Market Weekly Report: The crypto market is overall weak under the influence of the Christmas holiday.

Market Overview

This week, the crypto market is showing an overall downward trend influenced by the Christmas holiday. The market sentiment index has slightly risen from 7% to 10%, but it still remains in the extreme fear zone. Notably, despite the overall market weakness, the USDC, which is dominated by the US market, achieved a growth of 1.91%, indicating that institutional funds are continuously entering 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 well. The overall supply of stablecoins continues to grow, 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 significant market attention, with a total scale reaching $10.9 billion. In particular, the aipool model that integrates TEE technology has become a new focus in the market, expected to become a new type of asset issuance method following "inscription mining", demonstrating the deep integration trend of AI and blockchain technology.

Affected by the holidays and the overall market decline, the Meme coin sector performed poorly this week, with a noticeable decrease in investor participation and capital inflow, as market enthusiasm temporarily shifted to other sectors.

The public chain sector has shown strong resistance to declines. Among them, 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, indicating that major public chains continue to focus on technological innovation and ecological construction.

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

Market Sentiment Index Analysis

The market sentiment index rose from 7% last week to 10%, remaining in the extreme fear zone. Altcoins underperformed the benchmark index this week, showing a significant downward trend. Due to the Christmas holiday, liquidity has sharply decreased, leading to increased market price volatility and making sudden surges and drops more likely. Given the current market structure, it is expected that Altcoins will temporarily move in sync with the benchmark index, with low probability of independent trends. When Altcoins are in the extreme fear zone, the market is often at a stage bottom, and a reversal to the upside could happen at any time.

Overview of the Overall Market Trend

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

• DeFi-related encryption projects have performed outstandingly, demonstrating the market's ongoing interest in enhancing base yields.

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

Hot Tracks

AI Agent

This week, the overall market is in a downward trend, with all sectors experiencing declines. Although most tokens in the AI Agent sector are also seeing price drops 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 the future crypto market and DeFi.

One of the boosters for the periodic surges in the crypto market is the emergence of new asset issuance methods. For example, past asset issuance methods such as ICOs, IEOs, INOs, IDOs, and engraving have rapidly propelled market development and increased crypto market prices. In the current context of rapid integration of AI and encryption, aipool has become a relatively popular asset issuance method, and it is also a continuation of the "Money Printing FI" trend 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 driven by the aipool model in the near future, so we should pay close attention to aipool-type projects.

DeFi track

TVL Growth Ranking

The top 5 projects with the largest TVL growth in the market over the past week (excluding projects with a smaller TVL, with a standard of 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 (gun pools).

Overall performance of the track

• The market value of stablecoins is steadily increasing: USDT has slightly decreased by 0.27%, while USDC has increased by 1.91%. The growth of USDC, which is primarily based in the US market, indicates that the purchasing power in the market is still maintaining a continuous 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 in 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 last week to $52.7 billion now, with a small negative growth rate of 0.37%. The main reason is that this week, the Western market led by the U.S. is in the Christmas holiday, resulting in a decrease in trading volume and on-chain activities for various tokens. It is expected that there will not be much change during the New Year's Day holiday next week. 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

Upward driving force: Due to the recent downward trend in the market, the APY of various DeFi protocols has declined. Stablecoin yield projects have increased yields through token/point rewards, giving gun pool projects a significant advantage in APY. Specifically:

• Market Environment: Although we are in a bull market cycle, the recent market downturn has led to a significant decrease in the base interest rate.
• Interest rate side: The basic lending rate is raised, reflecting the market's pricing expectations for funds.
• Yield side: The yield of stablecoin yield projects has expanded compared to other projects, 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 upward trend in the market, investors are focusing more on returns and borrowing leverage, neglecting the risks of decline. This week, the market liquidity sharply decreased due to the Christmas holiday, resulting in selling pressure without sufficient liquidity to absorb it, causing prices to continuously fall and leading to the liquidation of long contracts in the market. This chain reaction of liquidations significantly increases the risk of further price declines, leading to more assets being liquidated.

Performance in Other Tracks

public chain

The top 5 public chains with the highest TVL growth in the crypto market over the past week (excluding chains with smaller TVLs):

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

Overview of the Gains Ranking

The top 5 tokens with the highest increase in the market over the past week (excluding tokens with very 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 Gainers List

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 downturn in the market. Due to the Christmas holiday, there are fewer users participating in trading, causing a withdrawal of market funds. The number of investors participating in Meme coin projects has noticeably decreased this week, resulting in a lack of attention and funds in the Meme coin sector at this stage.

social media hotspot

According to the data from LunarCrush's daily growth top five and the AI score top five in Scopechat, the most frequently occurring topic this week (12.21-12.27) is L1s.

Due to the Christmas holiday this week, the market, led by the United States, has entered a holiday phase, with market makers and institutions on break, resulting in a significant decline in market liquidity. Most ordinary investors have reduced on-chain investment activities and engaged in selling, leading to a substantial market drop, although the declines for various public chains were relatively small. During an overall market downturn, public chains typically perform better than other sectors. Besides using funds to buy BTC and ETH as a hedge, most investors have allocated their funds to various public chains. When the decline ends and an uptrend begins, public chains generally rise before other projects.

overall overview of the market themes

According to the 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 in this sector. This week, TON did not follow the market's decline and instead rose by 6.3%, making the SocialFi track 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 account for a large proportion, at 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 Events in the Crypto Market

• December 30 (Monday): The European Securities and Markets Authority releases MiCA encryption regulations implementation
• January 2 (Thursday): Initial jobless claims in the United States for the week
• January 3rd (Friday): The court approved the FTX Chapter 11 reorganization plan to take effect.

Next Week Outlook

macroeconomic factor analysis

• Next week enters the New Year's holiday, with few macroeconomic data releases.
• In previous years, during the New Year's holiday, the market, primarily driven by purchases from the United States, would generally continue the sluggish purchasing power seen during the Christmas period, leading to 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. Most investors are still unwilling to sell their tokens, and in order to increase their holding returns, they are actively participating in machine gun pool projects to enhance their profits.

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

Investment Strategy Recommendations

• Maintain a defensive allocation, increase the allocation of key assets BTC and ETH, and enhance the asset's risk-hedging attributes.
• While hedging risks, you can participate in some high-yield gun pool DeFi projects.
• It is recommended that investors remain cautious, strictly control their positions, and manage risks effectively.