Market Overview

Main Market Trends

The current market is in a state of extreme panic, with the sentiment index plummeting to 7%. The Federal Reserve's hawkish stance has led to a reduction in rate cut expectations from 4 times to 2 times, triggering approximately $1 billion in forced liquidations, indicating that the market is undergoing a significant deleveraging process.

The DeFi sector has experienced its first negative growth in TVL in nearly two months ( -2.21% ), but the market value 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 stable yield projects like liquidity pools are in high demand.

The market size of the AI Agent track has reached 9.9 billion USD, and the investment focus has shifted from speculative AI Meme coins to infrastructure construction, indicating that the market is gradually maturing, with project directions becoming more rational and practical.

The meme coin market has clearly cooled down, with funds beginning 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 mark a phase of the end of the meme coin craze.

During significant market fluctuations, the public chain sector has shown strong resilience against downturns, becoming the preferred choice for investors seeking safety, reflecting the market's continued confidence in infrastructure.

As the Christmas holidays approach, market liquidity is expected to decline. It is recommended that investors adopt a defensive allocation strategy, focusing on BTC and ETH, while also paying attention to DeFi stable income and AI infrastructure projects. However, caution should be exercised regarding the potential for increased volatility during the holiday period.

Market Sentiment Index Analysis

• The market sentiment index has fallen from 53% last week to 7%, entering the extreme fear range.
• Altcoins performed weaker than the benchmark index this week, showing a significant downward trend. Due to leveraged positions, the market experienced forced liquidations of over $1 billion, with long positions significantly deleveraging. Given the current market structure, it is expected that altcoins will remain in sync 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 a state of extreme fear.

Overview of Overall Market Trends

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

• DeFi-related cryptocurrency projects have performed remarkably well, indicating the market's continued interest in enhancing fundamental returns.

• The AI Agent track project has generated significant public sentiment this week, indicating that investors are actively seeking the next market breakout point.

• This week, Meme track projects generally declined, and funds began to withdraw from Meme coin projects, reflecting a gradual waning of market enthusiasm for Meme coins.

Hot Track

AI Agent

This week, the overall market is in a downward trend, with all sectors experiencing declines. Although most tokens in the AI Agent sector are also on a downward trend this week, they are the most discussed in the market. Previously, the market focus on AI Agents was primarily concentrated on Meme token projects featuring AI Agents, but it is now gradually shifting towards the infrastructure development of AI Agents.

Due to the fact that traditional VC coin projects are not favored by the market in this cycle, and Meme coin projects do not bring sustained growth to the market, the AI Agent track is currently very likely to lead the market development in the future. 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 integrated 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.

The top five AI Agent projects by market capitalization:

| Project Name | Market Cap ( million USD ) | 7-Day Change | |--------|------------|--------| | Worldcoin | 235.60 | -20.42% | | Fetch.ai | 534.41 | -15.94% | | SingularityNET | 497.84 | -13.22% | | Ocean Protocol | 245.80 | -14.66% | | Oasis Network | 349.72 | -16.68% |

DeFi Track

TVL growth ranking

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

| Project Name | 7-Day Increase | 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 Index: ⭐️⭐️)

• 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 Development: This week, VaultCraft launched the stETH 4X leverage Looper based on Lido Finance, supporting multi-chain deployment on Base, Arbitrum, Optimism, and Ethereum. It enables direct staking from L2 to the mainnet through Chainlink CCIP, providing users with an APY yield of over 7%. Additionally, it has established a partnership with Matrixport and secured 1000 BTC custody services, leading to a rapid increase in its TVL. Strategic cooperation has also been reached 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 based 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 market kept reaching new highs. After the Federal Reserve meeting on Thursday, there was a substantial decline. The drastic fluctuations created an excellent trading environment for users looking to participate in contract trading and gain high returns. As a result, many on-chain users flocked to Hyperliquid to engage in trading, leading to the total open contracts on Hyperliquid exceeding $4.3 billion. This week, Hyperliquid responded to market demand by adding leveraged trading features for several popular cryptocurrencies such as VIRTUAL, USUAL, and PENGU, supporting up to 5x leverage, which attracted a considerable number of on-chain users to participate in trading.

Resolv (Not Issued): (Recommended Index: ⭐️⭐️)

• Project Introduction: Resolv is a delta-neutral stablecoin project that revolves around the tokenization of market-neutral investment portfolios. This architecture is based on economically viable and fiat-independent sources of yield. This allows for competitive returns to be allocated to the protocol's liquidity providers.

• Latest developments: This week, Resolv completed its 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, it adjusted the Spectra YT reward points to 15 points per day, optimized the reward mechanism, initiated the Grants program, and confirmed the first three recipients. Furthermore, through in-depth collaboration with projects such as Base, Euler Finance, and Aerodrome, it strengthened the platform's competitiveness in the DeFi sector.

Babylon (not yet issued): (Recommendation Index: ⭐️⭐️⭐️⭐️⭐️)

• Project Introduction: The Babylon project is aimed at leveraging 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, addressing the conflict between Bitcoin holders' pursuit of asset security and participation in high-yield projects.

• Latest Developments: Although the market price has been quite volatile this week, the performance of BTC has been very strong, remaining at a high level. Additionally, users are generally optimistic about the future development of BTC, which further strengthens their determination to hold and also seek to unlock the liquidity of their BTC holdings, leading them to choose more interest-bearing projects based on BTC. 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: ⭐️⭐️⭐️)

• 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 returns and lending services for the decentralized stablecoin LISUSD.

• Latest Development: This week, Lista DAO launched Gauge Voting and Bribe Market features, allowing veLISTA holders to participate in the LISTA emission decisions for liquidity pools. It also announced strategic partnerships with 48Club_Official and defidotapp, especially in exploring new opportunities within the BNBChain ecosystem, while advancing the integration of PumpBTC as an innovative collateral through the LIP #012 proposal. Additionally, Lista DAO attracts users with approximately $230,000 in weekly veLISTA reward distributions and high APR compounding incentives, along with a competitive lending rate of 5.25%. This week, Lista DAO, in collaboration with FDLabsHQ, launched a winter event with a total of 7,000 USDT and provided airdrop opportunities for 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 (machine gun pool).

Overall Performance of the Track

• Stablecoin market capitalization steadily increases: USDT has grown from 145.1 billion last week to 145.9 billion, an increase of 0.55%, while USDC has risen from 41.5 billion to 42.1 billion, with an increase of 1.44%. It can be seen that although the market has seen a decline this week, both USDT, which is primarily non-U.S. market-based, and USDC, which is primarily U.S. market-based, have experienced growth, indicating that the entire market is still maintaining a continuous inflow of funds.

• Liquidity is gradually increasing: The risk-free arbitrage rates in traditional markets are continuously declining 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.

• 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 decline of 2.21%. The main reason is the significant drop in the entire market this week, which forced many contracts and loans to be liquidated, leading to a decrease in TVL in the DeFi sector, breaking the continuous upward trend of the past two months. In the next two weeks, the overall changes in TVL should be closely monitored, paying attention to whether the downward trend continues.

In-depth Analysis

Upward driving force:

The core driving factors of this round of price increase can be summarized as follows: the market entering a bull market cycle drives the demand for liquidity to rise, which in turn pushes up the level of base lending rates, amplifying the profit space for arbitrage cycle strategies in DeFi protocols. Specifically:

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

• Interest rate side: The basic lending rate has been raised, reflecting the market's pricing expectations for funds.

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

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

Potential Risks:

Due to the recent upward trend in the market, investors are more focused on yield and borrowing leverage, while overlooking the risk of decline. This week, the Federal Reserve unexpectedly announced that next year