Market Overview

Main Market Trends

Overall Market Overview

The current market is in a state of extreme panic, with the sentiment index dropping from 53% to 7%. Coupled with the Federal Reserve's hawkish statements (the expectation for interest rate cuts has decreased from 4 times to 2 times), this has triggered approximately $1 billion in forced liquidations, indicating that the market is undergoing a significant deleveraging process.

DeFi ecosystem development

The DeFi sector has seen its first negative growth in TVL in nearly two months (-2.21%), but the market capitalization of stablecoins continues to grow (USDT +0.55%, USDC +1.44%), indicating that despite the market correction, the underlying liquidity is still flowing in, and projects with stable returns like yield farms are in demand.

AI Agent

The market size of the AI Agent track has reached $9.9 billion, with investment focus shifting from speculative AI Meme coins to infrastructure development. This transition shows that the market is gradually maturing, with project directions becoming more rational and practical.

Meme Coin Trend

The market heat for Meme coins has noticeably cooled down, with funds starting to withdraw on a large scale, indicating a decrease in market speculation sentiment. Investors are more inclined to seek projects with substantial application value, which may signify the phased end of the Meme coin craze.

Public Chain Performance Analysis

In the midst of significant market fluctuations, the public chain sector has demonstrated strong resilience against declines, becoming the preferred choice for investors seeking safety, reflecting the market's continued confidence in infrastructure.

Future Market Outlook

As the Christmas holiday approaches, market liquidity is expected to decline. Investors are advised to adopt a defensive allocation strategy, focusing on BTC and ETH, while also paying attention to DeFi stable yield and AI infrastructure projects. However, caution is needed regarding the potential increased volatility risks during the holiday period.

Market Sentiment Index Analysis

• The market sentiment index has fallen from 53% last week to 7%, entering the extreme fear zone.
• Altcoins performed worse than the benchmark index this week, showing a significant decline. Due to the impact of leveraged positions, the market experienced forced liquidations of positions worth over $1 billion, significantly deleveraging long positions. Given the current market structure, it is expected that Altcoins will synchronize with the benchmark index in the short term, with a low probability of independent market movements.
• Altcoins often experience upward reversals when they are in extreme fear zones.

Overview of Overall Market Trends

• The cryptocurrency market is in a downward trend this week, with the sentiment index in extreme fear.

• DeFi-related cryptocurrency projects have performed outstandingly, showing the market's continued focus on enhancing base yields.

• The AI Agent sector project has garnered high public attention this week, indicating that investors are beginning to actively seek the next market breakout point.

• This week, Meme track projects generally fell, and funds began to withdraw from Meme coin projects, reflecting a gradual decline in market enthusiasm for Meme coins.

Hot Tracks

AI Agent

This week, the overall market is in a downward trend, with various sectors also experiencing declines. Although most token prices in the AI Agent sector have also been falling this week, they have the highest level of discussion in the market. Previously, the market's attention on AI Agents was mostly focused on Meme token projects associated with AI Agents, but it is now gradually shifting towards the infrastructure development of AI Agents.

Due to the lack of market popularity for traditional VC coin projects in this cycle and the inability of Meme coin projects to bring sustained growth to the market, the AI Agent track is currently very likely to lead the market's development in the coming period. This is because the AI Agent track not only includes AI Meme but also encompasses many other tracks such as AI DePIN, AI Platform, AI Rollup, AI infra, etc., all of which can be combined with AI Agent. Essentially, all blockchain projects are manifestations of smart contracts, and the birth of AI Agent is aimed at improving and enhancing smart contracts. Therefore, AI Agent and Crypto represent the best combination.

Top five AI Agent projects by market capitalization:

|Project Name|Market Cap (USD)| |---|---| |The Graph|1.45B| |Render Token|1.14B| |Ocean Protocol|273.55M| |Fetch.ai|664.84M| |SingularityNET|559.72M|

DeFi track

TVL Growth Ranking

The top 5 projects by TVL growth in the past week (excluding projects with a TVL below $30 million) are as follows, data source: Defilama

|Project Name|7-Day Growth Rate|TVL (million)| |---|---|---| |VaultCraft|5344.32%|102.41| |Hyperliquid|183.98%|2754.63| |Resolv|77.31%|131.34| |Babylon|64.43%|5774.49| |DAO List|48.52%|859.86|

VaultCraft (VCX): (Recommended Rating: ⭐️⭐️)

• Project Introduction: The VaultCraft cryptocurrency project is a public chain project based on Algorand, aimed at reducing the costs for participants when storing and launching the network. VaultCraft's design leverages Algorand's Proof-of-Stake consensus protocol.

• Latest developments: This week, VaultCraft launched the stETH 4X leverage Looper based on Lido Finance, supporting multi-chain deployment on Base, Arbitrum, Optimism, and Ethereum. It achieves direct staking functionality from L2 to the mainnet through Chainlink CCIP, providing users with an APY yield of over 7%. Additionally, it established a partnership with Matrixport and secured 1000 BTC custody services, leading to a rapid increase in its TVL. It has also reached strategic cooperation with Safe and CoWSwap.

Hyperliquid (HYPE): (Recommendation Index: ⭐️⭐️⭐️⭐️⭐️)

• Project Introduction: Hyperliquid is a high-performance decentralized finance platform focused on providing perpetual contract trading and spot trading services. It is built on its own high-performance Layer 1 blockchain and uses the HyperBFT consensus algorithm, capable of processing up to 200,000 orders per second.

