Market Overview
Main Market Trends
Overall Market Situation
The current market is in a state of extreme panic, with the sentiment index falling from 53% to 7%, coupled with the hawkish stance of the Federal Reserve (the expected rate cut has dropped from 4 times to 2 times), triggering about $1 billion in forced liquidations, indicating that the market is experiencing a significant deleveraging process.
DeFi Ecosystem Development
The DeFi sector has seen its first TVL decline in nearly two months (-2.21%), but the market capitalization of stablecoins is still growing (USDT +0.55%, USDC +1.44%), indicating that despite the market correction, basic liquidity is still flowing in, and projects like yield farming are attracting attention.
AI Agent
The AI Agent sector has reached a market size of $9.9 billion, with investment focus shifting from speculative AI Meme coins to infrastructure building, indicating that the market is gradually maturing, and project direction is becoming more rational and practical.
Meme Coin Trends
The Meme coin market has seen a significant cooling in enthusiasm, with capital starting to withdraw on a large scale, indicating a decrease in speculative sentiment, and investors are more inclined to seek projects with real application value, which may mark the end of the Meme coin craze.
Public Chain Performance Analysis
In the face of significant market volatility, the public chain sector has shown strong resilience, becoming the first choice for investors to hedge, reflecting the market's continued confidence in the infrastructure.
Future Market Outlook
As the Christmas holiday approaches, market liquidity is expected to decline, and investors are advised to adopt a defensive allocation strategy, focusing on BTC and ETH, while also paying attention to DeFi stable returns and AI infrastructure projects, but be aware of the risk of increased volatility during the holiday period.
Market Sentiment Index Analysis
· The market sentiment index has fallen from 53% last week to 7%, in the extreme panic zone.
· Altcoins have underperformed the benchmark index this week, showing a significant decline. Affected by leveraged positions, the market has seen over $1 billion in forced liquidations, with a significant deleveraging of long positions. Given the current market structure, Altcoins are expected to move in sync with the benchmark index in the short term, with a low probability of independent performance.
· When Altcoins are in the extreme panic zone, an upward reversal often occurs.
Overall Market Trend Overview
· The cryptocurrency market has been in a downward trend this week, with the sentiment index in the extreme panic zone.
· Crypto projects related to DeFi have performed well, indicating that the market continues to focus on improving basic returns.
· The AI Agent sector has seen high sentiment this week, indicating that investors are starting to actively look for the next market breakout point.
· Meme coin projects have generally declined this week, with capital starting to withdraw from Meme coin projects, reflecting a gradual decline in market enthusiasm for Meme coins.
Hot Sectors
AI Agent
This week, the overall market was in a downward trend, with all sectors in a state of decline. Although the prices of most AI Agent tokens have also been in a downward trend this week, the sector has received the highest level of discussion in the market. Previously, the market's attention to the AI Agent sector was mainly focused on Meme token projects with AI Agent features, but now it is gradually shifting towards AI Agent infrastructure building.
Due to the lack of market enthusiasm for traditional VC-backed token projects in this cycle, and the inability of Meme coin projects to provide sustained growth, the AI Agent sector is currently the most likely to lead the next phase of market development, as the AI Agent sector not only includes AI Meme, but also AI DePIN, AI Platform, AI Rollup, AI infra and many other sectors, all of which can be combined with AI Agent. Essentially, each blockchain project is a manifestation of a smart contract, and the emergence of AI Agent is to improve and enhance smart contracts. Therefore, AI Agent and Crypto are a perfect combination.
Top 5 AI Agent projects by market capitalization:
DeFi Sector
TVL Growth Ranking
Top 5 projects by TVL growth in the past week (excluding projects with TVL less than $30 million), data source: Defilama
VaultCraft (VCX): (Recommendation: 2 stars)
· Project Introduction: VaultCraft is a crypto project based on the Algorand public chain, aiming to reduce the costs for participants in storing and launching the network. VaultCraft's design leverages Algorand's Proof-of-Stake consensus protocol.
· Latest Developments: This week, VaultCraft launched a 4X leveraged Looper based on Lido Finance's stETH, and also supports multi-chain deployment on Base, Arbitrum, Optimism and Ethereum, using Chainlink CCIP to achieve direct staking functionality from L2 to mainnet, providing users with over 7%+ APY returns. It has also established a partnership with Matrixport and obtained a 1000 BTC custody business, leading to a rapid growth in its TVL. It has also reached strategic cooperation with Safe and CoWSwap.
