Original author: Frontier Lab
Reprinted: Lawrence, Mars Finance
Market overview
Overall market overview: This week, the crypto market exhibited a downtrend influenced by the Christmas holiday, with the market sentiment index rising slightly from 7% to 10%, yet still remaining in the extreme fear zone; it is noteworthy that despite the overall market weakness, USDC, primarily from the U.S. market, still achieved a 1.91% growth, indicating that institutional funds continue to flow in, injecting some confidence into the market.
DeFi ecological development: The DeFi sector saw a slight decrease in TVL of 0.37% to $52.7 billion this week, but stablecoin yield projects like gun pools performed well, and the overall supply of stablecoins has continued to grow, indicating that despite the market correction, base liquidity is still flowing in, and stable yield projects like gun pools are in high demand.
AI Agent Development: The AI Agent track continues to receive high market attention, with a total scale of $10.9 billion. Especially, the aipool model combined with TEE technology has become the new market focus, likely to become a new asset issuance method after 'inscription', highlighting the trend of deep integration between AI and blockchain technology.
Meme coin trend: Influenced by the holiday and overall market downturn, the meme coin sector performed poorly this week, with noticeable decreases in investor participation and capital inflow, leading to a temporary shift of market heat towards other sectors, highlighting the high volatility characteristics of this sector.
Public chain performance analysis: The public chain sector has shown strong resilience to declines, with Stacks completing an important milestone for sBTC, BOB advancing the BitVM Bridge development, and Taiko launching a new round of ecological plans, indicating that major public chains continue to push forward in terms of technological innovation and ecological construction.
Future market outlook: Looking ahead, the market is expected to maintain a sluggish trend during the New Year's holiday. Investors are advised to maintain defensive allocations, increase exposure to leading assets, while moderately participating in high-yield gun pool projects. In the long term, the market generally expects an upward trend in the first quarter of 2025, making AI Agent and DeFi gun pool projects worthy of close attention.
Market Sentiment Index Analysis
The market sentiment index rose from 7% last week to 10%, still remaining in the extreme fear zone.
Altcoins performed weaker than the benchmark index this week, showing a significant downward trend. Due to the Christmas holiday, liquidity sharply declined, leading to increased price volatility in the market and making sudden spikes and drops more likely. Consequently, market sentiment has not been high. Given the current market structure, Altcoins are expected to remain in sync with the benchmark index in the short term, with a low probability of independent trends.
When Altcoins are in an extreme fear zone, the market often approaches a phase bottom, with an upward reversal possible at any time.
Overview of the overall market trend
· The cryptocurrency market is in a downtrend this week, and the sentiment index remains in extreme fear.
· Crypto projects related to DeFi performed prominently, showing sustained market interest in enhancing base yields.
· AI Agent track projects have garnered high public opinion this week, indicating that investors are actively seeking the next market breakout point.
Hot sectors
AI Agent
This week, the overall market is in a downtrend, with all sectors experiencing declines. Although most tokens in the AI Agent track are also in a downward trend this week, they have attracted the highest discussion in the market. The most discussed this week is the development of the aipool model combining AI Agent + TEE in the future of Crypto and its impact on DeFi.
A key driver for periodic surges in the crypto market has been the emergence of new asset issuance methods. For instance, past methods such as ICOs (Initial Coin Offerings), IEOs (Initial Exchange Offerings), INOs (Initial NFT Offerings), IDOs (Initial Decentralized Exchange Offerings), and inscriptions have all rapidly propelled market growth and boosted crypto market prices. In the context of the rapid fusion of AI and Crypto, the current aipool has become a highly popular asset issuance method, serving as a continuation of the 'money FI' trend in early 2024. If the aipool asset issuance method is widely accepted by the market, then a wave of asset issuance driven by the aipool model may soon emerge, making it important to focus on projects of the aipool type.
Top five AI Agent projects by market capitalization:
DeFi sector
TVL Growth Ranking
The top 5 projects with the highest TVL increase in the past week (excluding projects with a smaller TVL, defined as over $30 million), data source: Defilama
Resolv (not yet issued): (Recommendation Index: 3 stars)
· Project Introduction: Resolv is a Delta-neutral stablecoin project focused on the tokenization of market-neutral investment portfolios. Its architecture is based on economically viable and independent sources of yield from fiat currencies. This allows for competitive returns to be distributed to the liquidity providers of the protocol.
