The market is weak during the double festival period, and Q1 next year may welcome a pump market | Frontier Lab crypto market weekly report

Market Overview

This week, the crypto market showed a downward trend under the influence of the Christmas holiday. Although the market sentiment index rose slightly from 7% to 10%, it remains in the extreme fear zone. It is worth noting that despite the overall market weakness, the USDC, which is mainly 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 slightly decreased by 0.37% this week to $52.7 billion, but projects like the machine gun pool and other stablecoin yield projects performed impressively. The total supply of stablecoins continues to grow, indicating that foundational liquidity is still flowing in, and projects like the machine gun pool and other stable yield projects are in high demand.

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

The performance of the Meme coin sector has been sluggish this week, with a noticeable decrease in investor participation and capital inflow. The market heat has temporarily shifted to other sectors, reflecting the high volatility characteristics of this sector.

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

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

Market Sentiment Index Analysis

The market sentiment index rose from 7% last week to 10%, still in the extreme fear zone. Altcoins 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 it easy to experience sharp rises and falls. 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 trends.

When altcoins are in a state of extreme panic, the market is often at a temporary bottom, ready to flip upwards at any moment.

Overview of Overall Market Trends

The crypto market has been in a downward trend this week, and the sentiment index remains in a state of extreme fear.

Defi-related encryption projects have performed remarkably, showing that the market continues to focus on improving basic returns.

The AI Agent track project has garnered significant public attention this week, indicating that investors are actively seeking the next market breakout point.

Hot Tracks

AI Agent

This week, the overall market is in a downward trend, and various sectors are also in a state of decline. Although most token prices in the AI Agent sector are also in a downward trend this week, the level of discussion in the market is the highest. This week, there has been a lot of discussion 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 that causes periodic surges in the crypto market is the emergence of new asset issuance methods. For example, previous asset issuance methods such as ICOs, IEOs, INOs, IDOs, and engraving have rapidly propelled market development and increased crypto market prices. In the context of 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 the "money-printing FI" at the beginning of 2024. If the aipool asset issuance method is widely accepted by the market, we can expect a small wave of asset issuance frenzy brought about by the aipool model in the near future, so we should pay special attention to aipool-type projects.

DeFi track

TVL rise ranking

The top 5 projects with the highest TVL rise in the market over the past week (excluding projects with a smaller TVL, standard is 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%

Overall performance of the track

The market capitalization of stablecoins is steadily increasing: USDT decreased from $145.1 billion last week to $144.7 billion, a drop of 0.27%, while USDC grew from $42.1 billion to $42.9 billion, an increase of 1.91%. It can be seen that although the market is in a downtrend this week, USDC, which is primarily based in the US market, still experienced growth, indicating that the main purchasing force in the market continues to maintain a steady influx of funds.

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

Funding situation: The TVL of Defi projects has decreased from 52.9 billion USD last week to 52.7 billion USD now, a drop of 0.37%. The main reason is that this week, the Western market led by the US is in the Christmas holiday period, and both the trading volume of various tokens and on-chain activities have decreased. Moreover, next week will be their New Year's holiday, and it is expected that there will not be much change. Therefore, the focus should be on the overall TVL changes in the market in January and whether the downward trend continues.

Other track performance

Top 5 public chain TVL rise:

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

Top 5 Tokens by Rise:

1. ZEN: 124.91%
2. MOCA: 108.87%
3. PHA: 105.84%
4. AGLD: 73.77%
5. MOVE: 66.81%

Top 5 Meme Tokens by Rise:

1. LUNA: 60.21%
2. KOMA: 37.49%
3. AIXBT: 30.37%
4. SPX: 21.45%
5. TURBO: 20.47%

social media hotspots

The most frequently occurring theme is L1s, with listed tokens including AVAX, VET, FTM, INJ, SUI, etc.

Market Theme Overall Overview

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

Next Week's Crypto Major Events Preview

• December 30: The European Securities and Markets Authority publishes MiCA encryption regulation implementation
• January 2: Initial jobless claims in the United States for the week
• January 3: The court approves the effectiveness of FTX's Chapter 11 restructuring plan.

Outlook for Next Week

• Macroeconomic factors analysis: Next week marks the New Year's holiday, and there will be few macro data releases. In previous years during the New Year's holiday, the market, mainly driven by purchases from the United States, typically continues the subdued purchasing power seen during the Christmas period, resulting in increased market volatility.

• Sector rotation trend: DeFi sector: Investors generally expect a market-wide pump in the first quarter of next year. To increase their holding returns, they are actively participating in machine gun pool projects. AI Sector: The AI Agent track continues to attract attention, with a market size reaching $10.9 billion. The aipool asset issuance model based on AI Agent + TEE has garnered widespread attention.

• Investment Strategy Recommendations: Maintain a defensive allocation, increase the allocation of major assets BTC and ETH, and enhance the risk-hedging properties of the assets. While hedging risks, you can participate in some high-yield gunpool DeFi projects. Investors are advised to remain cautious, strictly control their positions, and implement good risk management.