Hyperliquid (HYPE): (Recommendation: 5 stars)
· Project Introduction: Hyperliquid is a high-performance decentralized finance platform focused on providing perpetual contract trading and spot trading services. It is based 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 violent fluctuations, with the market continuously setting new highs before Wednesday, and then experiencing a significant decline after the Federal Reserve meeting on Thursday. The dramatic volatility has created a very good trading environment for users who want to participate in contract trading to obtain high returns, leading to a large number of on-chain users joining Hyperliquid to participate in trading, with the total open interest exceeding $4.3 billion. This week, Hyperliquid responded to market demand by adding leveraged trading functionality for several popular token pairs such as VIRTUAL, USUAL, and PENGU, supporting up to 5x leverage, attracting a significant number of on-chain users to participate in trading.
Resolv (Unissued): (Recommendation: 2 stars)
· Project Introduction: Resolv is a delta-neutral stablecoin project that focuses on the tokenization of market-neutral investment portfolios. This architecture is based on economically viable and fiat-independent revenue sources. This allows competitive returns to be distributed to the protocol's liquidity providers.
· Latest Developments: This week, Resolv completed integration with Base, significantly reducing transaction costs and improving transaction speed. It has launched lending services for USR, USDC and wstUSR through Euler Finance, and launched a USR-USDC liquidity pool on Aerodrome, while also adjusting the Spectra YT reward points to 15 per day to optimize the reward mechanism. It has also launched a Grants program and confirmed the first 3 recipients. Through deep cooperation with projects such as Base, Euler Finance and Aerodrome, it has strengthened its competitiveness in the DeFi field.
Babylon (Unissued): (Recommendation: 5 stars)
· Project Introduction: The Babylon project is a project that aims to use the security of Bitcoin to enhance the security of other Proof-of-Stake blockchains. The core idea is to activate idle Bitcoin assets through a trustless staking mechanism, solving the contradiction between Bitcoin holders' pursuit of asset security and participation in high-yield projects.
· Latest developments: Although the market price fluctuated quite violently this week, BTC's performance has been very strong, still maintaining at a high level. In addition, users are generally optimistic about BTC's subsequent development, so they are more determined to hold it while wanting to unlock the liquidity of their BTC holdings, and will therefore choose more BTC-based yield projects. This week, Babylon deepened the application of ZK scalability technology through cooperation with Layeredge, and established a strategic partnership with Sui to promote the construction of a modular ecosystem.
Lista DAO (LISTA): (Recommendation Index: 3 stars)
· Project introduction: 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 decentralized stablecoin LISUSD lending services.
· Latest developments: This week, Lista DAO launched the Gauge Voting and Bribe Market functions, allowing veLISTA holders to participate in the LISTA emission decision-making of liquidity pools. It also announced strategic cooperation with 48Club_Official and defidotapp, especially in exploring new opportunities in the BNBChain ecosystem, and promoted the integration of PumpBTC as innovative collateral through the LIP #012 proposal. In addition, Lista DAO attracts users through weekly USDT 230,000 veLISTA reward distribution, high APR compounding incentives, and a competitive 5.25% lending rate. This week, Lista DAO partnered with FDLabsHQ to launch a winter event worth 7,000 USDT, and airdropped slisBNB and clisBNB to BNBChain holders.
In summary, we can see that the projects with rapid TVL growth this week are mainly concentrated in the stablecoin yield sector (Vault).
Overall Sector Performance
· Stablecoin market cap steadily growing: USDT grew from $145.1 billion last week to $145.9 billion, an increase of 0.55%, and USDC grew from $41.5 billion last week to $42.1 billion, an increase of 1.44%. It can be seen that although the market declined this week, both USDT, which is mainly non-US market, and USDC, which is mainly US market, have seen growth, indicating that the overall market is still maintaining continuous capital inflow.
· Liquidity gradually increasing: The risk-free arbitrage rate in the traditional market is constantly declining with the continued interest rate cuts, while the arbitrage rate of on-chain DeFi projects is constantly increasing due to the appreciation of cryptocurrency assets, making a return to DeFi a very good choice.
· Capital situation: The TVL of DeFi projects increased from $54.1 billion last week to the current $52.9 billion, experiencing negative growth for the first time in nearly two months, with a negative growth of 2.21%. The main reason is that the overall market experienced a significant decline this week, causing a large number of contracts and loans to be forcibly liquidated, leading to a decline in the TVL in the DeFi sector, breaking the upward trend of the past two months. In the next two weeks, the focus should be on the overall TVL changes and whether the downward trend will continue.
In-depth Analysis
Upward Driving Force: The core driving factors for this round of upward trend can be summarized as the following transmission path: the market entering a bull market cycle has driven the surge in liquidity demand, which in turn has pushed up the basic lending interest rate level, amplifying the profit space of the arbitrage cycle strategy in DeFi protocols.