· Latest developments: This week, Resolv completed important technical upgrades, successfully transforming into an Omnichain project by integrating LayerZero and Stargate technology. The OFT standard used has passed security audits from multiple institutions. Resolv performed outstandingly this week in ecological development, attracting a second $100 million funding inflow within the week, achieving an ecological growth rate of 84%. Its USDC Vault offers up to 36.36% APY in Euler Finance, attracting $5.67 million in TVL this week. Resolv also launched the wstUSR pool on Pendle.fi and introduced a unified point structure.
USDX Money (not yet issued): (Recommendation Index: 3 stars)
· Project Introduction: The USDX Money project is an emerging synthetic dollar stablecoin protocol aimed at providing a new native stablecoin solution through multi-chain and multi-currency strategies. The core goal of the project is to build next-generation stablecoin infrastructure and maintain the peg stability of USDX to the U.S. dollar through Delta-neutral hedging strategies.
· Latest developments: USDX Money completed a new UI/UX upgrade this week to optimize user interaction experience, and launched USDX/USDT and sUSDX/USDX liquidity pools on Curve Finance, continuously expanding the ecosystem scale. Among them, sUSDX reached $170 million TVL through cooperation with Lista DAO. USDX Money also launched an X-Points incentive program that includes content creation and angel initiatives, and held special Christmas events.
Usual (USUAL): (Recommendation Index: 5 stars)
· Project Introduction: Usual is a stablecoin project supported by Binance, aimed at providing a new stablecoin solution through a decentralized approach. The core mechanism of the project includes three main tokens: stablecoin USD0, bond product USD0++, and governance token USUAL.
· Latest developments: Recently, Usual secured $10 million in Series A funding led by Binance Labs and KrakenVentures, and collaborated with the M^0 Foundation to launch a new product, UsualM. It also became the largest USD0/USD0++ pool on Curve Finance. With UsualTVL surpassing $1.5 billion, it has entered the top five global stablecoins, and the DAO treasury has doubled to $17 million. The Usual project also launched staking yields of up to 18,000% APY for USUALx and initiated a community airdrop event.
Hashnote (not yet issued): (Recommendation Index: 2 stars)
· Project Introduction: The Hashnote project is a solution focused on institutional cryptocurrency management, aiming to provide transparency and optimize asset management through blockchain technology. Hashnote combines digital assets and traditional finance to offer users innovative yield-enhancing solutions, such as USYC.
· Latest developments: Hashnote reached a strategic cooperation with CoreDAO this week and participated in its ecosystem panel meeting, focusing on the launch of an innovative Bitcoin dual-staking model that combines BTC and Core Token, aimed at providing users with sustainable yield solutions. The project CEO shared a new strategy during the meeting, garnering over 14,000 views, indicating strong market interest in this innovative model.
Spectra (SPECTRA): (Recommendation Index: 2 stars)
· Project Introduction: Spectra is a protocol for future yield tokenization. DeFi users can deposit interest-bearing tokens from other protocols for a specified future period and trade the future yields generated by that asset in advance. Spectra works by placing interest-bearing tokens (IBT) or any fixed-term yield assets in a smart contract and issuing future yield tokens (FYT) in return.
· Latest developments: This week, Spectra successfully launched a new governance contract on the Base mainnet and introduced the Gauges and ncentivize pages in the Spectra App, while optimizing the multi-locking functionality for veSPECTRA holders, enabling them to participate more efficiently in the Gauge voting mechanism. Additionally, Spectra completed adjustments to APW emissions, with the new emission mechanism executed at a ratio of 1:20.
In summary, we can see that the projects with rapid TVL growth this week are mainly concentrated in the stablecoin yield sector (gun pools).
Overall performance of the sector
· Stablecoin market capitalization steadily grows: USDT decreased from $145.1 billion last week to $144.7 billion, a drop of 0.27%, while USDC increased from $42.1 billion to $42.9 billion, an increase of 1.91%. It can be seen that although the market is in a downtrend this week, USDC, mainly driven by the U.S. market, still saw growth, indicating that the market's buying power remains consistently entering.
· Liquidity gradually increasing: The risk-free arbitrage rates in traditional markets continue to decline with ongoing interest rate cuts, while the arbitrage rates of on-chain DeFi projects are increasing due to the rising value of cryptocurrency assets. Returning to DeFi will be a very good choice.
TVL of various DeFi sectors (Data source: https://defillama.com/categories)
· Funding situation: The TVL of DeFi projects rose from $52.9 billion last week to $52.7 billion. Despite two consecutive weeks of negative growth, the decrease was minor at 0.37%. The primary reason is that the Western markets, led by the U.S., were in the Christmas holiday this week, causing trading volumes and on-chain activities of various tokens to decline. Next week, with the New Year's holiday approaching, it is expected that there will not be significant changes. Therefore, attention should be paid to the overall TVL changes in January and whether the downward trend continues.
