Market Overview
Main Market Trends
Overall Market Overview
The current market is in a state of extreme fear, with the sentiment index falling from 53% to 7%. Coupled with the Federal Reserve's hawkish stance (cut expectations reduced from four to two), approximately $1 billion in forced liquidations have occurred, indicating that the market is undergoing a significant deleveraging process.
DeFi Ecosystem Development
The DeFi sector has seen its first negative growth in TVL in nearly two months (-2.21%), although the market capitalization of stablecoins continues to grow (USDT +0.55%, USDC +1.44%), indicating that despite market corrections, foundational liquidity is still flowing in, with stable yield projects like money market pools in high demand.
AI Agent
The market size of the AI Agent sector has reached $9.9 billion, with investment focus shifting from speculative AI Meme coins to infrastructure development. This transition indicates that the market is gradually maturing, with project directions becoming more rational and practical.
Meme Coin Trends
The Meme coin market has noticeably cooled down, with funds beginning to withdraw en masse, indicating a decrease in market speculation sentiment, and investors are more inclined to seek projects with substantial application value. This may signal the phased end of the Meme coin craze.
Public Chain Performance Analysis
Amid significant market fluctuations, the public chain sector has demonstrated strong resilience, becoming the investors' preferred hedge, reflecting the market's firm confidence in foundational infrastructure.
Future Market Outlook
As the Christmas holiday approaches, market liquidity is expected to decrease. It is recommended that investors adopt a defensive allocation strategy, focusing on BTC and ETH, while also paying attention to DeFi stable yield and AI infrastructure projects. However, caution is advised regarding potential increased volatility during the holiday period.
Market Sentiment Index Analysis
The market sentiment index dropped from 53% last week to 7%, falling into the extreme fear zone.
Altcoins underperformed the benchmark index this week, showing significant declines. Affected by leveraged positions, the market experienced forced liquidations of around $1 billion, significantly deleveraging long positions. Given the current market structure, Altcoins are expected to remain in sync with the benchmark index in the short term, with low probability for independent trends.
When Altcoins are in an extreme fear zone, upward reversals often occur.
Overall Market Trend Overview
The cryptocurrency market is in a downward trend this week, with the sentiment index in a state of extreme fear.
DeFi-related cryptocurrency projects have performed well, showing that the market continues to focus on improving foundational yields.
The AI Agent sector projects have had high public sentiment this week, indicating that investors are actively seeking the next market breakout point.
This week, Meme sector projects generally fell, with funds starting to withdraw from Meme coin projects, reflecting a gradual decline in market enthusiasm for Meme coins.
Hot Tracks
AI Agent
This week, the overall market is in a downward trend, with all tracks experiencing declines. Although most tokens in the AI Agent track are also in a downward trend, they have the highest discussion levels in the market. Previously, the market's focus on AI Agent was mostly concentrated on meme token projects with AI Agents, which is now gradually shifting towards infrastructure development for AI Agents.
Due to the traditional VC coin projects not being favored by the market in this cycle, and Meme coin projects failing to bring sustained growth, the AI Agent sector is currently very likely to lead the next market development. The AI Agent sector includes not only AI Meme but also many other tracks such as AI DePIN, AI Platform, AI Rollup, AI infra, which can all be integrated with AI Agents. Essentially, all blockchain projects are manifestations of smart contracts, and the birth of AI Agents aims to improve and enhance smart contracts. Therefore, the combination of AI Agents and Crypto is the best fit.
Top five AI Agent projects by market capitalization:
DeFi Sector
TVL Growth Rankings
The top five projects with the highest TVL growth over the past week (excluding projects with lower TVL, the standard being over $30 million) are sourced from Defilama.
VaultCraft (VCX): (Recommended Index: ⭐️⭐️)
Project Overview: VaultCraft is a crypto project based on Algorand, aimed at reducing costs for participants in storing and launching the network. VaultCraft's design utilizes Algorand's Proof-of-Stake consensus protocol.
