The market is weak during the Double Festival, and Q1 next year may迎来上涨行情 | crypto market weekly report

Market Overview

This week, the crypto market is generally in a downward trend due to the impact of the holiday season. Although the market sentiment index has slightly risen, it is still in the extreme fear zone. It is worth noting that despite the weak market, USDC, which is primarily based in the US market, still achieved a 1.91% rise, showing that institutional funds continue to enter the market and inject some confidence.

The total locked value in the DeFi sector slightly decreased by 0.37% to $52.7 billion, but yield projects like the machine gun pool are performing well. The total supply of stablecoins continues to grow, indicating that 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 attention, with a total scale reaching 10.9 billion USD. In particular, the aipool model that combines TEE technology has become a new focus in the market and is expected to be a new asset issuance method following "inscriptions," showcasing the deep integration trend of AI and blockchain technology.

The meme coin sector has been adversely affected by the holidays and market downturn, with a noticeable decrease in investor participation and capital inflow, as market interest shifts to other sectors.

The public chain sector shows strong resilience against declines. Stacks has achieved an important milestone with sBTC, BOB is advancing the development of the BitVM Bridge, and Taiko has launched a new round of ecological plans, demonstrating that major public chains continue to push forward in technological innovation and ecological construction.

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

Market Sentiment Index Analysis

• The market sentiment index rose from 7% last week to 10%, still in the extreme fear zone.
• Altcoin performed weaker than the benchmark index this week, showing a significant downtrend. Due to the Christmas holiday, liquidity has sharply decreased, increasing market price volatility, making it easy to experience sudden pumps and drops. It is expected that Altcoin will remain in sync with the benchmark index in the short term, with a low probability of an independent market.
• When altcoins are in a state of extreme fear, the market is often at a stage bottom and may reverse upward at any time.

Overview of Overall Market Trends

• The crypto market has been in a downtrend this week, with the sentiment index still in extreme fear.

• Defi-related projects performed outstandingly, showing the market's ongoing attention to improving basic yields.

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

Hot Tracks

AI Agent

This week, the market is in a downtrend, with all sectors declining. Although most tokens in the AI Agent sector have also decreased in price, it is the most discussed topic in the market. This week, there is hot debate about the development of the aipool model, which combines AI Agent and TEE, and its impact on Defi in the future crypto market.

One of the boosters for the periodic rise in the crypto market is the emergence of new asset issuance methods. For example, ICOs, IEOs, INOs, IDOs, and inscriptions have all rapidly propelled market development and price increases. Against the backdrop of the rapid integration of AI and crypto, aipool has become a highly popular asset issuance method, continuing the "money-making FI" trend from early 2024. If the aipool model is widely accepted by the market, we may soon see a wave of asset issuance, making aipool-related projects worthy of close attention.

DeFi track

TVL rise ranking

The top 5 projects by TVL growth in the market over the past week (excluding projects with smaller TVL, standard is above 30 million USD):

1. Resolv: 82.04%, TVL 239.01 million
2. USDX Money: 74.25%, TVL 446.42 million
3. Usual: 55.56%, TVL 1599.36 million
4. Hashnote: 52.54%, TVL 1652.47 million
5. Spectra: 51.81%, TVL 122.55 million

Overall Performance of the Track

• Stablecoin market cap: USDT slightly decreased to $144.7 billion, a drop of 0.27%. USDC increased to $42.9 billion, a rise of 1.91%. Despite the market decline, USDC, which is mainly based in the US market, still grew, indicating that major funds continue to enter the market.

• 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 have increased due to the rising value of encryption assets. Returning to DeFi will be a better choice.

• Funding situation: The TVL of Defi projects dropped from $52.9 billion to $52.7 billion, with a slight negative growth for two consecutive weeks, a decrease of 0.37%. The main reason is that the Western market is on holiday this week, leading to a decline in trading volume and on-chain activity. It is expected that the situation will be similar during the New Year's holiday next week. It is recommended to pay attention to the overall TVL changes in January to observe whether the downward trend continues.

In-depth Analysis

pump driving force:

• Market environment: Although in a bull market cycle, the recent decline has caused the base interest rate to drop significantly.
• Interest rate side: The base lending rate has risen, reflecting the market's expectations for fund pricing.
• Yield Side: The yield rate of stablecoin income projects has expanded compared to other projects, attracting user participation.

