Author: Nancy, PANews
Each crypto cycle sees the emergence of a dominant narrative, and AI+ is undoubtedly one of the biggest themes in this bull market, especially as the AI Agent craze is occupying the vast majority of on-chain liquidity, and discussions about crypto AI being in a similar DeFi Summer cycle are increasing in the market. This article by PANews will compare the market development scale of crypto AI and DeFi, and explore the similarities and differences in the development of these two fields.
A market cap of $48 billion exceeds the DeFi Summer period, whether it can replicate the DeFi success is controversial
According to CoinGecko data, as of January 2, the market cap of the crypto AI sector has reached $48.8 billion, far exceeding the market cap of DeFi during the "DeFi Summer" period. According to The Block data, after the explosive growth phase in 2020, the DeFi market cap reached a high of $60.4 billion, and it was not until mid-April 2021 that it broke through the $50 billion mark, by which time the market had gradually matured and diversified. This comparison shows that the explosive power of crypto AI has surpassed the early development stage of DeFi, and it has shown stronger advantages in market appeal and growth potential.
Specifically, the AI Agent sub-sector has been continuously exploding during this period. CoinGecko data shows that as of January 2, the market cap of AI Agent has reached $16.93 billion, accounting for 34.7% of the entire crypto AI track, which is equivalent to the total market cap of DeFi protocols in January 2021. Taking the leading projects Virtuals Protocol ($5.02 billion) and ai16z ($2.7 billion) as examples, the sum of their market caps has already exceeded the market cap of all DeFi protocols at the end of 2020, further highlighting the rapid development of the AI track. The market caps of the leading DeFi projects Uniswap and Aave reached a maximum of $22.05 billion and $6.58 billion respectively in the previous bull market.
In terms of capital investment, DeFi has attracted a large amount of venture capital after its rapid development, and crypto AI is also in a similar stage, with more and more funds flowing into the AI field, and investment around crypto AI has surged. According to the 2024 financing report compiled by PANews, DeFi projects received $1.69 billion in 296 investment and financing events in 2024, while AI projects, as an emerging category, have seen rapid growth this year, with nearly 100 disclosed financing events, 15.2% of which received funding in the tens of millions of dollars range, with a total funding scale of around $600 million.
Although the data performance of the crypto AI track is impressive, the market still has different views on whether its development cycle can be similar to DeFi. For example, Messari's latest report points out that AI Agent will reach its peak in the first quarter of 2025 and will not recover. The reasons are as follows: (1) AI Agent agents have not yet proven their product adaptability to support market speculation; (2) The success of Alt-L1 is based on the clear demand for block space during the DeFi boom, but AI Agent lacks both demand and a clear user base; (3) The launch of AI Agent depends on market speculation, but when the market realizes that they will only be toys in the foreseeable future, this speculative cycle will collapse.
There are also views that AI has similar development potential as DeFi. For example, crypto KOL @0xWizard said that 2020 can be called the "Cambrian explosion of DeFi", and 2025 is likely to be the "Cambrian explosion of AI Agent". Various Ai+Crypto applications will emerge in the coming year. Researcher Haotian believes that the arrival of AI Agent is like the DeFi Summer in 2020, which will create a new "bubble" narrative cycle of Build+Speculation. Although the AI Agent ecosystem does not even have its own dedicated infra conditions yet, in terms of ecosystem plasticity, the industry narrative opportunities brought by AI Agent are much grander than DeFi.
Former Spartan Group member @0xJeff predicted that 2025 will be called the Agentic (agency) era, and Agentic-type L1 will reach a market cap of $100 billion, similar to the L1 valuation cycle of 2020-21; DeFi will reach a TVL high of over $200 billion with the help of AI Agent, etc.
Regarding the valuation of AI-related MEME coin projects, crypto KOL @Rui said that in the early MEME market, the valuation of projects was closely related to whether they could be listed on exchanges, especially top exchanges. But with the rise of AI Agent and changes in the market, the valuation system based on exchange logic for large-cap MEME is no longer valid, and people's valuation expectations for projects are not which exchanges they are listed on, but what kind of ecosystem they will create. For projects with existing ecosystems, valuation can be determined based on their ecosystem share; for single-project or "wild ecosystem" projects, the key to valuation is whether they can break through a $100 million market cap, below which they rely more on dissemination, community, and early capital support.
Four major commonalities from cultural influence to capital efficiency
The combination of technology and capital is the core driving force for the development of the crypto industry. In the previous bull market, DeFi reshaped the crypto financial world through decentralized platforms and smart contracts. Now, crypto AI is changing the way the crypto market operates in a more intelligent and automated way. From the current perspective, the two have similarities in terms of cultural influence, technological foundation, access threshold, and capital efficiency.
Meme culture
As one of the core narratives of the previous crypto bull market, DeFi itself has a spirit of rebellion against traditional finance. Many DeFi projects, while providing real financial functions, attract attention through humorous and parodic naming (such as various food series). Initially, the market even tended to see DeFi more as a liquidity game than a pure financial tool, but this culture of breaking the "solemnity" of traditional finance unexpectedly sparked reflection on the traditional financial system and quickly accumulated a large number of developers and users to participate.