Latest Developments: This week, VaultCraft launched a stETH 4X leverage Looper based on Lido Finance, supporting multi-chain deployment on Base, Arbitrum, Optimism, and Ethereum. It enables direct staking from L2 to the mainnet through Chainlink CCIP, offering users an APY yield of up to 7%+. Additionally, a partnership with Matrixport has been established to secure 1000 BTC custody services, rapidly increasing its TVL. Strategic collaborations have also been achieved with Safe and CoWSwap.
Hyperliquid (HYPE): (Recommended Index: ⭐️⭐️⭐️⭐️⭐️)
Project Overview: Hyperliquid is a high-performance decentralized finance platform focused on providing perpetual contract trading and spot trading services. It is built on its own high-performance Layer 1 blockchain, using the HyperBFT consensus algorithm, capable of processing up to 200,000 orders per second.
Latest Developments: This week, the overall market experienced extreme fluctuations. Before Wednesday, the market kept reaching new highs, but after the Federal Reserve meeting on Thursday, there was a significant drop. The volatility created a very favorable trading environment for users looking to participate in contract trading for high returns, leading many on-chain users to join Hyperliquid for trading, causing Hyperliquid's outstanding contracts to exceed $4.3 billion. This week, Hyperliquid responded to market demand by adding leverage trading features for several popular tokens such as VIRTUAL, USUAL, and PENGU, supporting up to 5x leverage, attracting many on-chain users to participate in trading.
Resolv (not yet issued): (Recommended Index: ⭐️⭐️)
Project Overview: Resolv is a delta-neutral stablecoin project that revolves around the tokenization of market-neutral investment portfolios. This architecture is based on economically viable and fiat-independent sources of return, allowing competitive returns to be distributed to liquidity providers of the protocol.
Latest Developments: This week, Resolv completed integration with Base, significantly reducing transaction costs and increasing transaction speed. It launched lending services for USR, USDC, and wstUSR through Euler Finance and introduced a USR-USDC liquidity pool on Aerodrome. Additionally, it adjusted the Spectra YT yield points to 15 points daily, optimized the reward mechanism, initiated a Grants program, and confirmed the first three recipients. Through deep cooperation with projects like Base, Euler Finance, and Aerodrome, it has strengthened its competitiveness in the DeFi space.
Babylon (not yet issued): (Recommended Index: ⭐️⭐️⭐️⭐️⭐️)
Project Overview: The Babylon project aims to enhance the security of other proof-of-stake blockchains by leveraging the security of Bitcoin. The core idea is to activate idle Bitcoin assets through a trustless staking mechanism, addressing the contradiction between Bitcoin holders' pursuit of asset security and participation in high-return projects.
Latest Developments: This week, despite significant price fluctuations in the market, BTC performed very strongly, maintaining high levels. Additionally, users are generally optimistic about BTC's future development, leading to stronger holding positions while seeking to liberate the liquidity of their BTC holdings, resulting in more choices for income-generating projects based on BTC. This week, Babylon deepened the application of ZK scalability technology through cooperation with Layeredge and established a strategic partnership with Sui to advance the construction of a modular ecosystem.
Lista DAO (LISTA): (Recommended Index: ⭐️⭐️⭐️)
Project Overview: Lista DAO is a liquidity staking and decentralized stablecoin project based on the BSC chain, aiming to provide users with crypto asset staking yields and lending services for the decentralized stablecoin LISUSD.
Latest Developments: This week, Lista DAO launched Gauge Voting and Bribe Market features, allowing veLISTA holders to participate in the LISTA distribution decisions of liquidity pools. It also announced strategic partnerships with 48 Club_Official and defidotapp, particularly to explore new opportunities in the BNBChain ecosystem, and promoted the integration of PumpBTC as an innovative collateral through proposal LIP #012. Additionally, Lista DAO attracts users with weekly distributions of approximately $230,000 in veLISTA rewards and competitive lending rates of 5.25%. This week, Lista DAO collaborated with FDLabsHQ on a winter event totaling 7,000 USDT, providing BNBChain holders with airdrop opportunities for slisBNB and clisBNB.