Deep Analysis
Driving forces for the increase:
The core driving factors behind this round of increase can be summarized as follows: Due to the recent downtrend in the market, the APY of various DeFi protocols has decreased, while stablecoin yield projects have raised yields through token/point rewards. Overall in the market, this has made the APY of gun pool projects significantly advantageous. Specifically:
· Market Environment: Although in a bull market cycle, the recent market is in a downtrend, leading to a significant decrease in the base interest rate.
· Interest Rate Side: The base borrowing rate has risen, reflecting market expectations for the pricing of funds.
· Yield Side: The yield rates of stablecoin yield projects have expanded compared to other projects, attracting more users to participate in this transmission mechanism, reinforcing the value support of stablecoin yield projects, and forming a positive growth momentum.
Potential risks: Due to the market's recent upward trend, investors are more focused on yields and borrowing leverage, neglecting the risks of downturns. Additionally, this week, due to the Christmas holiday, there was a sharp reduction in market liquidity, leading to selling pressure in the market without sufficient liquidity to absorb it, causing continuous price declines and triggering liquidation of long contracts in the market, resulting in losses for investors. The risk of cascading liquidations due to such liquidations has significantly increased, further driving down prices and liquidating more assets.
Other sector performances
Public Chain
The top 5 public chains with the highest TVL increase in the past week (excluding public chains with smaller TVL), data source: Defilama.
Stacks: This week, 922 BTC were transferred to the Stacks network, completing the first phase deposit limit of 1,000 BTC for sBTC. In terms of DeFi applications, 35% of sBTC has already generated yield on the Zest Protocol. The ALEX community voted to allocate 12 million ALEX tokens for the Surge initiative. Furthermore, Stacks realized L1/L2 asset exchange capabilities through Bitflow Finance and AI console, while incentivizing developers to contribute via the 'Stackies' community reward program.
BOB: This week, BOB collaborated with Fiamma Labs to develop and release a BitVM Bridge prototype based on zero-knowledge technology, planning to launch the testnet in early 2025. They also reached a cooperation with Lombard Finance, successfully deploying Lombard Finance on the BOB chain, and initiated preliminary governance discussions with Aave to introduce its protocol to the BOB network. Additionally, BOB launched a 6-week DeFi incentive campaign, motivating LST holders to participate through Babylon Points, and conducted multiple community education tasks and Spaces events.
Taiko: This week, Taiko launched the Trailblazers Season 3 plan, establishing a reward pool of 6 million TAIKO tokens and launched the Liquidity Royale event to provide 12,000 TAIKO tokens as rewards for the top 100 liquidity providers; the number of projects in the Taiko on-chain ecosystem has grown to 130, with Symmetric added as an important DEX partner, and held the first community meet-up in Turkey with ITU Blockchain and Node 101, strengthening community building through holiday gifting activities and meme competitions.
Cardano: This week, Cardano emphasized the technical advantages of the slashing mechanism that guarantees user ADA asset security, launched convenient web application development tools, and deepened cooperation with hardware wallet provider Ledger. It also promoted the decentralization process of community governance through a voting decision-making model using DReps (delegates).
Sei: This week, Sei released a significant technical breakthrough named 'Giga,' successfully expanding EVM to a processing capability of 5 gigagas per second, enhancing performance by 50 times. Additionally, they released the Giga Roadmap through Developer Office Hours, providing a clear roadmap for future technological developments, launched EVM Wrapped functionality, allowing users to view their activity records across multiple EVM chains, enhancing cross-chain interoperability. Sei also launched a '12 Days of Christmas' holiday event and collaborated with PythNetwork, Silo, and Nansen.
Overview of the increase ranking
The top 5 tokens with the highest increase in the past week (excluding tokens with very low trading volumes and meme coins), data source: Coinmarketcap.
ZEN: This week, Horizen successfully deployed the Horizen 2.0 Devnet test network, launching an optimized zero-knowledge (ZK) verification solution to reduce technical complexity and costs. They also established a strategic partnership with Automata Network to promote Web3 development, receiving recognition from institutional investors via Grayscale's Horizen Trust. This week, Horizen completed the final halving of ZEN and listed it on Bitvavo exchange, while actively preparing the token distribution plan for the zkVerify project.
MOCA: This week, Moca Network successfully integrated with SK Planet's OK Cashbag application, bringing significant user growth, including 1.5 million page views and 800,000 spin-the-wheel interactions. Moca Network remains active in community operations, enhancing user engagement through the Christmas marketing event (#MocaFam), and placing special emphasis on user safety education, frequently releasing anti-fraud reminders.
