The reconstruction of DeFi zone valuation, sector rotation becomes apparent | Frontier Lab crypto market weekly report

Market Overview

Main Trends in the Market

• The market sentiment index has dropped from 91% to 53%, still in the greed zone, but BTC maintains high-level fluctuations while Altcoins are generally under pressure, leading to increased market differentiation.
• The market capitalization of USDT and USDC both increased (+2.91% and +3.23%, respectively), and the total TVL in Decentralized Finance continues to rise to $54.1 billion, with the overall market still attracting new funds.
• The Decentralized Finance zone leads the market with a weekly return rate of 16.47%, and DEX trading volume hits a new high for 2024 (63 billion USD), demonstrating strong development momentum.
• The meme coin market has returned to the spotlight, showing active performance amid market fluctuations, bringing new liquidity and user growth points to the market.
• DEX projects have received the highest attention, while AI, GameFi, and other sectors have shown weak performance, with market focus shifting towards infrastructure and liquidity zones.
• Investors are advised to remain cautious, focusing on opportunities in re-staking projects and the DEX zone, while closely monitoring the market fluctuations that may arise from next week's Federal Reserve interest rate meeting.

Market Sentiment Index Analysis

• The market sentiment index fell from 91% last week to 53%, remaining in the bullish zone.
• Altcoins performed weaker than the benchmark index this week, showing a fluctuating downward trend. After falling in the first half of the week, most assets failed to recover lost ground. Due to the influence of leveraged positions, the market saw about $2 billion in forced liquidations, with significant deleveraging among 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 independent market trends.

Overview of the overall market trend

• The crypto market has been in a wide fluctuation trend this week, and the sentiment index remains in the bullish phase.
• Decentralized Finance related encryption projects perform outstandingly, showing that the market continues to focus on improving basic returns.
• DEX projects performed well this week, and on-chain investors have started actively participating in on-chain investment activities.
• This week, the Meme zone has returned to the spotlight and started to attract market attention.

hot zone

DEX

This week, due to the overall price volatility in the market, many profit opportunities have been created for investors. On-chain investors are actively trading on DEX, and as on-chain capital and users continue to enter the DEX zone, it has driven the growth of DEX projects this week.

On-chain data of DEX

The most intuitive data to observe about DEX is its TVL and trading volume, which can directly reflect the status of the DEX zone.

• TVL: The TVL of DEX zone projects has risen rapidly this week, increasing from last week's 25.22B to the current 26.58B, a growth rate of 5.39%. It is evident that funds are actively flowing into DEX projects.

• DEX Weekly Trading Volume: The trading volume of DEX reached its highest level in mid-2024 this week, reaching a level of 63 billion USD, while the trading volume in the last 24 hours reached 7.58 billion USD, indicating a surge in trading volume in the DEX zone.

The DEX zone is showing a clear trend of business model upgrades. Leading protocols represented by Hyperliquid and dYdX are undergoing a strategic transformation from a single trading function to a comprehensive financial infrastructure. This evolutionary path is reflected in: protocols based on their own chain architecture achieving vertical integration through functional aggregation, creating a one-stop Decentralized Finance service ecosystem. Such architectural innovation indicates that the DEX track is evolving from a single trading level to a comprehensive financial infrastructure direction, and the reconstruction of track value is underway.

SUI

The Sui ecosystem has been highly discussed in the market this week, with the SUI price increasing by 7.8%, outperforming BTC and ETH. The growth performance of DeFi projects within the Sui ecosystem has been outstanding this week.

Sui chain Decentralized Finance project data

• TVL: The TVL of Sui surged rapidly this week, increasing from last week's 1.598b to the current 1.793b, a rise of 12.88%, indicating that on-chain funds are actively entering the Sui zone.

• Accounts: The total number of users on the Sui chain has reached 66,543,317, an increase of 2,184,755 from last week's 64,358,562, representing a growth rate of 3.39%. Although the growth rate may not seem significant, the ability to achieve growth amid the sharply fluctuating market this week indicates that the Sui chain has a certain capacity to attract traffic.

• DEX trading volume: The main DEXs on the Sui chain are: Cetus, Aftermath Finance, and BlueMove DEX. This week, the total trading volume of DEX on the Sui chain exceeded 35 billion USD, with an average daily trading volume reaching 466 million USD, indicating that DEX on the Sui chain is very active.

• Defi project TVL increment: The top three projects in the Sui ecosystem by TVL are NAVI Protocol, Suilend, and Aftermath Finance, which belong to the lending and DEX zones, with TVL growth rates of 1.14%, 17.22%, and 1.72% respectively this week. It can be seen that although there is a fluctuating trend, funds in the Sui ecosystem are continuously entering projects in the Defi zone.

To determine whether a public chain is favored by the market, the most direct criterion is the fluctuation in its TVL. Based on the above data, we can see that the Sui chain is currently maintaining rapid development. Due to the strong performance of SUI compared to the overall market, the underlying assets of the Sui ecosystem are continuously appreciating, which in turn drives the growth of the APY of its on-chain DeFi projects. Additionally, the overall market has significant fluctuations, presenting profit opportunities, which has attracted a large number of on-chain users to participate, promoting the development of the entire Sui ecosystem.