In summary, we can see that the projects with rapid TVL growth this week are primarily concentrated in the stablecoin yield sector (money market pools).
Overall Track Performance
Market capitalization of stablecoins steadily increased: USDT rose from $145.1 billion last week to $145.9 billion, with an increase of 0.55%. USDC grew from $41.5 billion to $42.1 billion, with an increase of 1.44%. This shows that although the market saw a decline this week, both USDT, primarily in non-US markets, and USDC, primarily in US markets, experienced growth, indicating that the entire market continues to welcome funds.
Liquidity is gradually increasing: The risk-free arbitrage rates in traditional markets are continuously decreasing with the ongoing interest rate cuts, while the arbitrage rates in on-chain DeFi projects are rising due to the increasing value of cryptocurrency assets, making a return to DeFi a very good choice.
TVL across various DeFi tracks (data source: https://defillama.com/categories)
Funding Situation: The TVL of DeFi projects increased from $54.1 billion last week to $52.9 billion now, marking the first negative growth in nearly two months, with a decline of 2.21%. This is primarily due to the significant market drop this week, which forced many contracts and loans to be liquidated, leading to a decrease in TVL in the DeFi sector, breaking the continuous growth trend of the past two months. The next two weeks should focus on the overall TVL changes and whether the downtrend continues.
In-depth Analysis
Driving Forces of Increase:
The core drivers of this round of increase can be summarized into the following transmission pathways: The market has entered a bull cycle, driving an increase in liquidity demand, which in turn pushes the underlying borrowing interest rates upward, amplifying the profit space for arbitrage loop strategies in DeFi protocols. Specifically:
Market Environment: The bull market cycle brings an overall increase in liquidity demand.
Interest Rate Side: The underlying borrowing rates have risen, reflecting the market's pricing expectations for funds.
Yield Side: The yield rates of cyclical arbitrage strategies have expanded, and the intrinsic yields within protocols have significantly improved, reinforcing the intrinsic value support of the DeFi sector and forming a positive growth momentum.
Potential Risks:
Given that the market has been on an upward trend recently, investors are focusing more on yields and borrowing leverage, while neglecting the risk of declines. This week, the unexpected decision by the Federal Reserve to reduce the number of rate cuts next year from 4 to 2 led to a rapid market decline, resulting in over $1 billion in contracts and borrowed assets being liquidated, causing losses for investors. This liquidation risk could potentially lead to a chain of liquidations, further reducing prices and liquidating more assets.
Performance of Other Tracks
Public Chains
The top five public chain projects with the highest TVL growth over the past week (excluding public chains with smaller TVLs) are sourced from Defilama.
Hyperliquid: This week, the overall market experienced extreme fluctuations. Before Wednesday, the market kept reaching new highs, but after the Federal Reserve meeting on Thursday, there was a significant drop. The volatility created a very favorable trading environment for users looking to participate in contract trading for high returns, leading many on-chain users to join Hyperliquid for trading, causing Hyperliquid's outstanding contracts to exceed $4.3 billion. This week, Hyperliquid responded to market demand by adding leverage trading features for several popular tokens such as VIRTUAL, USUAL, and PENGU, supporting up to 5x leverage, attracting many on-chain users to participate in trading.
Bitcoin: In the first half of the week, the overall market reached a new high, but experienced a significant drop after Thursday. The entire market saw considerable price declines, with BTC's drop being relatively smaller compared to other projects. Users are buying BTC to hedge risks, and market participants are increasingly optimistic about BTC's future rise, leading to stronger holding of BTC. Consequently, in the process of holding BTC, users are opting to invest BTC into BTCFi projects for additional earnings, causing an increase in Bitcoin's TVL.