Specifically:
· Market Environment: The bull market cycle has brought an overall increase in liquidity demand
· Interest Rate End: The rise in basic lending rates reflects the market's pricing expectations for capital
· Yield End: The expansion of the yield rate of the arbitrage cycle strategy, the significant improvement of the endogenous income of the protocol has strengthened the intrinsic value support of the DeFi sector, forming a virtuous growth momentum.
Potential Risks: As the market has been in an upward trend recently, investors have been more focused on yield rates and borrowing leverage, but have ignored the risk of downside. This week, due to the Fed's unexpected adjustment of the 4 rate cuts originally planned for next year to 2, the market experienced a rapid decline, causing over $1 billion in contracts and borrowing assets to be liquidated, causing losses to investors. This liquidation risk may lead to a chain reaction of liquidations, causing prices to fall further and more assets to be liquidated.
Performance of Other Sectors
Public Chain
Top 5 public chain TVL growth in the past week (excluding public chains with relatively small TVL), data source: Defilama
Hyperliquid: The overall market experienced violent fluctuations this week, continuously hitting new highs before Wednesday, and then experiencing a significant decline after the Fed meeting on Thursday. The violent fluctuations created a very good trading environment for users who want to participate in contract trading to obtain high returns, so many on-chain users joined Hyperliquid to participate in trading, causing Hyperliquid's open interest to exceed $4.3 billion. This week, Hyperliquid responded to market demand and added leverage trading functions for popular token pairs such as VIRTUAL, USUAL, and PENGU, supporting up to 5x leverage, attracting many on-chain users to participate in trading.
Bitcoin: This week, the market reached new highs in the first half of the week, but then experienced a significant decline after Thursday, with the prices of various projects experiencing a large decline. BTC's decline was relatively small compared to other projects, and users flocked to buy BTC for hedging purposes, and the market users also became more bullish on BTC's future rise, holding BTC more firmly. Therefore, in the process of holding BTC, they will choose to put BTC assets into BTCFi projects to earn additional income, causing the TVL of Bitcoin to also increase.
BSC: This week, BNB Chain introduced new projects such as Seraph_global, SpaceIDProtocol, and cococoinbsc to join the ecosystem, actively promoting the integration of AI and Web3 in the gaming field, and strongly supporting the development of Meme projects. Through the Meme Heroes LP program, it provided $50,000 in liquidity support for the CHEEMS and $HMC projects, and launched a daily Memecoin airdrop plan including projects such as GOUT, MALOU, BUCK, and $WHALE, and also launched a $200,000 Meme Innovation competition.
AILayer: AILayer's activities this week were mainly focused on community operations and ecosystem cooperation: it collaborated with OrochiNetwork to launch a Giveaway activity; it launched a Mini App ranking activity to increase user participation; it continued to attract community participation through interactive activities such as "Would You Rather Challenge" and "Riddle of the Week"; it also held the EP31 AMA activity themed "How AILayer Uses AI to Revolutionize Bitcoin" to showcase the project's vision for the integration of AI and blockchain.
Mantle: Mantle achieved an important breakthrough this week by integrating Compound III, bringing $USDe lending functionality to users and supporting ETH and BTC as collateral assets. By expanding the Mantle Scouts Program to 40 industry-leading Scouts and launching the Mantle Meetup initiative, it also introduced the Moe's Rager large-scale incentive activity with a total of 1 million MNT, and successfully attracted over 110,000 users to participate in the Yield Lab project, generating 2.5 million transactions, bringing on-chain traffic to Mantle.
Gainers Overview
Top 5 token gainers in the past week (excluding meme coins and tokens with low trading volume), data source: Coinmarketcap
This week's gainers list showed a concentration in the public chain sector.
UXLINK: This week, UXLINK reached a strategic cooperation with DuckChain and received investment support from UFLY_Labs, jointly building the Social Growth Layer (SGL). The number of LINE platform users has exceeded 2 million, and UXLINK has set a new historical high in the Upbit trading pair. UXLINK launched a large-scale $500,000 airdrop activity covering more than 20 Web3 projects, and continued to attract new users through joint activities with trading platforms such as OKX.
USUAL: This week, Usual launched an innovative USD0++ holder incentive vault and a delta-neutral strategy, providing users with yields of up to 76%-82% APY, while maintaining stable high-yield performance in the Curve USD0/USD0++ and USD0/USDC pools, with an average of over 50%. Usual's TVL has recently experienced rapid growth, rising from $750M to $800M, and after the end of the third week's reward plan, TVL increased by 44%, while the minting rate decreased by 28%, bringing a deflationary effect to the USUAL token. The Usual project team also emphasized that 90% of the tokens are allocated to the community, and the DAO maintains a transparent operational model with 100% of the revenue.
