1. Background: After leverage cleansing, the altcoin season continues
On December 10, the crypto market experienced a crash, during which Bitcoin fell by 5%. Excluding altcoins related to Bitcoin and Ethereum (Total 3), the drop was more severe, reaching as high as 14%.
At that time, WOO X Research published an article on this situation, characterizing the decline as 'Bullish leverage liquidation, bull market structure unchanged'. The market also showed strong resilience, with Bitcoin recovering to 100,000 dollars and Ethereum challenging the 4,000 dollar mark again.
Meanwhile, the altcoin season we are most concerned about can be judged by BTC.D. When the market fell on 12/10, BTC.D rose to 58%, and after the drop was corrected, BTC.D also fell to 56%, indicating that the altcoin season is still established and ongoing.
The logic behind the rise of altcoins is: when external funds enter the crypto market, such as investors who have not previously engaged, traditional financial institutions, Web 2 companies, national pensions, etc., the first choice is undoubtedly Bitcoin, and then some funds will flow into lower market cap altcoin sectors.
Currently, in addition to the recently popular AI Agent track continuing to grow, other sectors including Meme, DeFi, RWA, L1/2 have also shown strong upward momentum in coin prices, seemingly ushering in a bright future for altcoins.
However, some tracks seem to have been forgotten by the market, while other sectors have surged. The BTC ecosystem, NFT, and GameFi have remained indifferent. Do these tracks still have a future? What is the recent development situation? Let's let WOO X Research take a look.
Reference: Coingecko
2. Related to the BTC ecosystem
The BTC ecosystem broadly refers to BTCFi and related protocols and assets such as inscriptions and runes, with the core narrative point being:
Liberate Bitcoin liquidity: The DeFi market is dominated by Ethereum, while Bitcoin is mostly idle and does not pursue capital utilization efficiency. Compared to ecological applications, trading speed, and other needs, the Bitcoin ecosystem's demand for security far exceeds that of other public chains. Therefore, the user profile of Bitcoin differs from that of other public chains, predominantly consisting of institutions and large holders with substantial amounts of Bitcoin, focusing on long-term, stable, and certain passive income.
During the period from April to July this year, the protocol that triggered the Bitcoin staking craze was Merlin Chain, with a maximum total locked value of 2.64 billion dollars. The accepted assets included Bitcoin and supported leading inscriptions and NFT projects such as ORDI, RATS, etc. However, after Merlin issued tokens, the coin price did not meet expectations, and there were many controversies at the time. The entire chain's TVL has rapidly declined, and market attention has waned, revealing that the EVM cross-chain mapping technology has been debunked.
Reference: DefiLlama
The relevant protocol currently to look forward to is the Bitcoin Re-Staking Protocol Babylon, which has completed three rounds of public financing, totaling 96 million US dollars, with a current TVL of 5 billion dollars, ranking first in the Bitcoin ecosystem and 12th overall. It can be seen that the market still expects the 'Bitcoin Interest Collection' model to operate successfully, with the focus on whether Babylon can safely and sustainably generate profits after officially starting to earn interest, further boosting TVL and driving the whole ecosystem's explosion.
Bitcoin's native meme assets: The emergence of Bitcoin inscriptions in May 2023, due to their technical characteristics, endows asset issuance with transparency. At that time, the market was deeply frustrated with VC coins. Inscriptions undoubtedly initiated a 'grassroots' revolution from the bottom up, allowing retail investors to trade in a fair environment. Whether the asset price can maintain momentum depends on the community's consensus and cohesion, making it a natural issuance ground for meme coins. Among them, ORDI, SATS, RATS, and other inscription assets have all seen hundreds of times growth.
However, inscriptions have also faced criticism for wasting Bitcoin block space and creating on-chain garbage, while runes can be seen as an evolved version of inscriptions, allowing for more efficient transfers, bundling multiple tokens into a single transaction, and setting multiple transfer destinations (BRC-20 can only transfer one type of token at a time), alleviating issues such as Bitcoin UTXO expansion and network congestion caused by the use of BRC-20 and other token standards.