BSC: This week, BNB Chain introduced new projects such as Seraph_global, SpaceIDProtocol, and cococoinbsc into its ecosystem, actively promoting the integration of AI and Web3 in the gaming sector. It strongly supports the development of Meme projects by providing liquidity support of $50,000 for CHEEMS and $HMC projects through the Meme Heroes LP plan, while launching a daily Memecoin airdrop plan featuring projects including GOUT, MALOU, BUCK, and $WHALE, and starting a Meme Innovation competition totaling $200,000.
AILayer: This week, AILayer's activities focused on community operation and ecosystem cooperation: collaborating with OrochiNetwork to conduct a giveaway; launching a Mini App leaderboard activity to enhance user engagement; continuing to attract community participation through interactive activities such as 'Would You Rather Challenge' and 'Riddle of the Week'; and hosting an EP 31 AMA event themed 'How AILayer Revolutionizes Bitcoin with AI', showcasing the project's vision of combining AI and blockchain.
Mantle: This week, Mantle integrated Compound III, achieving significant breakthroughs and providing users with $USDe lending functionality while supporting ETH and BTC as collateral. By expanding the Mantle Scouts Program to 40 top industry Scouts and launching the Mantle Meetup program, it initiated a large incentive activity with a total of 1 million MNT. The Yield Lab project successfully attracted over 110,000 users, generating 2.5 million transactions and bringing on-chain traffic to Mantle.
Growth Rankings Overview
The top five tokens with the highest growth rates over the past week (excluding tokens with very small trading volumes and meme coins) are sourced from Coinmarketcap.
This week, the growth rankings exhibited centralized characteristics, with most rising tokens belonging to public chain tracks.
UXLINK: This week, UXLINK reached a strategic partnership with DuckChain and gained investment support from UFLY_Labs to jointly build a social growth layer (SGL). The number of LINE platform users surpassed 2 million. Meanwhile, UXLINK set a historical high in Upbit trading pairs and launched a large-scale airdrop activity totaling $500,000, covering over 20 Web3 projects, while continuously attracting new users through joint activities with trading platforms like OKX.
USUAL: This week, Usual launched an innovative USD 0++ holder incentive treasury and delta-neutral strategy, providing users with APY yields of up to 76%-82%. It also maintained stable high-yield performance in Curve's USD 0/USD 0++ and USD 0/USDC pools, averaging over 50%. Usual's TVL has recently experienced rapid growth, rising from $750M to $800M. After the third-week reward program ended, TVL showed an increase of 44%, while the minting rate decreased by 28%, leading to a deflationary effect on the USUAL token. The Usual project team emphasized that 90% of the token distribution is for the community, with a transparent operational model where the DAO retains 100% of the revenue.
MOCA: This week, Moca released version 3.0, introducing the concept of 'integrated accounts' and launching the AIR Kit, aiming to solve the fragmentation of Web3 user identities. Moca reached an important cooperation with SK Planet to integrate Moca into the OK Cashbag application, reaching a user base of 28 million in South Korea. Meanwhile, the MOCA token is set to launch on the two major South Korean exchanges, Upbit and Bithumb. Through deep cooperation with Nifty Island and the launch of Fixed Mode to optimize the MocaDrop mechanism, Moca has significantly enhanced user experience and ecosystem participation.
HYPE: This week, the overall market experienced extreme fluctuations. Before Wednesday, the market kept reaching new highs, but after the Federal Reserve meeting on Thursday, there was a significant drop. The volatility created a very favorable trading environment for users looking to participate in contract trading for high returns, leading many on-chain users to join Hyperliquid for trading, causing Hyperliquid's outstanding contracts to exceed $4.3 billion. This week, Hyperliquid responded to market demand by adding leverage trading features for several popular tokens such as VIRTUAL, USUAL, and PENGU, supporting up to 5x leverage, attracting many on-chain users to participate in trading.
