The market is weak during the double festival period, and there may be a rise in the Q1 of next year.

Market Overview

This week, the cryptocurrency market showed a downward trend affected by the Christmas holiday. The market sentiment index slightly rose to 10%, but it remains in the extreme fear zone. It is worth noting that despite the overall market weakness, USDC, which is primarily based on the US market, still achieved a growth of 1.91%, indicating that institutional funds continue to enter the market, injecting some confidence.

The DeFi sector's TVL fell slightly by 0.37% this week to $52.7 billion, but stablecoin yield projects like the Machine Gun Pool performed remarkably. The overall supply of stablecoins continues to show an upward trend, indicating that despite the market correction, the underlying liquidity is still flowing in, and stable yield projects like the Machine Gun Pool are in high demand.

The AI Agent track continues to receive high market attention, with a total scale reaching 10.9 billion USD. In particular, the aipool model combined with TEE technology has become a new market focus, expected to become a new type of asset issuance method following "inscription", demonstrating the deep integration trend of AI and blockchain technology.

Due to the impact of the holiday and the overall market decline, the Meme coin sector performed poorly this week, with a noticeable decrease in investor participation and capital inflow. The market enthusiasm has temporarily shifted to other sectors, reflecting the high volatility characteristics of this sector.

The public chain sector demonstrates strong resilience against declines, with Stacks achieving an important milestone for sBTC, BOB advancing the development of the BitVM Bridge, and Taiko launching a new round of ecological initiatives, indicating that major public chains continue to focus on technological innovation and ecosystem development.

Looking ahead, the market is expected to continue its sluggish trend during the New Year holiday, and it is recommended that investors maintain a defensive allocation, increasing the proportion of top assets, while also moderately participating in high-yield gun pool projects. In the long term, the market generally anticipates a rise in the first quarter of 2025, and AI Agent and DeFi gun pool projects are worth paying special attention to.

Market Sentiment Index Analysis

The market sentiment index has risen from 7% last week to 10%, still in the extreme fear zone. Altcoins have performed weaker than the benchmark index this week, showing a significant downtrend. Due to the Christmas holiday, liquidity has sharply decreased, leading to increased market price volatility, making sudden rises and falls more likely. 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. When Altcoins are in the extreme fear zone, the market is often at a stage bottom, and an upward reversal can happen at any time.

Overview of Overall Market Trends

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

• DeFi-related cryptocurrency projects have performed well, demonstrating the market's ongoing interest in increasing baseline returns.

• The AI Agent track project has seen high public sentiment this week, indicating that investors are starting to actively seek the next market breakout point.

Hot Tracks

AI Agent

This week, the overall market is in a downtrend, with various sectors also in a declining state. Although most token prices in the AI Agent sector are also experiencing a downtrend this week, the level of discussion in the market is the highest. This week, there has been considerable discussion about the development of the aipool model, which combines AI Agent and TEE, in the future of the crypto market and its impact on Defi.

One of the boosters for the periodic large pump in the crypto market is the emergence of new asset issuance methods. For example, past asset issuance methods like ICOs, IEOs, INOs, IDOs, and engraving have rapidly propelled market development and increased prices in the crypto market. With the rapid integration of AI and crypto, aipool has become a highly popular asset issuance method at this stage, and it is also a continuation of "money printing FI" at the beginning of 2024. If the aipool asset issuance method is widely accepted by the market, we will soon witness a small wave of asset issuance frenzy brought about by the aipool model, so we should focus on aipool-type projects.

DeFi track

TVL rise ranking

The top 5 projects by TVL growth in the past week (excluding projects with a lower TVL, standard being over 30 million USD):

1. Resolv: 82.04%
2. USDX Money: 74.25%
3. Usual：55.56%
4. Hashnote: 52.54%
5. Spectra: 51.81%

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 slightly declines by 0.27%, while USDC rises by 1.91%. The growth of USDC, which is primarily focused on the U.S. market, indicates that the purchasing power in the market continues to maintain a steady inflow of funds.

• Liquidity is gradually increasing: The risk-free arbitrage rates in traditional markets continue to decline with interest rate cuts, while the arbitrage rates of on-chain DeFi projects are continuously increasing due to the rise in cryptocurrency asset values. Returning to DeFi will be a very good choice.

• Funding Situation: The TVL of DeFi projects has decreased from $52.9 billion last week to $52.7 billion now. Although there has been negative growth for two consecutive weeks, the magnitude is small at 0.37%. The main reason is that the Western markets, led by the U.S., are in the Christmas holiday this week, resulting in a decline in both trading volume of various tokens and on-chain activities. Next week marks the New Year's holiday, and it is expected that there will not be much change. It is recommended to pay close attention to the overall TVL changes in the market in January and whether the downward trend continues.

