Market Overview

Main Market Trends

The current market is in a state of extreme panic, with the sentiment index dropping from 53% to 7%. The Federal Reserve's hawkish statements have led to a reduction in interest rate cut expectations from 4 times to 2 times, triggering about $1 billion in forced liquidations, indicating that the market is undergoing a significant deleveraging process.

The DeFi sector has seen its first negative TVL growth in nearly two months ( -2.21% ), but the market capitalization of stablecoins continues to grow ( USDT +0.55%, USDC +1.44% ). This indicates 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 sector has reached $9.9 billion, with investment focus shifting from speculative AI Meme coins to infrastructure development, indicating that the market is gradually maturing, and project directions are 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 speculative sentiment, and investors are more inclined to find projects with substantial application value.

During significant market fluctuations, the public chain sector has shown strong resilience against declines, becoming the preferred choice for risk aversion, reflecting the market's continued confidence in infrastructure.

As the Christmas holidays approach, market liquidity is expected to decline. It is advisable to adopt a defensive allocation strategy, focusing primarily on BTC and ETH, while also paying attention to DeFi stable yield and AI infrastructure projects, but be cautious of the increased volatility risks that may arise during the holidays.

Market Sentiment Index Analysis

• The market sentiment index has fallen from 53% last week to 7%, placing it in the extreme fear zone.
• Altcoins underperformed the benchmark index this week, showing a significant downward trend. Due to leveraged positions, the market saw forced liquidations of over $1 billion, with notable deleveraging among long positions. Given the current market structure, it is expected that Altcoins will align with the benchmark index in the short term, with a low probability of independent market movements.
• Altcoins often experience an upward reversal when they are in an extreme panic zone.

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 outstandingly, demonstrating the market's ongoing focus on enhancing fundamental returns.
• The AI Agent track project has received high public attention this week, indicating that investors are actively seeking the next market breakout point.
• This week, projects in the Meme sector generally declined, with funds beginning to withdraw, reflecting a gradual decline in market enthusiasm for Meme coins.

Hot Tracks

( AI Agent

This week, the market is in a downward trend, with all sectors declining. Although the token prices in the AI Agent sector have also fallen, it is the most discussed topic in the market. Previously, the focus was on AI Agent Meme tokens, but it has now shifted to infrastructure development.

The AI Agent track is expected to lead the market development, as it includes numerous tracks such as AI DePIN, AI Platform, AI Rollup, and AI infra, all of which can be integrated with AI Agents. Essentially, blockchain projects are a form of smart contracts, and AI Agents aim to enhance smart contracts, integrating well with Crypto.

The top five AI Agent projects by market capitalization:

1. Worldcoin )WLD###
2. Fetch.ai (FET)
3. SingularityNET (AGIX)
4. Ocean Protocol (OCEAN)
5. Render (RNDR)

( DeFi track

)# TVL Growth Ranking

The top 5 projects by TVL growth in the market over the past week, excluding smaller public projects not counted in TVL, with a threshold of over 30 million USD ###:

1. VaultCraft: 5344.32%
2. Hyperliquid: 183.98%
3. Resolv: 77.31%
4. Babylon: 64.43%
5. DAO List: 48.52%

VaultCraft ###VCX( has launched a stETH 4X leverage Looper based on Lido Finance, supporting multi-chain deployment, enabling direct staking from L2 to mainnet via Chainlink CCIP, providing up to 7%+ APY. A partnership with Matrixport has been established to secure 1000 BTC custody business, rapidly increasing TVL. At the same time, strategic cooperation has been reached with Safe and CoWSwap.

Hyperliquid )HYPE( This week, due to severe market fluctuations, the number of open contracts exceeded 4.3 billion USD. The leverage trading function for multiple popular cryptocurrency trading pairs has been added, supporting up to 5x leverage, attracting user participation.

Resolv has completed integration with Base, reducing transaction costs and improving speed. Launched lending services through Euler Finance, introduced liquidity pools on Aerodrome, adjusted the yield point mechanism, and initiated the Grants program.

The Babylon project deepens the application of ZK scalability technology through collaboration with Layeredge and establishes a strategic partnership with Sui to advance the construction of a modular ecosystem.

The Lista DAO has launched Gauge Voting and Bribe Market features, allowing veLISTA holders to participate in liquidity pool LISTA emission decisions. Collaborating with multiple parties to explore opportunities in the BNBChain ecosystem and promote PumpBTC as an innovative collateral integration.

)# Overall Performance of the Track

• The market value of stablecoins is steadily growing: USDT increased by 0.55%, USDC increased by 1.44%, indicating continuous capital inflow.
• Liquidity is gradually increasing: The risk-free arbitrage rates in traditional markets are declining, while the arbitrage rates in on-chain DeFi projects are increasing. Returning to DeFi will be a good choice.
• Funding situation: The TVL of DeFi projects has seen a negative growth of 2.21% for the first time, mainly due to a significant market decline leading to liquidations. It is important to focus on the overall TVL changes in the next two weeks and observe whether the downward trend continues.

In-depth Analysis

Upward driving force:

• Market Environment: Bull market cycle brings an overall increase in liquidity demand
• Interest rate side: The base lending rate has been raised, reflecting the market's expectations for funding pricing.
• Earnings Side: The yield of the cyclical arbitrage strategy has expanded, and the internal yield of the protocol has significantly improved.