VELO: Velodrome reached a partnership this week with Sony Block Solutions Labs to expand Velodrome into this new generation Layer 2 solution based on Optimism Superchain, while achieving significant progress in liquidity building. Inkonchain has locked 2.5 million veVELO and provided $1.4 million in incentive funds. Additionally, liquidity support has also been provided for the proxy tokens of Mode Network.
Meme Token Growth Rankings
Data Source: coinmarketcap.com
This week, Meme projects were significantly impacted by the market decline, not following the market rise in the first half of the week. After a drop on Wednesday, they followed the market in a significant decline, resulting in very few Meme coins showing upward trends this week. It is evident that the current market's attention and funds are not focused on the Meme coin sector.
Social Media Hot Topics
Based on data from LunarCrush's daily growth top five and Scopechat's top five AI scores, the statistics for this week (12.14-12.20) are as follows:
The most frequently discussed topic is L1s, with the following tokens being highlighted (excluding tokens with very small trading volumes and meme coins):
Data Sources: Lunarcrush and Scopechat
According to data analysis, the most关注度 on social media this week is the L1s projects. After the Federal Reserve adjusted next year's rate cut expectations from four times to two, there was a significant drop on Thursday, and the entire market followed suit. Among them, the declines of various public chains were smaller than those of other tracks. When the whole market experiences a broad decline, public chains often perform better than other tracks. Besides buying BTC and ETH for risk aversion, most funds are still invested in various public chains. When the drop ends and rises occur, public chains generally rise ahead of other projects.
Overall Market Topic Overview
Data Source: SoSoValue
Weekly return rate statistics indicate that the Cefi track performed the best, while the Gamefi track performed the worst.
Cefi Sector: In the Cefi sector, BNB and BGB have significant shares, accounting for 86.07% and 5.45% respectively, totaling 91.52%. This week, Binance continued to launch new coins, maintaining a market presence with impactful tokens, bringing considerable traffic to Binance. Meanwhile, BNB outperformed the overall market, declining only 2.58%, better than BTC and ETH. Bitgit has also performed brilliantly recently, continually listing hot tokens, with its BGB token rising 37.93% this week, thereby boosting the overall performance of the Cefi sector.
Gamefi Sector: Throughout this cycle, the Gamefi sector has not received market attention, with limited funds and traffic entering, leading to a lack of the previous wealth effect in the Gamefi sector, causing its attention to decline further. The overall share of IMX, BEAM, GALA, SAND, and AXS in this sector has reached 82.14%, and the performance of these tokens this week was weaker than the overall market, resulting in the poorest performance in the Gamefi sector.
Next week's major Crypto events preview
Thursday (December 26) Initial Unemployment Claims in the US.
Next Week's Outlook
Macroeconomic Factor Analysis
Next week enters the Christmas holiday in the US, with few macro data releases.
In previous years, entering the Christmas and New Year holidays, the market, primarily driven by US purchases, experienced a decline in purchasing power and increased market volatility.
Sector Rotation Trends
DeFi Sector
Although the current market environment is poor, investors generally expect a broad rise in the market in the first quarter of next year, so most investors are still reluctant to sell their tokens. Meanwhile, to increase their holding yields, many are participating in money market projects to enhance returns.
AI Sector
The AI Agent sector continues to receive sustained market attention, with a market size reaching $9.9 billion.
The integration of Web2 and Web3 ecosystems is accelerating, with the integration of data networks and functional AI Agents with existing cryptocurrency products speeding up.
Investment Strategy Recommendations
Maintain a defensive allocation, increasing exposure to leading assets BTC and ETH to enhance the risk-averse attributes of assets.
While hedging risks, one can participate in some high-yield money market Defi projects.
Investors are advised to remain cautious, strictly control positions, and manage risks effectively.