PHA: This week, Phala Network officially launched Phala 2.0, integrating GPU TEE technology and Ethereum Layer 2 scaling functionality. They also collaborated with NVIDIA to jointly test TEE's efficiency on H100/H200, announcing the decision to migrate the Khala chain to the Ethereum mainnet. Phala Network's TEE-as-a-Service has been adopted by multiple projects, including Flashbots. Year-round data shows a significant increase in AI Agent contract execution volume to 4,500 times, with active TEE Workers reaching 37,650, showcasing Phala Network's leading position in the field of decentralized AI infrastructure.
AGLD: This week, Adventure Gold interacted with the community through a Christmas-themed marketing campaign, with the Christmas blessing tweet receiving high community engagement (27 likes, 14 retweets). Additionally, Adventure Gold collaborated with BladeGamesHQ in AI Agent-driven on-chain economics, showcasing the project's exploration at the intersection of gaming ecology and AI technology.
MOVE: This week, Movement launched several innovative products based on its technology stack, including the Puffpaw Vape with multi-chain support (featuring usage data tracking and rewards functionality), the Vomeus smart vape with a high-definition screen, and the Sentimint project, which allows users to mark emotions and memories on objects. Meanwhile, Movement enhanced performance through Block-STM parallel optimization and Rollup architecture, and expanded its on-chain DeFi landscape through cross-chain integration with WBTC.
Meme Token Increase Ranking
Data source: coinmarketcap.com
This week, meme projects were significantly affected by the overall market downturn. With the Christmas holiday in effect, fewer users participated in market trading, resulting in a withdrawal of funds from the market. Consequently, the number of investors participating in meme coin projects noticeably decreased, leading to diminished current market attention and funding in the meme coin sector.
Social media hotspots
Based on data from LunarCrush's daily growth top five and Scopechat's AI score top five, statistics for this week (12.21-12.27) are as follows:
The topic that appeared most frequently is L1s, with the following tokens on the list (excluding tokens with very low trading volumes and meme coins):
Data source: Lunarcrush and Scopechat
According to data analysis, the L1s project garnered the highest attention on social media this week. Due to the Christmas holiday, the market mainly led by the U.S. entered a holiday phase, causing significant liquidity decline as market makers and institutions took a break, leading to reduced on-chain investment activities and accompanied by selling behavior, resulting in a considerable market downturn, with public chains seeing relatively smaller declines. During a general market downturn, public chains often perform better than other sectors. Aside from buying BTC and ETH for hedging, most investors have also allocated funds into various public chains, and when the downturn ends and an upturn begins, public chains generally rise before other projects.
Overall overview of market themes
Data source: SoSoValue
In terms of weekly return rates, the SocialFi sector performed the best, while the RWA sector performed the worst.
· SocialFi sector: The absolute leader in the SocialFi sector remains TON, accounting for 91.07% of the SocialFi sector's market capitalization. This week, TON did not follow the market downturn and instead rose by 6.3%, making it the best-performing sector. This week, Toncoin collaborated with GMX to promote high-frequency DeFi trading.
· RWA sector: In the RWA sector, OM, ONDO, and MKR occupy a significant share, accounting for 44.28%, 23.85%, and 18.36%, totaling 86.49%. This week, OM, ONDO, and MKR respectively fell by 10.76%, 19.86%, and 8.28%, with declines larger compared to projects in other sectors, resulting in the RWA sector performing the worst this week.
Next week's major crypto events preview
On Monday (December 30), the European Securities and Markets Authority released the implementation of MiCA crypto regulations
On Thursday (January 2), the number of initial unemployment claims in the U.S. for the week.
On Friday (January 3), the court approved the implementation of FTX's Chapter 11 restructuring plan.
Outlook for next week
· Macroeconomic factors assessment
Next week enters the New Year's holiday, with few macro data releases expected. In previous years, the market dominated by U.S. purchases has generally continued the sluggish purchasing power seen during the Christmas holiday, leading to increased market volatility.
· Sector rotation trend
Although the current market environment is poor, investors generally expect a broad market rise in the first quarter of next year. Therefore, most investors are still reluctant to sell their tokens. At the same time, in order to increase holding yields, many are participating in gun pool projects to enhance returns. The AI sector, particularly the AI Agent track, continues to attract market attention, with the market size reaching $10.9 billion. The asset issuance model based on AI Agent + TEE for aipool has garnered widespread interest.
· Investment strategy recommendations: Maintain defensive allocation, increase exposure to leading assets BTC and ETH to enhance the hedging attributes of assets while also participating in some high-yield gun pool DeFi projects. Investors are advised to remain cautious, strictly control positions, and implement risk management.