MOCA: This week, Moca released the Moca 3.0 version, introducing the "integrated account" concept and launching the AIR Kit, aiming to solve the problem of Web3 user identity fragmentation. Moca has reached an important partnership with SK Planet, integrating Moca into the OK Cashbag application, reaching a user base of 28 million in South Korea. Meanwhile, the MOCA token will be listed on the major South Korean exchanges Upbit and Bithumb. Moca has significantly improved user experience and ecosystem participation through deep cooperation with Nifty Island and the launch of the Fixed Mode optimization of the MocaDrop mechanism.
HYPE: This week, the overall market experienced violent fluctuations. Before Wednesday, the market continued to set new highs, but after the Federal Reserve meeting on Thursday, the market experienced a significant decline. The violent volatility created a very good trading environment for users who wanted to participate in contract trading to obtain high returns, leading to a large number of on-chain users joining Hyperliquid to participate in trading, with the number of open contracts exceeding $4.3 billion. This week, Hyperliquid responded to market demand by adding leverage trading functionality for several popular token pairs, including VIRTUAL, USUAL, and PENGU, supporting up to 5x leverage, attracting more on-chain users to participate in trading.
VELO: This week, Velodrome reached a cooperation with the Soneium platform developed by Sony Block Solutions Labs, expanding Velodrome to this new-generation Layer 2 solution based on the Optimism Superchain. Velodrome also made important progress in liquidity building, with inkonchain locking 2.5M veVELO and providing $1.4M in incentive funds, as well as providing liquidity support for the proxy tokens of the Mode Network.
Meme Token Price Increase Ranking
This week, Meme projects were significantly impacted by the market decline. In the first half of the week, they did not follow the overall market uptrend, and after the decline on Wednesday, they followed the overall market in a significant decline, resulting in very few Meme tokens showing an upward trend this week. It is clear that the current market attention and capital are not focused on the Meme token sector.
Social Media Hotspots
Based on the top five daily growth data from LunarCrush and the top five AI score data from Scopechat, the statistical data for this week (12.14-12.20) is as follows:
The most frequently mentioned topic was L1s, and the listed tokens are as follows (excluding tokens with small trading volumes and meme tokens):
According to the data analysis, the highest social media attention this week was on L1 projects. After the Federal Reserve's expectation of two rate hikes next year instead of four on Thursday, the market experienced a significant decline, and all sectors followed the overall market decline, but the declines of various public chains were relatively smaller compared to other sectors. When the overall market experiences a general decline, the performance of various public chains is usually better than other sectors. In addition to investing in BTC and ETH for hedging, most investors also allocate funds to various public chains, and these public chains tend to rise earlier than other projects when the decline ends and the market starts to rebound.
Overall Market Theme Overview
Based on weekly returns, the Cefi sector performed the best, while the Gamefi sector performed the worst.
· Cefi Sector: In the Cefi sector, BNB and BGB account for a relatively large proportion, accounting for 86.07% and 5.45% respectively, with a total of 91.52%. This week, Binance has been continuously listing new tokens, maintaining a relatively influential token on the market every day, bringing a lot of traffic to Binance. At the same time, BNB performed stronger than the overall market, declining by only 2.58%, outperforming BTC and ETH. Bitgit has also performed well recently, continuously listing popular tokens, and its token BGB rose 37.93% against the trend this week, driving the overall performance of the Cefi sector.
· Gamefi Sector: In this cycle this year, the Gamefi sector has not received much market attention, and consequently, there has been a lack of capital and traffic entering the sector, resulting in the loss of the previous wealth effect. The sector is dominated by IMX, BEAM, GALA, SAND, and AXS, accounting for a total of 82.14%, and the performance of these tokens was weaker than the overall market this week, leading to the worst performance of the Gamefi sector.
Preview of Major Crypto Events Next Week
Thursday (December 26): U.S. initial jobless claims
Outlook for Next Week
· Macroeconomic Factors Analysis
Next week, the U.S. will enter the Christmas holiday season, with few macroeconomic data releases. In previous years, when entering the Christmas and New Year's holidays, with the U.S. as the main purchasing force, the market has seen a decline in purchasing power and increased market volatility.
· Sector Rotation Trends
Although the current market environment for the DeFi sector is poor, most investors generally expect the market to experience a broad-based rally in the first quarter of next year, so most are unwilling to sell their tokens. At the same time, to increase their token holdings' yields, many are actively participating in yield farming projects.
The AI sector, particularly the AI Agent track, has received sustained market attention, with a market size of $9.9 billion. The integration of Web2 and Web3 ecosystems is accelerating, and the integration of data networks, functional AI Agents, and existing crypto products is also speeding up.
· Investment Strategy Recommendations
Maintain a defensive configuration, increase the allocation of top assets BTC and ETH to enhance the hedging properties of the assets and offset risks. Investors can also participate in some high-yield DeFi yield farming projects, but are advised to exercise caution, control positions, and manage risks carefully.
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