Author: @xingpt
Before analyzing the AI Agent track, it might be better to step back and look at what crypto has experienced in this cycle as a whole:
Decoupling Bitcoin from the crypto space
Before this round, Bitcoin was almost synonymous with the crypto space; buying Bitcoin meant buying crypto assets, meaning recognition of crypto and decentralization.
However, after the approval of the Bitcoin spot ETF, from the President of the United States to listed companies, buying Bitcoin and acknowledging its value seems to have become mainstream opinion. However, the existence of crypto, especially Ethereum and Altcoins, does not seem to have received recognition from mainstream society and funds.
The reasons are complex.
The main reason is asset positioning: Bitcoin is seen as an alternative asset linked to gold, widely recognized for its inflation hedging and preservation of value properties that surpass sovereign currencies.
In the eyes of old money on Wall Street, Ethereum and other altcoins still lack a mature and sustainable business model and are seen as tech meme stocks. However, compared to solid tech companies like Nvidia, Microsoft, and Amazon, which have users, products, and demand, Ethereum and other crypto assets have a high valuation but lack return elasticity, making them assets with a very low risk-reward ratio from an asset allocation perspective.
As shown in the figure, Ethereum's Sharpe Ratio is lower than that of tech companies like Meta and Google. Bitcoin's Sharpe Ratio is second only to the super performer Nvidia in this cycle.
Another important factor is that the overall macro interest rates and the degree of monetary easing still cannot be compared with the pandemic-induced massive liquidity in the previous cycle. Coupled with the booming development of the AI industry, this has led to insufficient attraction of crypto to off-chain funds. The reasoning is easy to understand: there is only so much money in total, and if it is spent on buying AI stocks and GPUs, there is no way to buy altcoins and Ethereum.
The USD M2 money supply has still not recovered to the 2022 peak (data source: CEIC)
The internal circulation ecosystem in the crypto space is extremely imbalanced (Imbalance)
Since the crypto space lacks the ability to attract off-chain funds, can the funds within the space leverage enough purchasing power?
If we roughly estimate the total on-chain funds using the total amount of stablecoins + contract positions, it is not difficult to find that the current total amount of on-chain funds has far exceeded the last bull market. However, besides BTC, most altcoins have not made new highs. Where exactly does the problem lie?
The root cause of the problem lies in the supply-demand imbalance. On the supply side, there are numerous new projects with extremely high valuations, most of which have not found actual application scenarios (PMF) and have few real users.
These projects exist due to the excessive financing of crypto VCs during the 2022 bull market. Because crypto VCs raised too much capital, most of this funding has a 5-year limit, with about 3 years for investment + 2 years for exit, leading funds to overlook project quality in a frenzy to deploy capital.
So who will provide buying power for these projects?
Previously, the exit channels were mainly centralized exchanges, but after the FTX incident, centralized exchanges have become the target of criticism. The long arm of US regulation has made centralized exchanges suffer greatly, as they not only fear hefty fines but also risk founders being imprisoned. Consequently, the goals of centralized exchanges will shift from user expansion and increasing trading volume to obtaining profits.
User-expansion-oriented exchanges must give benefits back to users, including lowering the valuations of new projects, sharing opportunities to participate in early projects (IEO), and a series of offline activities to attract new users.
Under the pressure of regulation, exchanges have simultaneously scaled back offline and regional expansion efforts, while also actively or passively halting similar IEO benefit-sharing businesses. This has also led to insufficient growth momentum for demand and buying power in the market.
AI Agent has unique advantages compared to Meme coins
As is well known, the core application scenarios in the crypto space are asset trading and asset issuance; each bull market can only generate wealth effects by involving users in new models of asset issuance and trading, which in turn leads to the bull market phenomenon of leveraging on-chain funds and attracting off-chain funds.
However, under the premise of high valuations for projects in the market and serious supply-demand imbalance, Meme coins became the first track to break the deadlock.