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

Potential risks: The market has been rising recently, with investors focusing more on yield and borrowing leverage, neglecting the risks of a downturn. After the Federal Reserve unexpectedly adjusted its interest rate cut expectations, the market quickly fell, with over $1 billion in contracts and borrowing assets being liquidated. This liquidation risk could lead to a chain reaction of liquidations, further lowering prices and liquidating more assets.

Performance in Other Tracks

( public chain

The top 5 public chain TVL increases in the market over the past week:

1. Hyperliquid: 183.98%
2. Bitcoin: 44.94%
3. BSC: 2.71%
4. AILayer: 2.02%
5. Mantle: 0.75%

Due to severe market fluctuations, Hyperliquid has over $4.3 billion in open contracts. It has added leverage trading features for multiple popular cryptocurrency trading pairs to attract user participation.

Bitcoin has fallen less in the market downturn, with users buying BTC as a hedge. Optimistic about future price increases, more users are choosing to invest BTC in BTCFi projects to earn additional returns.

BSC introduces new projects to join the ecosystem, promoting the integration of AI and Web3 in the gaming field, supporting the development of Meme projects, and providing liquidity support for multiple projects.

AILayer focuses on community operations and ecological cooperation, holding various interactive activities to attract participation.

Mantle integrates Compound III to implement $USDe lending functionality, expands the Scouts Program, and launches a large incentive campaign to attract a large number of users to participate.

) Overview of the Rise Rankings

The top 5 tokens with the highest gains in the market over the past week:

1. UXLINK: 107.18%
2. USUAL: 74.72%
3. MOCA: 72.37%
4. HYPE: 52.43%
5. VELO: 47.49%

This week's gainers list shows a concentrated sector characteristic, with most of the rising tokens belonging to the public chain track.

UXLINK has partnered with DuckChain and received investment to build a social growth layer. A large-scale airdrop event has been launched, collaborating with multiple trading platforms to attract new users.

USUAL has launched an innovative incentive vault and strategy, offering high APY returns. TVL is growing rapidly, emphasizing a transparent operating model.

MOCA released version 3.0, introducing new concepts and launching the AIR Kit. In collaboration with SK Planet, it has been integrated into the OK Cashbag application.

Due to market fluctuations, the number of open contracts for HYPE has increased significantly. The leveraged trading feature for several popular cryptocurrency trading pairs has been added.

VELO has partnered with Sony Block Solutions Labs to expand into new Layer 2 solutions. Progress has been made in liquidity building.

Meme Token Gain Rankings

1. Fartcoin ###FARTCOIN###: 96.66%
2. aixbt by Virtuals ###AIXBT(: 18.83%
3. Cheems Token )CHEEMS(: 8.58%

This week, the Meme projects were greatly affected by the market downturn, failing to follow the market's rise in the first half of the week and experiencing a significant decline in the second half. At this stage, market attention and funds are not concentrated in the Meme coin sector.

) Social Media Hotspots

This week, the most frequently mentioned topic is L1s. Among the listed tokens, public chain projects such as HBAR, SUI, XRP, ETH, TRX, CRO, AVAX, ONDO, OM, QNT, and DOT have received relatively high attention.

During the overall market decline, various public chains performed relatively well. In addition to investing in BTC and ETH for hedging, most funds were allocated to various public chains. When the decline ends and an increase occurs, public chains generally rise before other projects.

Overall Market Themes Overview

Weekly return rate statistics show that the Cefi sector performed the best, while the Gamefi sector performed the worst.

In the CeFi sector, BNB and BGB account for a large proportion, totaling 91.52%. Binance continues to introduce new coins to attract traffic, with BNB performing better than the overall market. Bitget has shown impressive performance, with BGB rising against the trend by 37.93%, driving the performance of the entire CeFi sector.

The Gamefi sector has seen low attention this year, lacking funds and traffic. In this sector, IMX, BEAM, GALA, SAND, and AXS account for 82.14%, performing worse than the market, resulting in the poorest performance for the Gamefi sector.

Preview of Major Crypto Events Next Week

• December 26, ( Thursday ): The number of initial unemployment claims in the U.S. for the week is announced.

Outlook for Next Week

( Macroeconomic Factors Assessment

• Next week enters the Christmas holiday in the United States, with fewer macro data releases.
• In previous Christmas and New Year holidays, the purchasing power of the market, dominated by the United States, decreased, and market volatility increased.

) Sector Rotation Trend

• DeFi sector: Investors expect a market-wide rise in the first quarter of next year and are unwilling to sell tokens, participating in gun pool projects to increase returns.
• AI Sector: The AI Agent track continues to attract attention, with a market size reaching $9.9 billion. The integration of Web2 and Web3 ecosystems is accelerating, and the integration process of data networks and functional AI Agents with existing crypto products is speeding up.

Investment Strategy Recommendations

• Maintain a defensive allocation, increase BTC and ETH allocation, enhance asset hedging properties.
• Participate in high-yield machine gun pool DeFi projects to hedge risks
• It is recommended to exercise caution, strictly control positions, and implement good risk management.