In-depth analysis

pump driving force: The core driving factors behind this round of pump can be summarized as follows: Due to the recent downtrend in the market, the APY of various DeFi protocols has decreased, while stablecoin yield projects have increased their yields through token/point rewards, which overall gives the machine gun pool projects a significant advantage in APY. Specifically:

• Market Environment: Although it is in a bull market cycle, the market has recently been in a downtrend, causing the market's base interest rate to drop significantly.
• Interest rate side: The base lending rate has been raised, reflecting the market's expectations for the pricing of funds.
• Earnings side: The yield of stablecoin earning projects has expanded compared to other projects, thereby attracting more users to participate.

This conduction mechanism strengthens the value support of stablecoin yield projects, creating a positive growth momentum.

Potential risks: Due to the recent rising trend in the market, investors have been paying more attention to yield and borrowing leverage, while ignoring the downside risks. This week, due to the Christmas holiday, the liquidity in the market sharply decreased, resulting in selling pressure without sufficient liquidity to absorb it, which led to continuous price declines and triggered liquidations of long contracts in the market, causing losses for investors. This chain liquidation risk caused by these liquidations significantly increased, resulting in further price reductions and the liquidation of more assets.

Performance in Other Tracks

public chain

The top 5 public chains by TVL rise over the past week (excluding public chains with smaller TVL):

1. Stacks: 16.95%
2. BOB: 12.81%
3. Taiko: 4.22%
4. Cardano: 2.94%
5. Sei: 1.23%

rise leaderboard overview

The top 5 tokens by price increase in the past week (excluding tokens with too low trading volume and meme coins):

1. ZEN (Horizen): 124.91%
2. MOCA (Moca Network): 108.87%
3. PHA (Phala Network): 105.84%
4. AGLD (Adventure Gold): 73.77%
5. MOVE (Movement): 66.81%

Meme Token Rise Ranking

1. LUNA (Luna by Virtuals): 60.21%
2. KOMA (Koma Inu): 37.49%
3. AIXBT (aixbt by Virtuals): 30.37%
4. SPX (SPX6900): 21.45%
5. TURBO (Turbo): 20.47%

This week, Meme projects have been significantly affected by the overall market decline. Due to the Christmas holiday this week, there are fewer users participating in market trading, leading to a withdrawal of funds in the market. The number of investors participating in Meme coin projects has noticeably decreased, resulting in the current market attention and funds not being focused on the Meme coin sector.

social media hotspot

According to data analysis, the L1s project has received the highest attention on social media this week. Due to the Christmas holiday this week, the market, primarily driven by the United States, has entered a holiday phase, with various market makers and institutions on break, resulting in a significant decline in market liquidity. Most ordinary investors have reduced their on-chain investment activities and engaged in selling behaviors, leading to a considerable drop in the market, although the declines of various public chains have been relatively small. When the entire market experiences a general decline, public chains often perform better than other sectors. Apart from investing in BTC and ETH for hedging, most market investors still allocate funds to various public chains. When the decline ends and a rise occurs, public chains generally rise before other projects.

Overall Overview of Market Themes

According to weekly return rate statistics, the SocialFi sector performed the best, while the RWA sector performed the worst.

• SocialFi Track: The absolute leader in the SocialFi track is still TON, accounting for 91.07% of the market value of this sector. This week, TON did not follow the market downtrend but instead rose by 6.3%, making the SocialFi sector perform the best. This week, Toncoin collaborated with GMX to promote the development of high-frequency DeFi trading.

• RWA Track: In the RWA track, OM, ONDO, and MKR have a large market share, accounting for 44.28%, 23.85%, and 18.36% respectively, totaling 86.49%. This week, OM, ONDO, and MKR fell by 10.76%, 19.86%, and 8.28% respectively, with a larger decline compared to other track projects, resulting in the RWA track performing the worst this week.

Next Week's Major Crypto Events Preview

• On Monday (December 30), the European Securities and Markets Authority released the implementation of the MiCA crypto regulation.
• The number of initial unemployment claims in the United States for the week ending Thursday (January 2)
• On Friday (January 3rd), the court approved the FTX Chapter 11 restructuring plan to take effect.

Outlook for Next Week

Macroeconomic Factor Analysis

• Next week we will enter the New Year's holiday, with little macro data to be released.
• In previous years, during the New Year's holiday, the market, mainly driven by purchases from the United States, would generally continue the low purchasing power seen during the Christmas period, resulting in increased market volatility.

sector rotation trend

• DeFi track: Although the current market environment is poor, investors generally expect a widespread rise in the market in the first quarter of next year, so most investors are still unwilling to sell their tokens. At the same time, in order to increase their holding returns, they are actively participating in machine gun pool projects to enhance yields.

• AI sector: The AI Agent track has received continuous attention from the market, with a market size reaching $10.9 billion. The asset issuance model of aipool based on AI Agent + TEE has received widespread attention from the market.

investment strategy suggestion

• Maintain a defensive allocation, increase the allocation of major assets BTC and ETH, and enhance the hedging attributes of the assets.
• While hedging risks, you can participate in some high-yield gun pool Defi projects.
• It is advisable for investors to remain cautious, strictly manage their positions, and implement good risk management.