Market Overview

Main Market Trends

Market Overview

The market is currently in a state of extreme panic, with the sentiment index dropping from 53% to 7%. Coupled with the Federal Reserve's hawkish statements, the expectation of interest rate cuts has decreased from 4 times to 2 times, triggering about $1 billion in forced liquidations, indicating that the market is undergoing a significant deleveraging process.

( DeFi ecosystem development

The DeFi sector has seen its first negative growth in TVL in nearly two months ) -2.21% ###, but the market value of stablecoins continues to grow ( USDT +0.55%, USDC +1.44% ), indicating that despite the market correction, fundamental liquidity is still flowing in, and stable yield projects like gun pools are in high demand.

( AI Agent

The market size of the AI Agent track has reached 9.9 billion USD, with investment focus shifting from speculative AI Meme coins to infrastructure construction. This transition indicates that the market is gradually maturing, with project directions becoming more rational and practical.

) Meme Coin Trend

The popularity of the Meme coin market has clearly cooled down, with funds starting to withdraw on a large scale, indicating a decrease in market speculation sentiment. Investors are more inclined to look for projects with substantial application value, which may signal the phased end of the Meme coin craze.

Public Chain Performance Analysis

In the face of significant market fluctuations, the public chain sector has demonstrated strong resilience against declines, becoming the preferred choice for investors seeking safety, reflecting the market's continued confidence in infrastructure.

Future Market Outlook

As the Christmas holiday approaches, market liquidity is expected to decline. It is recommended that investors adopt a defensive allocation strategy, focusing on BTC and ETH, while also paying attention to DeFi stable yield and AI infrastructure projects. However, one should be cautious of the increased volatility risks that may arise during the holiday period.

Market Sentiment Index Analysis

The market sentiment index has fallen from 53% last week to 7%, indicating an extreme fear zone. Altcoins have performed worse than the benchmark index this week, showing a significant downward trend. Due to leveraged positions, the market has experienced over $1 billion in forced liquidations, with long positions significantly deleveraging. 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 an extreme fear zone, upward reversals often occur.

![Market panic escalates, focus shifts to the DeFi and AI Agent tracks｜Frontier Lab Crypto Market Weekly]###https://img-cdn.gateio.im/webp-social/moments-40183066e1913a84216b0233a6b43613.webp###

Overview of Overall Market Trends

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

DeFi-related crypto projects have performed outstandingly, demonstrating the market's ongoing focus on enhancing fundamental yields.

The AI Agent track project has high public sentiment this week, indicating that investors are beginning to actively seek the next market breakout point.

This week, Meme project tokens have generally declined, and funds are starting to withdraw from Meme coin projects, reflecting a gradual decrease in market enthusiasm for Meme coins.

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 have also seen price drops this week, the level of discussion in the market is the highest. Previously, the market attention for AI Agent was mostly focused on meme token projects associated with AI Agents, but it is now gradually shifting towards the infrastructure development of AI Agents.

Due to the lack of market popularity for traditional VC coin projects in this cycle, and the inability of Meme coin projects to bring sustained growth to the market, the AI Agent sector is currently very likely to lead the next market development. This is because the AI Agent sector not only includes AI Meme, but also encompasses many other sectors such as AI DePIN, AI Platform, AI Rollup, AI infra, etc., all of which can be combined with AI Agent. Essentially, all blockchain projects are manifestations of smart contracts, and the birth of AI Agent is aimed at improving and enhancing smart contracts. Therefore, AI Agent and Crypto represent the best combination.

) DeFi track

TVL Growth Ranking

The top 5 projects in terms of TVL growth in the past week, excluding projects with a smaller TVL of ###, are those with a standard of over 30 million USD ###. Data source: Defilama.

|-------------|----------|--------------| | Project Name | Seven-Day Increase | TVL(million) | | VaultCraft | 5344.32% | 102.41 | | Hyperliquid | 183.98% | 2754.63 | | Resolv | 77.31% | 131.34 | | Babylon | 64.43% | 5774.49 | | DAO List | 48.52% | 859.86 |

VaultCraft(VCX):( Recommendation Index: ⭐️⭐️)

Project Introduction: VaultCraft is a cryptocurrency project based on the Algorand public blockchain, aimed at reducing the costs for participants when storing and launching the network. VaultCraft's design leverages Algorand's Proof-of-Stake ( consensus protocol.

Latest developments: This week, VaultCraft launched a stETH 4X leverage Looper based on Lido Finance, supporting multi-chain deployment on Base, Arbitrum, Optimism, and Ethereum. It enables direct staking from L2 to the mainnet through Chainlink CCIP, offering users APY yields of up to 7%+. Additionally, a partnership with Matrixport has been established, securing 1000 BTC in custody services, which has rapidly increased its TVL. Strategic cooperation has also been reached with Safe and CoWSwap.

Hyperliquid)HYPE(:) Recommendation Index: ⭐️⭐️⭐️⭐️⭐️(

Project Introduction: Hyperliquid is a high-performance decentralized finance platform focused on providing perpetual contract trading and spot trading services. It is based on its own high-performance Layer 1 blockchain and utilizes the HyperBFT consensus algorithm, capable of processing up to 200,000 orders per second.