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

Potential Risks: The long-term pump in the market has led investors to focus more on yield and borrowing leverage, neglecting the risk of decline. During the holidays, liquidity sharply decreased, and the selling pressure was difficult to bear, resulting in a continuous drop in prices, triggering the liquidation of long contracts, increasing the risk of cascading liquidations, which may further lower prices.

Other tracks performance

public chain

The top 5 public chains by TVL rise in the crypto market over the past week:

1. Stacks: 16.95%, TVL 130.62 million
2. BOB: 12.81%, TVL 232.55 million
3. Taiko: 4.22%, TVL 413.49 million
4. Cardano: 2.94%, TVL 503.44 million
5. Sei: 1.23%, TVL 224.31 million

Overview of the rise list

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

1. ZEN (Horizen): 124.91%, circulating market value $556,570,852
2. MOCA (Moca Network): 108.87%, circulating market value $557,280,321
3. PHA ( Phala Network ): 105.84%, circulating market value $216,306,693
4. AGLD ( Adventure Gold ): 73.77%, circulating market cap $170,111,563
5. MOVE (Movement): 66.81%, circulating market value $2,581,550,729

Meme Token Rise Ranking

1. LUNA (Luna by Virtuals): 60.21%, Circulating Market Cap $116,514,426
2. KOMA (Koma Inu): 37.49%, circulating market value $108,799,371
3. AIXBT (aixbt by Virtuals): 30.37%, circulating market value $360,123,237
4. SPX (SPX6900): 21.45%, circulating market value $749,449,535
5. TURBO (Turbo): 20.47%, circulating market value $745,975,419

This week, Meme projects have been significantly affected by the overall decline in the market. Due to the holiday, there are fewer users participating in trading, resulting in capital withdrawal. The number of investors in the Meme coin sector has noticeably decreased, and market attention and funds have shifted to other sectors.

social media hotspots

The most frequently appearing theme this week is L1s, with the listed tokens including AVAX, VET, FTM, INJ, SUI, BNB, ALGO, XTZ, ATOM, and CRO.

Analysis shows that the L1s projects received the highest attention on social media this week. Due to the impact of the Christmas holiday, market liquidity has significantly declined, leading ordinary investors to reduce on-chain investment activities and engage in selling, resulting in a substantial market downturn. When the market experiences a widespread decline, public chains typically perform better than other sectors. Besides investing in BTC and ETH for hedging, most investors still allocate funds to various public chains. During market rebounds, public chains often rise ahead of other projects.

Overall Overview of Market Themes

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

• SocialFi track: The main player TON accounts for 91.07%, rising against the trend by 6.3% this week, driving the performance of the entire track.
• RWA track: Major projects OM, ONDO, and MKR fell by 10.76%, 19.86%, and 8.28% respectively, with significant declines, resulting in the worst performance of this track.

Next Week's Major Events in the Crypto Market

• December 30: The European Securities and Markets Authority publishes MiCA encryption regulations implementation
• January 2: The number of initial jobless claims in the U.S. for the week is announced.
• January 3: The court approved the implementation of FTX's Chapter 11 restructuring plan.

Outlook for Next Week

Macroeconomic factors assessment:

• Entering the New Year's holiday, there are fewer macro data releases.
• In previous years during the New Year's Day period, the purchasing power of the market dominated by the United States usually continued the sluggish trend of Christmas, and market volatility may increase.

Sector rotation trend:

• DeFi track: Despite the poor market environment, investors expect a potential pump in the first quarter of next year, and most are unwilling to sell their tokens, opting instead to participate in machine gun pool projects to increase yields.
• AI Sector: The AI Agent track continues to attract attention, with a market size reaching $10.9 billion. The asset issuance model of aipool based on AI Agent + TEE is widely discussed.

Investment Strategy Recommendations:

• Maintain a defensive allocation, increase the proportion of leading assets such as BTC and ETH, and enhance their hedging properties.
• You can moderately participate in high-yield machine gun pool Defi projects.
• It is recommended to remain cautious, strictly control positions, and manage risks effectively.