Decentralized Finance zone

TVL Growth Ranking

The top 5 projects by TVL growth in the market over the past week (excluding projects with a smaller TVL, with a standard of over 30 million USD), data source: Defilama.

| Project Name | Weekly Growth Rate | TVL (million) | |----------|------------|----------------| | Synthetix | 87.69% | 576.82 | | Babylon | 67.32% | 3782.36 | | Usual Money | 53.61% | 833.76 | | BounceBit | 50.31% | 664.98 | | Equilibria | 40.27% | 281.03 |

Synthetix (SNX): (Recommendation Index: ⭐️⭐️⭐️⭐️)

• Project Introduction: Synthetix is a decentralized synthetic asset protocol based on Ethereum, aimed at providing on-chain exposure to real-world assets through blockchain technology. The core functionality of Synthetix includes allowing users to mint synthetic assets by collateralizing their SNX tokens.

• Latest developments: This week, Synthetix increased the APY for LP users by implementing SCCP-373, raising the trading fee share for V3 LP from 40% to 60%. Additionally, Synthetix Treasury plans to charge some integrator fees to increase the revenue for V3 LP. Furthermore, Synthetix announced this week the completion of its acquisition of the leveraged token platform TLX, aiming to integrate TLX's leveraged token features, drive the launch through improved parameters and redeployed contracts, while also introducing a leveraged token incentive program.

Babylon (Token Not Yet Issued): (Recommended Rating: ⭐️⭐️⭐️⭐️⭐️)

• Project Introduction: The Babylon project is designed to enhance 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 their participation in high-yield projects.

• Latest developments: Although market prices have been quite volatile this week, BTC's performance has remained very strong, staying at a high level. Moreover, users are generally optimistic about BTC's future development, which further strengthens their decision to hold while seeking to liberate the liquidity of their BTC holdings, leading to a greater choice of yield-generating projects based on BTC. Additionally, this week, a trading platform announced that users can directly stake BTC from their accounts to earn rewards on Babylon, bringing significant new funds to Babylon. During the promotional period, users of the trading platform who participate in the activity are offered up to a 12% points boost, incentivizing a large number of users to participate.

Usual Money (USUAL): (Recommended Index: ⭐️⭐️⭐️)

• Project Introduction: Usual Money is a stablecoin project supported by a certain trading platform, aimed at providing a new stablecoin solution through a decentralized approach. The core mechanism of the project includes three main tokens: stablecoin USD0, bond product USD0++, and governance token USUAL.

• Latest Developments: Recently, Usual Money upgraded its Checker. After the upgrade, the annualized yield for holders of the bond product USD0++ reached 48%, with an average APY of 54% for USD0/USD0++ in Curve, and an average annualized return rate of 52% for USD0/USDC. At the same time, the minting volume of USUAL was reduced by 17%, which increased the price of USUAL. This has attracted many users to participate in Usual Money to gain high annual arbitrage returns.

BounceBit (BB): (Recommended Index: ⭐️⭐️⭐️⭐️)

• Project Introduction: BounceBit is a re-staking infrastructure layer within the Bitcoin ecosystem. Designed in deep collaboration with a certain trading platform, it constructs high-yield CeDeFi components; additionally, it builds the BounceBit Chain to provide specific use cases for Restaking.

• Latest developments: Recently, BounceBit has increased the staking rates for various tokens, with a 30-day annualized yield of 54.25% for USDT, 24.55% for BTC, 37.13% for BNB, and 37.7% for ETH, attracting a large number of users to invest their assets into BounceBit for staking. At the same time, this week, BounceBit reached a partnership with Ondo to introduce tokenized RWA into BounceBit, starting to venture into the RWA sector.

Equilibria (EQB): (Recommended Index: ⭐️⭐️⭐️)

• Project Introduction: Equilibria is a gun pool project aimed at generating high returns for users. It utilizes the yield enhancement model based on veToken adopted by Pendle, providing higher returns for LPs through the tokenized version of vePENDLE, ePENDLE, and offering additional rewards to PENDLE holders.

• Latest Developments: This week, Equilibria has strengthened its collaboration with Curve by launching the first enhanced pool - scrvUSD pool, aimed at increasing user yields. Subsequently, enhanced pools for SolvBTC, cmETH, and ePENDLE were added, raising users' APY to a maximum of 59%, thereby attracting a large number of users to participate in arbitrage.

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

Overall performance of the zone

• The market capitalization of stablecoins is steadily growing: USDT increased from 141 billion dollars last week to 145.1 billion dollars, with a growth rate of 2.91%. USDC rose from 40.2 billion dollars last week to 41.5 billion dollars, with a growth rate of 3.23%. It can be seen that this week both USDT, which is primarily focused on non-US markets, and USDC, which is mainly based in the US market, have shown growth, indicating that the entire market continues to maintain a steady inflow of funds.

• Liquidity is gradually increasing: The risk-free arbitrage rates in traditional markets are continuously decreasing due to ongoing interest rate cuts, while the arbitrage rates of on-chain Decentralized Finance projects are increasing due to the rising value of encryption assets. Returning to Decentralized Finance will be a very good choice.

• Funding situation: The TVL of DeFi projects has increased from 53.2 billion USD last week to 54.1 billion USD now, with new funds reaching 1.69%. This week continues to maintain positive growth, and it has sustained an upward trend for nearly two months, proving that there is a continuous influx of funds into DeFi projects.

In-depth Analysis

Upward driving force:

The core driving factors of this round of increase can be summarized as follows: the market entering a bull market cycle drives the demand for liquidity to rise, which in turn promotes the fundamentals.