Market panic escalates, follow the DeFi and AI Agent tracks

Market Overview

main market trend

Market Overview

The current market is in a state of extreme panic, with the sentiment index dropping from 53% to 7%. Coupled with the hawkish stance of the Federal Reserve (with interest rate cut expectations reduced from 4 times to 2 times), this has triggered around $1 billion in forced liquidations, indicating that the market is undergoing a significant deleveraging process.

Decentralized Finance ecosystem development

The DeFi sector has experienced its first negative growth in TVL over the past 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, with stable yield projects such as liquidity pools being favored.

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 construction. This transition shows that the market is gradually maturing, with project directions becoming more rational and practical.

Meme Coin Trend

The popularity of 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 practical application value, which may signal a phase of the Meme coin craze coming to an end.

Public Chain Performance Analysis

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

Future Market Outlook

As the Christmas holiday approaches, market liquidity is expected to decline. It is recommended that investors adopt a defensive allocation strategy, focusing on BTC and ETH, while also following DeFi stable yield and AI infrastructure projects. However, caution should be exercised regarding the potential increase in volatility during the holiday period.

Market Sentiment Index Analysis

• The market sentiment index has dropped from 53% last week to 7%, falling into the extreme fear zone.
• Altcoins performed weaker than the benchmark index this week, showing a significant decline. Due to leveraged positions, the market saw forced liquidations of over $1 billion, leading to a significant deleveraging of long positions. 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 an independent market.
• Altcoins often experience upward reversals when they are in extreme fear zones.

Overall Market Trend Overview

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

• DeFi-related crypto projects have shown outstanding performance, indicating that the market continues to follow the aspect of improving basic returns.

• The AI Agent track project has received high attention this week, indicating that investors are actively seeking the next market breakout point.

• This week, projects in the Meme track generally fell, with funds beginning 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 downtrend, with various sectors also experiencing declines. Although the prices of most tokens in the AI Agent sector have also been trending down this week, the level of discussion in the market is the highest. Previously, the market attention on AI Agent was mostly focused on meme token projects featuring AI Agent, but it is now gradually shifting towards the infrastructure development of AI Agent.

Due to the lack of popularity of 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 development of the market 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, and AI infra, all of which can be integrated with AI Agent. Essentially, all blockchain projects are forms of smart contracts, and the birth of AI Agent is intended to improve and enhance smart contracts. Therefore, AI Agent and Crypto represent the best combination.

Top Five AI Agent Projects by Market Capitalization:

| Project Name | Market Cap ( million USD ) | 7-Day Price Change | |---------|------------|------------| | Worldcoin | 30.89 | -20.22% | | Fetch.ai | 23.10 | -20.56% | | Render | 21.49 | -19.99% | | SingularityNET | 19.24 | -19.35% | | Ocean Protocol | 14.26 | -21.17% |

Decentralized Finance赛道

TVL Growth Ranking

Top 5 projects by TVL growth in the past week (excluding public projects with smaller TVL, standard is over $30 million)

| 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)

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

• Latest developments: This week, VaultCraft launched a stETH 4X leverage Looper based on Lido Finance, supporting multi-chain deployment on Base, Arbitrum, Optimism, and Ethereum, and enabling direct staking from L2 to the mainnet through Chainlink CCIP, providing users with an APY yield of up to 7%+, and established a partnership with Matrixport to acquire 1000 BTC custody services, leading to a rapid increase in its TVL. At the same time, strategic cooperation was reached with Safe and CoWSwap.

Hyperliquid (HYPE)

• 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 employs the HyperBFT consensus algorithm, capable of processing up to 200,000 orders per second.

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

Resolv (not issued)

• Project Introduction: Resolv is a Delta-neutral stablecoin project that revolves around the tokenization of market-neutral investment portfolios. The 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 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. At the same time, it adjusted the Spectra YT yield points to 15 points per day, optimized the reward mechanism, initiated the Grants program, and confirmed the first three recipients. Additionally, through deep collaboration with projects like Base, Euler Finance, and Aerodrome, it strengthened the platform's competitiveness in the Decentralized Finance field.

Babylon (Token not yet issued)

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

• Latest developments: Although market prices have fluctuated significantly this week, BTC's performance has remained very strong, maintaining a high position. Additionally, users are generally optimistic about BTC's future development, making them more determined to hold while also wanting to liberate the liquidity of their BTC holdings, thus opting for more income-generating 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)

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

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

Overall performance of the track

• The Market Value of Stablecoins Grows Steadily: USDT increased from 145.1 billion USD last week to 145.9 billion USD this week, reflecting a growth of 0.55%. USDC rose from 41.5 billion USD last week to 42.1 billion USD, with a growth rate of 1.44%. It can be seen that although the market experienced a decline this week, both USDT, which is primarily in non-US markets, and USDC, which is mainly in the US market, have shown growth, indicating that the overall market continues to see a sustained inflow of capital.

• Liquidity is gradually increasing: The risk-free arbitrage rates in traditional markets are continuously decreasing as interest rates are cut, 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 USD last week to 52.9 billion USD now, marking the first negative growth in nearly two months, with a decrease of 2.21%. The main reason is the significant market downturn this week, which forced many contracts and loans to be liquidated, leading to a decline in TVL in the DeFi sector, breaking the continuous upward trend of the past two months. In the next two weeks, attention should be focused on the overall changes in TVL and whether the downward trend continues.

In-depth Analysis

Upward Driving Force:

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

• Market Environment: The bull market cycle brings an increase in overall liquidity demand.

• Interest Rate Side: The base lending rate has increased, reflecting the market's pricing expectations for funds.

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

This conduction mechanism strengthens the intrinsic value support of the Decentralized Finance 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 neglecting the downside risks. This week, after the Federal Reserve unexpectedly adjusted the forecast for four rate cuts next year down to two, the market...