Latest Developments: This week the overall market experienced significant volatility. Before Wednesday, the market continuously set new highs, but after the Federal Reserve meeting on Thursday, there was a substantial decline. This intense fluctuation created a very favorable trading environment for users looking to engage in contract trading for high returns, leading many on-chain users to join Hyperliquid for trading, pushing the number of open contracts on Hyperliquid to over $4.3 billion. This week, Hyperliquid responded to market demand by adding leveraged trading features for several popular tokens such as VIRTUAL, USUAL, and PENGU, supporting leverage of up to 5 times, which attracted many on-chain users to participate in trading.

Resolv) Unissued Coins (: ) Recommendation Index: ⭐️⭐️ (

Project Introduction: Resolv is a delta-neutral stablecoin project that revolves around the tokenization of market-neutral investment portfolios. This architecture is based on economically viable revenue sources independent of fiat currencies. This allows for competitive returns to be distributed to the liquidity providers of the protocol.

Latest developments: This week, Resolv completed its integration with Base, significantly reducing transaction costs and improving transaction speed. It launched lending services for USR, USDC, and wstUSR through Euler Finance and introduced a USR-USDC liquidity pool on Aerodrome. At the same time, the Spectra YT yield points were adjusted to 15 points daily, optimizing the reward mechanism. The Grants program was initiated, and the first three recipients were confirmed. Additionally, through deep collaborations with projects such as Base, Euler Finance, and Aerodrome, the platform has strengthened its competitiveness in the DeFi sector.

Babylon) Unissued Coins (: ) Recommendation Index: ⭐️⭐️⭐️⭐️⭐️ (

Project Introduction: The Babylon project aims to leverage the security of Bitcoin to enhance the security of other proof-of-stake blockchains. 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-return projects.

Latest developments: Although market prices have been quite volatile this week, BTC's performance has been very strong, remaining at high levels. Additionally, as users generally have a positive outlook on BTC's future development, they are more determined to hold it while also seeking to unlock the liquidity of their BTC holdings, leading to more choices in BTC-based yield projects. This week, Babylon deepened the application of ZK scalability technology through cooperation with Layeredge and established a strategic partnership with a public blockchain to promote the construction of a modular ecosystem.

DAO List ) LISTA (: ) Recommendation Index: ⭐️⭐️⭐️ (

Project Overview: Lista DAO is a liquidity staking and decentralized stablecoin project based on the BSC chain, aimed at providing users with crypto asset staking returns and lending services for the decentralized stablecoin LISUSD.

Latest developments: This week, Lista DAO launched the Gauge Voting and Bribe Market features, allowing veLISTA holders to participate in the LISTA emission decisions of liquidity pools. It also announced strategic collaborations with 48Club_Official and defidotapp, particularly to explore new opportunities in the BNBChain ecosystem, while promoting the integration of PumpBTC as innovative collateral through the LIP #012 proposal. Additionally, Lista DAO attracts users through weekly veLISTA reward distributions of approximately $230,000 and high APR compounding incentives, along with a competitive lending rate of 5.25%. This week, Lista DAO, in collaboration with FDLabsHQ, launched a winter event totaling 7,000 USDT and provided airdrop opportunities for slisBNB and clisBNB to BNBChain holders.

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

)# Overall Performance of the Track

The market capitalization of stablecoins is steadily increasing: a certain stablecoin has grown from $145.1 billion last week to $145.9 billion, an increase of 0.55%, while another stablecoin has risen from $41.5 billion last week to $42.1 billion, an increase of 1.44%. It can be seen that although the market has experienced a decline this week, both a certain stablecoin that is primarily non-US market-based and another stablecoin that is primarily US market-based have shown growth, indicating that the entire market continues to maintain a steady influx of capital.

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

Funding Situation: The TVL of DeFi projects has risen from 54.1 billion USD last week to 52.9 billion USD now, marking the first negative growth in nearly two months, with a decline of 2.21%. The main reason for this is the significant market downturn this week, which forced many contracts and loans to be liquidated, leading to a decrease in the TVL in the DeFi space, breaking the continuous upward trend observed over the past two months. In the next two weeks, it is crucial to focus on the overall changes in TVL and monitor whether the downward trend continues.

(# In-depth Analysis

Upward driving force:

The core driving factors for this round of increase can be summarized as follows: the market entering a bull market cycle drives up liquidity demand, which in turn pushes up the level of base lending rates, amplifying the profit potential of arbitrage loop strategies in DeFi protocols. Specifically: Market Environment: Bull market cycle brings an overall increase in liquidity demand.

Interest rate side: The basic borrowing interest rate is raised, reflecting the market's expectations for the pricing of funds.

Yield side: The yield of the circular arbitrage strategy has expanded, and the endogenous yield of the protocol has significantly improved.

This transmission mechanism strengthens the intrinsic value support of the DeFi sector and creates positive growth momentum.

Potential Risks:

Due to the recent upward trend in the market, investors have been more focused on yields and leveraged borrowing, while neglecting the risks of a downturn. This week, after the Federal Reserve unexpectedly adjusted its forecast for four rate cuts next year to just two, the market experienced a rapid decline, resulting in over $1 billion in contracts and borrowed assets being liquidated, causing losses for investors. This liquidation risk is likely to lead to a chain reaction of liquidations, further driving down prices and liquidating more assets.

![Market panic escalates, attention turns to DeFi and AI Agent track｜Frontier Lab Crypto Market Weekly Report])https://img-cdn.gateio.im/webp-social/moments-5a157c17f1e3c1d653a5955ba445db9d.webp###

Performance in Other Tracks

Public Chain

In the past one