Meme is characterized by its lack of VC financing and fair launch, creating wealth effects through rapid price surges at low market caps, and has also driven new tracks for asset issuance (pump.fun) and asset trading (Gmgn, TG bot).
One of the most important characteristics of memes is that they have no practical use. This financial nihilism can deconstruct VC manipulations and is also suitable for the minority crypto users of IQ 50 and IQ 150. For most IQ 100 professionals and institutions, the difficulty of participation is still too high. It is hard to imagine explaining to a fund's LP that the reason to invest in Moodeng is that it is too cute, while the reason to sell Moodeng is that it has become fat and not cute anymore (I still love Moodeng).
However, AI Agent can gather the consensus of most people: talking investment in AI infrastructure with fund LPs; discussing on-chain memes and golden dog logic with IQ 50 and IQ 150 Degens; and talking about the logic of investing in AI Agent track projects with IQ 100 crypto professionals and VC in the crypto space.
In summary, AI Agent is the greatest common divisor of the web3 industry in this cycle.
How I view the AI Agent project
How should IQ 100 view AI Agent - from Dapp to Agent App
IQ 100 includes the vast majority of crypto professionals and investment institutions, including myself, so let's first analyze AI Agent using an investment framework I am familiar with.
I believe that for investment institutions in the crypto space, the most important point is to understand that AI Agent has reshaped the upstream and downstream industrial chain and valuation logic of crypto.
Through the two waves of crypto bull markets in 2017-18 and 2020-21, the industrial chain and valuation logic of blockchain projects gradually took shape:
Underlying public chain; market cap ceiling for Ethereum, currently valued at 400 billion USD; Dragon Two Solana, with a market value of about 1/4 of Ethereum, potentially reaching 1/3 or even 1/2 in the future;
Middle layer: such as the oracle Chainlink, with a fully circulating market value of 20 billion USD, about 5% of Ethereum;
Basic protocols like DeFi, Uniswap FDV market value of 13 billion USD; AAVE has a market value of about 5 billion USD; accounting for 3% and 1.25% of Ethereum respectively;
The underlying logic of DeFi is based on smart contracts, and the functional limitations of smart contracts have also restricted the innovation of other applications in the crypto space.
Now that AI is incorporated into the underlying technology stack of blockchain, the AI layer becomes a parallel technological foundation to smart contracts, known as the Fully-onchain AI Agent Layer.
Image source: (https://x.com/karsenthil/status/1874471383066984706)
This also explains another question: why previous AI projects could not lead a new narrative. Regardless of whether it is token incentives for sharing GPUs, data, data labeling, etc., these projects still treat blockchain as an incentive layer and have not stepped outside the scope of smart contract applications (DAPP). In contrast, AI Agent's application exists as an adhesive and a better UX interface between the blockchain layer and off-chain data. (Reference: https://x.com/jolestar/status/1872935141326373237)
Based on this logic for valuation, if the top middleware Chainlink in DeFi can account for 5% of Ethereum's market value; analogously, AI Agent's top framework might also occupy 5%; currently, the market value of ai16z is about 2.5 billion USD, leaving 8-10 times of space; here I take ai16z as an example, though there may be other better Agent frameworks emerging.
Platforms similar to Virtual with built-in frameworks are equivalent to Chainlink + Uni; Chainlink + Uni currently has a market cap of 33 billion USD, while Virtual is calculated at 5 billion USD, leaving 6 times the space.
Freysai (FAI) is somewhat like AAVE, low-profile but delivering high-quality products. The verifiable applications of AI TEE will also become standard in future Agent Apps, with a market cap ceiling of 1.25%-3% of Ethereum, corresponding to 5 to 10 billion USD.
Other head comparisons similar to Spore are equivalent to the stability or Launchpad of the previous cycle, and aixbt is comparable to DeFi aggregators like 1inch, with a lower limit of 1 billion USD valuation and an upper limit depending on market developments.
Other AI projects can be compared independently; I will not elaborate on each one here.