• Latest Developments: This week, the overall market experienced significant volatility. Before Wednesday, the main index was continuously reaching new highs, but after the Federal Reserve meeting on Thursday, there was a substantial decline. The intense fluctuations created a very favorable trading environment for users looking to engage in contract trading for high returns, leading many on-chain users to join Hyperliquid for trading, resulting in the number of open contracts on Hyperliquid exceeding $4.3 billion. This week, Hyperliquid responded to market demand by adding leverage trading features for several popular tokens, including VIRTUAL, USUAL, PENGU, supporting up to 5x leverage, which attracted many on-chain users to participate in trading.

Resolv (Unlaunched Token): (Recommended Index: ⭐️⭐️)

• 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 revenue sources that are independent of fiat currencies. This allows for competitive returns to be distributed to the liquidity providers of the protocol.

• Latest Developments: This week, Resolv completed integration with Base, significantly reducing transaction costs and improving transaction speed. It launched lending services for USR, USDC, and wstUSR through Euler Finance, and introduced a USR-USDC liquidity pool on Aerodrome. Additionally, the Spectra YT yield points were adjusted to 15 points daily, optimizing the reward mechanism, and the Grants program was initiated with the first three recipients confirmed. Furthermore, through deep cooperation with projects such as Base, Euler Finance, and Aerodrome, the platform has strengthened its competitiveness in the DeFi sector.

Babylon (Unissued Token): (Recommendation Index: ⭐️⭐️⭐️⭐️⭐️)

• Project Introduction: The Babylon project is aimed at enhancing the security of other proof-of-stake blockchains by leveraging the security of Bitcoin. The core concept is to activate idle Bitcoin assets through a trustless staking mechanism, addressing the contradiction between Bitcoin holders' pursuit of asset security and their participation in high-yield projects.

• Latest developments: Although market prices have been quite volatile this week, BTC has performed very strongly, remaining at a high level. Additionally, users are generally optimistic about BTC's future development, which further strengthens their resolve to hold while also seeking to unlock the liquidity of their BTC holdings, leading to more choices in 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 advance the construction of a modular ecosystem.

Lista DAO (LISTA): (Recommended Index: ⭐️⭐️⭐️)

• Project Introduction: Lista DAO is a liquidity staking and decentralized stablecoin project based on the BSC chain, aimed at providing users with crypto asset staking yields and lending services for the decentralized stablecoin LISUSD.

• Latest developments: This week, Lista DAO launched the Gauge Voting and Bribe Market features, allowing veLISTA holders to participate in the LISTA emission decisions of liquidity pools. It also announced strategic partnerships with 48Club_Official and defidotapp, particularly in exploring new opportunities within the BNBChain ecosystem, while promoting the integration of PumpBTC as an innovative collateral through LIP #012 proposal. Additionally, Lista DAO attracts users with approximately $230,000 weekly veLISTA reward distribution and high APR compounding incentives, along with a competitive borrowing rate of 5.25%. This week, Lista DAO, in collaboration with FDLabsHQ, is carrying out a winter event with a total of 7,000 USDT and providing airdrop opportunities for slisBNB and clisBNB holders on BNBChain.

In summary, we can see that the projects with rapid TVL growth this week are mainly concentrated in the stablecoin yield sector (machine gun pool).

Overall performance of the track

• Stablecoin market capitalization steadily increases: USDT grew from 145.1 billion last week to 145.9 billion, a growth rate of 0.55%. USDC grew from 41.5 billion last week to 42.1 billion, a growth rate of 1.44%. It can be seen that although the market experienced a decline this week, both USDT, which is primarily non-U.S. market-based, and USDC, which is U.S. market-based, have shown growth, indicating that the entire market is still maintaining a continuous influx of capital.

• Liquidity is gradually increasing: The risk-free arbitrage rates in traditional markets continue to decrease with the 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.

• Funding Situation: The TVL of Defi projects has risen from $54.1 billion last week to $52.9 billion now, marking the first negative growth in nearly two months, with a negative growth rate of 2.21%. The main reason is the significant decline in the overall market this week, which has led to many contracts and loans being forced into liquidation, resulting in a decrease in TVL in the Defi sector, breaking the continuous upward trend observed over the past two months. In the next two weeks, it is crucial to pay attention to the overall changes in TVL and whether the downward trend continues.

In-depth Analysis

Driving Forces of Increase:

The core driving factors of this round of increase can be summarized as the following transmission path: the market enters a bull market cycle, leading to an increase in liquidity demand, which in turn drives up the basic lending rate level, amplifying the profit space of arbitrage loop strategies in DeFi protocols. Specifically:

• Market Environment: Bull market cycle brings overall liquidity demand increase

• Interest rate side: The base lending rate has risen, reflecting the market's pricing expectations for funds.

• Yield side: The yield of the circular arbitrage strategy has expanded, and the endogenous yield within the protocol has significantly improved.

This conduction mechanism strengthens the intrinsic value support of the DeFi sector, forming a positive growth momentum.

Potential Risks:

Due to the recent upward trend in the market, investors are more focused on yields and borrowing leverage, while overlooking the risks of a downturn. This week, following the Federal Reserve's unexpected adjustment of next year's four rate cuts to two, the market has...