354.8 million to $290.3 million. Meanwhile, the trading volumes of Memecoin platforms like Pump.fun are rising. This suggests that crypto speculative funds may be rotating—when the Memecoin market heats up, some capsule toy players may exit. Notably, the user base of Courtyard, which is the least crypto-oriented, set a historic high, indicating that genuine collecting demand remains strong.

The market is quiet but lacks the final push! Market volatility and asset correlation continue to decline, entering a calmer state. This leaves the last piece of the puzzle to trigger a new bull market. At the same time, on-chain capsule toys experienced their first monthly pullback since February, suggesting that some speculative funds may be flowing back into Memecoins. Below, a deep analysis.

Market Dynamics

In the past 24 hours, the 2025 crypto equity sector led the market, rising 2.6%, being the only significantly rising sector. The gains were concentrated in Galaxy (+3.6%) and Circle (+3.1%), both of which just released their Q2 earnings reports. Circle benefited from Morgan Stanley's significant price target downgrade of 64% to $38, which created low expectations. However, the momentum was very narrow. Bullish (-1.5%) and Gemini (-0.6%) both closed down, and the broader crypto equity index fell 1.1%. This indicates that the gains are driven by company-specific earnings reactions rather than a revaluation of the entire sector.

Besides this sector, the market performed negatively. As the stock market consolidated below record highs this week, BTC fell 0.4%, consistent with gold (-0.4%) and the S&P 500 (-0.3%). BTC's downwards resilience in reaction to the stock market pullback failed to translate into upward participation once again. The relative strength instead highlights stories within crypto. BTC remains at the top of the digital asset sector, while long-tail assets are sold off, led by Meme (-5.0%), the Solana ecosystem (-3.4%), and AI (-2.7%).

As mentioned in yesterday's article, we know that crypto ETF fund flows have been weak. The ETF fund flows for BTC and ETH are becoming more synchronized. Their 60-day rolling correlation has risen to +0.67, approaching the top of the range. ETF demand behaves more like a single crypto configuration, but this is not surprising, as it often happens in declining markets.

Fortunately, overall correlation has been on a downward trend since March 2026. This has led to reduced overall market connectivity and a more differentiated trading environment.

Similarly, market volatility has decreased from over 60 in March to above 30 in August. The decline indicates that the market is entering a calmer state, with readings now comfortably below risk thresholds.

With market volatility and correlation decreasing, the only remaining element to trigger a new bull market is the sustainable rise in BTC prices.

Capsule Toy Cooling

On-chain capsule toys are one of the hottest sectors in crypto for 2026, but July marked the first monthly pullback since February.

The total consumption of on-chain capsule toys in July was $290.3 million, the second-highest monthly total in history, only behind June's record of $354.8 million. For the fifth consecutive month, Collector Crypt was the largest capsule toy platform, generating $154.9 million in consumption, accounting for 53% of July's total. However, Collector Crypt's monthly consumption decreased by 26% from June's $209.5 million.

Courtyard had its best monthly record in July, reaching a historic high of $85.3 million, up 7% month-over-month. Courtyard's performance is particularly noteworthy as it likely has the least crypto-oriented user base among major platforms. Its continued growth indicates that on-chain capsule toys resonate as a product category beyond the existing on-chain user base. Courtyard accounted for 29% of July's capsule toy consumption.

The platform rankings also shuffled, with Monster surpassing Phygitals and Beezie to become the third-largest capsule toy platform in July. Monster generated $14.3 million in trading volume, a 15% month-over-month increase, and rolled out a series of updates aimed at enhancing user experience:

Lucky Boost - Unpacking to obtain a common card increases the expected value of the next pack by 0.1%

Dupe Shield - Drawing the same card in consecutive packs gives the user a free pack

These updates went live on July 17 and 23. From the onboarding of Lucky Boost to the end of the month, Monster generated $9.7 million in trading volume, accounting for 68% of its July total.

Phygitals ($13.4 million, down 34% month-over-month) and Beezie ($12.9 million, down 30%) both experienced down months despite launching significant product updates. Phygitals launched a mobile app at the end of the month, while Beezie expanded to Solana on July 23. Overall, the top five capsule toy platforms (Collector Crypt, Courtyard, Monster, Phygitals, and Beezie) accounted for 97% of July's on-chain capsule toy consumption.

Looking at on-chain capsule toys from a broader perspective, the trading card secondary market's trading volume held steady at a historic high of $694.7 million, compared to $695.6 million in June. The weakened demand for trading cards is not the reason for July's decline in on-chain capsule toys.

It is also possible that a month of decline might not have much to interpret. On-chain capsule toy consumption grew at an astonishing rate in the first half of 2026, making some level of pullback inevitable. However, another possible explanation is that on-chain capsule toys are facing new competition for attention and capital from crypto-native traders.

Throughout July, while Collector Crypt's consumption decreased, Pump.fun's transaction volume increased. Collector Crypt's average daily consumption fell from $5.6 million in the first seven days of July to $3.4 million in the last seven days, a decrease of 39%. Meanwhile, Pump.fun's average daily transaction volume increased from $320.6 million to $388.5 million, up 21%. This relationship does not necessarily imply causation, but intuitively it makes sense. A significant portion of Collector Crypt's user base consists of active on-chain traders who rotate to any hot sector. When Memecoins regain momentum, some of the funds and attention flowing into on-chain capsule toys might shift elsewhere, even if the demand for trading cards remains strong.

Courtyard's performance further supports this possibility. While most crypto-native capsule toy platforms experienced pullbacks, Courtyard set a historic high in July. As previously stated, Courtyard likely has the least crypto-oriented user base among major platforms, meaning that its users may be less inclined to rotate back into Memecoins when speculative activity heats up.

Currently, it seems that July's decline is more like a natural pullback, potentially magnified by a revival of Memecoin activity, rather than evidence of a broader slowdown in the trading card market.

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