How should IQ 100 view AI Agent - how to change the ecological competition in the crypto space
In this cycle, wealth effects have almost all occurred on-chain since the Meme began, but on-chain memes still have too high of an operational threshold for outside users and IQ 100 institutions, as most users remain accustomed to trading on exchanges.
But the biggest advantage of the Agent app lies in interaction.
Buy assets: In the past - buy coins by recharging and placing orders from centralized exchange apps and websites;
Agent Era - Agent applications can directly use natural language to buy coins, and even intelligently assist in trading and investment decision-making;
Financing: In the past - conceptualizing, assembling teams for packaging, seeking VC funding for seed rounds, assembling top VCs or exchanges to take over and raise valuations;
Agent Era - directly go to GitHub and products, spread in the community, and the community directly funds it;
**Issuing tokens:** In the past - go to the testnet, announce high valuation information from VC financing six months ago, attract studios to brush the testnet, negotiate terms with exchanges and get cut down, then issue tokens and dump to recover funds;
Agent Era - AI automatically issues tokens, Agents hold private keys, Agents fund pools, and Agents call out in the community themselves;
The entire cycle follows several important standards:
Projects are open source, applications are real and visible, and code is traceable and verifiable.
Funds are relatively safe, private keys are held by Agents to avoid Devs withdrawing liquidity.
Financing and token issuance are transparent, avoiding issues like exchange token listings with insider trading, opaque airdrop rules, and VC core circle collusion.
Of course, issuing tokens with Agents also faces issues like on-chain frontrunning and KOL information advantages, but compared to past black-box operations, significant progress has evidently been made.
The Agent app that can win user trading access is likely to match the valuation of exchange platform tokens.
How should IQ 150 view AI Agent
Since I am Mid-Curve, I will reference my friend Alen's opinion from over a month ago (
https://x.com/qiqileyuan/status/1858357959807635854), he believes AI
The future of Agent will form a new AI society, where the AI population will create a socio-economic system exceeding one trillion dollars, and in this AI economy, Bitcoin and crypto will become important assets in monetary and economic circulation.
For AI entities, AGI is the brain, robots are the body, and crypto provides autonomous identity and economic systems.
In summary: do not think about what AI can do for you, but think about what you can do for AI.
How should IQ 50 view AI Agent
Whoever has big breasts should go all in.
At what stage is the Agent project development?
According to cookie.fun data, the total market cap of AI Agent is approximately 18.6 billion USD; about 64% of the total market cap of DeFi projects at 29 billion USD; 75% of the total market cap of GameFi projects at 24.6 billion USD, and 62% of all Layer 2 market caps at 30 billion USD. (Tracks categorized according to Coingecko)
Data source: cookie.fun
Although the market cap statistics are relatively rough, judging by market sentiment, AI Agent has just passed the halfway mark, equivalent to the sun around noon to 1 PM, at its prime.
The chart made by Messari shows a more optimistic trend, with AI Agent close to the midpoint, but the subsequent increase is more considerable.
Reference document: https://x.com/Defi0xJeff/status/1873272066834841699;
So, where might the possibilities for future speculation lie?
I used the development chart favored by IQ 100 people from Gartner to analyze the various applications of Agent, created by ChatGPT:
Besides the currently hottest Launchpad and Framework models, I personally view promising directions including: Agent powered crypto exchange: including intention trading, on-chain data analysis, and smart investment advisory-driven exchanges; fully realizing decentralized listings, decentralized asset custody, decentralized token issuance, with all investments and financing driven by Agents. Different types of Agent exchanges may vary in the degree of participation in investment decision-making and risk preference.
Agent powered Stablecoin: an evolved version of stablecoin, using AI to automatically rebase, maintain pegging, and other operations;
Application Agentification, similar to tokenization, will allow different types of applications + agents to operate, such as games, NFTs, physical assets, etc.; all applications will eventually incorporate Agent services into their core functionalities. (The bubble formed by excessive agentification can also be seen as a peak indicator, such as every chain starting to make AI Agents.
To conclude, the era of AgentFi is just beginning.