Similar to the meme culture in the early DeFi narrative, the popularization of crypto AI also relies on the power of MEME culture. The rise of AI Agent not only depends on technological innovation and application value, but also quickly gathers emotions through humorous and playful MEME methods, thereby stimulating the interest and participation of on-chain users, including bringing new groups such as off-chain developers and researchers to join in a more relaxed and interactive way.
Technological foundation
Relying on its support in smart contracts, token standards, and developer ecosystems, Ethereum's flexibility has provided a strong technological foundation for the rise of DeFi, allowing developers to innovate financial products based on demand, and its decentralization and open-source mechanism also provide users with a fair and transparent financial platform.
The emergence and popularity of the crypto AI narrative in this cycle is also rooted in the explosive progress of AI technology, especially the advent of large language models (such as ChatGPT), which has allowed people to see the huge potential of the combination of artificial intelligence technology and blockchain. At the same time, the rapid improvement of AI large model capabilities has also empowered more intelligent on-chain applications, such as trading strategies, market forecasting, smart contract automation, and data analysis, providing new perspectives and momentum for crypto technology innovation.
Access threshold
Compared to the complex procedures, bank accounts, and credit checks required by traditional financial systems, DeFi provides an open and transparent financial service model through blockchain and smart contracts, where users only need a crypto wallet and a small amount of crypto assets to freely engage in activities such as lending, trading, and liquidity provision, without being restricted by region or economic background.
Compared to traditional encryption tools and platforms, AI Agent provides a more intelligent and automated way of operation, allowing users to easily get started without the need to deeply understand complex technical details and have professional trading knowledge and experience. At the same time, high-quality AI Agent projects have also broken down the high thresholds of previous VC and centralized exchanges (CEX) platforms through lower participation thresholds and convenient operation paths, providing not only more participation opportunities for individual investors, but also opening up a lower-cost and more decentralized innovation channel for developers and project parties.
By combining with MEME culture, AI Agent has also lowered the cognitive threshold of people for encryption AI technology, especially for non-technical users, and broken the high-threshold image of technical projects, making the participation in this field more diversified, easy and entertaining.
Capital Efficiency
In the DeFi narrative, capital efficiency has always been one of the core driving forces. DeFi can greatly improve capital utilization efficiency through decentralized platforms, smart contracts and automated mechanisms. These platforms attract a large amount of institutional funds and retail users into the market by providing high APY and capital returns. Due to the lack of intermediaries and traditional banking processing procedures, funds can flow and obtain higher returns in a shorter period of time, greatly improving the capital efficiency of the market.
AI Agent can help users achieve more efficient capital operation in the crypto market through the automation and intelligence of artificial intelligence technology. Unlike traditional manual intervention, AI Agent can automatically execute transactions, asset management and risk control tasks based on real-time market data, helping users seize market opportunities, avoid emotional decision-making and human errors, and greatly improve the efficiency of capital operation. In addition, AI Agent projects provide more users with opportunities for benefit redistribution through on-chain execution mechanisms, allowing participants to enjoy the growth dividends of the project under low thresholds.
Four Key Differences from Technology-Driven to User Participation
Although DeFi and Crypto AI have shown similar momentum and potential in driving innovation in the crypto market, they differ significantly in several key aspects. These differences are reflected not only in the complexity of technology and the breadth of application scenarios, but also in the different ways of market driving force and user participation.
Application Scope
The main focus of DeFi is on-chain finance, with major innovations concentrated on the construction of decentralized exchanges (DEX), automated market makers (AMM), lending protocols and other financial instruments. Although these innovations have disrupted the traditional financial system, their application scenarios are relatively concentrated and clear. In comparison, the application scope of Crypto AI is broader, involving on-chain finance, AI-generated content (AIGC), Non-Fungible Tokens (NFT), smart contract automation, data analysis and other fields. Although the complexity of Crypto AI in technology integration is higher, it also allows it to reach more market and user needs. In the future, with the technological development of large-scale AI models, more cross-domain innovations and applications will be driven.
Technology Driving Force
The technological innovation of DeFi is mainly based on blockchain and smart contracts, driving the innovation of the decentralized finance ecosystem, with the core driving force coming from decentralized trading, permissionless financial innovation and smart contract automatic execution. The Crypto AI narrative, on the other hand, has complex and diverse technological driving forces, ranging from trading strategies and risk management in the financial field, to content generation, personalized recommendation, data analysis and a wider range of applications.
User Groups
The main user group of DeFi is on-chain native users, who usually have strong financial operation experience. In addition to attracting crypto natives, Crypto AI can also attract a large number of non-technical users, including content creators, developers and technical researchers, with significant advantages in popularity and market coverage.
Market Value Driving
The market value of DeFi projects is mainly determined by factors such as locked-in volume, exchange listings and liquidity, more dependent on the frequency of use of financial instruments on the platform and the degree of user participation, with a more direct and transparent market operation. In comparison, the market value logic of Crypto AI projects is more complex and has higher uncertainty, not only needing to look at the depth and breadth of technological innovation, but also considering the project's ecological influence and the development potential of actual application scenarios. This also means that the sustainability of the Crypto AI narrative depends on the combination of technological progress and user demand, with higher risks and potentials.