Inscriptions and runes are not only assets of the Bitcoin ecosystem but are also classified under the meme coin track. However, the iteration speed of meme coins is extremely fast, and the current mainstream narrative is meme coins combined with AI Agents. The wave of inscriptions and runes is no longer prevalent, and with leading exchanges having canceled support for the inscription asset format, it also signifies that if related assets are to be revived, the difficulty is quite high.
Reference: Magic Eden
3. Web 3 Games
In 2021, driven by DeFi Summer and the concept of the metaverse, GameFi, which combines finance and blockchain gaming, became a major narrative in the industry, attracting a large number of traditional game companies to develop GameFi games. As of 2024, Web3 practitioners are still placing their hopes for massive adoption on games, which is the biggest narrative in the gaming sector and the main consensus for VCs and traditional game companies to continue investing in this field. Additionally, the blockchain technology behind blockchain games that can grant players asset rights is also the main driving force for the continued X to Earn model in most blockchain games.
However, by 2024, Web 3 Gaming still has not resolved the death spiral caused by an overly Ponzi-like token economic model. As the space for profit-seeking shrinks, the incentive for users to play also diminishes, which can also be seen from the following data:
The growth rate of transaction volume is negative: Compared to 2021 and 2022, the daily transaction volume of blockchain games has also decreased to between 20 to 30 million dollars this year, with a negative growth rate.
Reference: Footprint
Daily Transaction Volume: The daily transaction volume of blockchain games this year has clearly decreased compared to two years ago, previously averaging between 20 to 30 million, and is now below 10 million.
Reference: Footprint
The current situation of Web 3 Gaming is: existing problems unresolved, overall sector usage is poor. If this situation continues, even if a crazy altcoin season arrives, it will be difficult to attract investors' favor.
Current key projects to focus on in Web 3 Gaming include Xterio, incubated and invested by the well-known Web 2 game company FunPlus, which is about to issue tokens. This project is a gaming infrastructure platform that emphasizes the use of AI technology within the platform, aiming to tie the narrative with AI. If one hopes for a revival of Web 3 Gaming, they can first look at the trends after Xterio issues its tokens.
4. NFT
In fact, NFTs appeared as early as 2017, but it wasn't until 2021 that they experienced a full explosion. This was not only due to the release of the ERC-721 standard, which improved the infrastructure, but the market also realized that NFTs, compared to fungible tokens, have the uniqueness that can be applied in personal digital identity, artwork, and other fields. However, the main driving force behind this was still the celebrity effect.
At that time, NBA Top Shot launched in the form of NFTs, allowing players to collect exciting moments of NBA stars on the court, attracting active participation from many crypto enthusiasts and fans. Among them, a dunk by famous star LeBron James in the 2020 Finals sold for as high as 230,000 dollars.
Subsequently, blue-chip NFT projects such as BAYC, Azuki, Doodles, and Pudgy Penguins emerged, opening the NFT Summer of 2021.
Due to the inherent low liquidity and scarcity of NFTs, price increases are easy, creating a wealth effect during bull markets. The myth of Free Mint leading to financial freedom is common, but with the arrival of the bear market in 2022, liquidity has been drained from the crypto circle, making NFTs even scarcer compared to general tokens. As a result, capital has visibly fled, and overall NFT liquidity has been withdrawn.
As can be seen from the following chart, the overall transaction volume on Opensea slowed significantly in 2022. Apart from Opensea's product competitiveness lagging behind, the main reason remains that the NFT market is not favored.
Reference: Dune
So, does NFT still have hope? What recent narratives and actions are there?
Opensea is about to launch new products
Magic Eden is issuing tokens
Pudgy Penguins is issuing tokens
Recent actions in the NFT space, whether from platforms or blue-chip projects, have been frequent. Both Ethereum and Solana chain blue-chip NFT projects show significant signs of price recovery. Is the NFT market really coming back?
Reference: Magic Eden
In addition to observing whether the prices of leading NFTs are steadily growing, one can also focus on the use cases of the combination of NFTs and AI. For example, the well-known AI Agent Zerebro on the Solana chain, who previously created 299 images on Polygon, and founder Jeffy has also launched 5,500 NFTs, allowing holders to become core members of the community.
The above is just a basic case of AI Agent and NFT collaboration. The crypto circle has always been characterized by speculation on new things rather than old ones, and NFTs are expected to warm up again with the help of AI Agents.
