Market Overview

Main Market Trends

Overall market situation

The market is currently in a state of extreme panic, with the sentiment index dropping sharply from 53% to 7%. The Federal Reserve's hawkish stance has reduced the interest rate cut expectations from 4 times to 2 times, triggering approximately $1 billion in forced liquidations, indicating that the market is undergoing a significant deleveraging process.

( DeFi ecosystem development

The DeFi sector has experienced a negative TVL growth for the first time in the past two months )-2.21%###, but the market value of stablecoins continues to grow (USDT +0.55%, USDC +1.44%). This indicates that despite the market correction, the underlying liquidity is still flowing in, and stable yield projects such as liquidity pools are in high demand.

( AI Agent

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

) Meme Coin Trend

The market heat for Meme coins has clearly cooled down, with funds beginning to withdraw on a large scale. This indicates a weakening of speculative sentiment in the market, with investors more inclined to seek projects with substantive application value, possibly marking the end of the phase of the Meme coin craze.

Public Chain Performance Analysis

In the midst of significant market fluctuations, the public chain sector has demonstrated strong resilience against declines, becoming the preferred choice for investors seeking refuge, reflecting that market confidence in infrastructure remains solid.

Future Market Outlook

As the Christmas holiday approaches, market liquidity is expected to decline. Investors are advised to 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 heightened volatility risks that may arise during the holiday period.

Market Sentiment Index Analysis

The market sentiment index has dropped from 53% last week to 7%, indicating an extreme fear zone. Altcoins have underperformed the benchmark index this week, showing a significant downward trend. Due to leveraged positions, the market has seen about $1 billion worth of forced liquidations, with notable 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 trends.

Altcoins often experience upward reversals when they are in an extreme fear zone.

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

Overview of Overall Market Trends

• The cryptocurrency market is in a downward trend this week, with the sentiment index in extreme fear.

• DeFi-related cryptocurrency projects have shown outstanding performance, indicating continued market attention to improving fundamental 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.

• This week, Meme track projects have generally declined, with funds beginning to withdraw from Meme coin projects, reflecting a gradual decline in market enthusiasm for Meme coins.

Hot Tracks

( AI Agent

This week, the overall market is in a downward trend, with various sectors also experiencing declines. Although most token prices in the AI Agent sector have also been on a decline this week, the level of discussion in the market is the highest. Previously, the market's attention on AI Agents 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 market development in the coming period. This sector not only includes AI Meme but also encompasses many other sectors such as AI DePIN, AI Platform, AI Rollup, and AI infra, all of which can be integrated with AI Agent. Essentially, all blockchain projects are expressions of smart contracts, and the emergence of AI Agent aims to enhance and improve smart contracts. Therefore, AI Agent and Crypto represent the best combination.

) DeFi track

TVL Growth Ranking

The top 5 projects by TVL growth in the market over the past week, not including 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: The VaultCraft crypto project is a public chain project based on Algorand, aimed at reducing the costs for participants in storing and launching the network. The design of VaultCraft leverages Algorand's (Proof-of-Stake) consensus protocol.

• Latest Development: This week, VaultCraft launched the stETH 4X leverage Looper based on Lido Finance, supporting multi-chain deployments on Base, Arbitrum, Optimism, and Ethereum. It enables direct staking from L2 to the mainnet through Chainlink CCIP, offering users an APY of over 7%. Additionally, it has established a partnership with Matrixport to secure 1000 BTC custody services, leading to a rapid increase in 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 built on its proprietary high-performance Layer 1 blockchain and utilizes the HyperBFT consensus algorithm, capable of processing up to 200,000 orders per second.

• Latest Developments: The overall market experienced significant fluctuations this week. Before Wednesday, the market continually hit new highs, but after the Federal Reserve meeting on Thursday, there was a substantial decline. The intense volatility created an excellent trading environment for users looking to participate in contract trading to achieve high returns, leading many on-chain users to join Hyperliquid for trading, resulting in the number of open contracts on Hyperliquid exceeding $4.3 billion. This week, Hyperliquid responded to market demand by adding leveraged trading features for several popular cryptocurrencies, including VIRTUAL, USUAL, and PENGU, supporting up to 5x leverage, which attracted many on-chain users to participate in trading.

Resolv( Unissued Tokens ): ( Recommended 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 that are independent of fiat currency. This allows competitive returns to be distributed to the liquidity providers of the protocol.

• Latest Development: 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, it adjusted the Spectra YT yield points to 15 points per day, optimized the reward mechanism, initiated the Grants program, and confirmed the first three recipients. Additionally, through deep collaborations with projects such as Base, Euler Finance, and Aerodrome, it strengthened the platform's competitiveness in the DeFi field.

Babylon( Token Not Issued):( Recommendation Index:⭐️⭐️⭐️⭐️⭐️)

• Project Introduction: The Babylon project aims 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 conflict between Bitcoin holders' pursuit of asset security and participation in high-return projects.

• Latest Developments: Although the market prices have been quite volatile this week, BTC has performed very strongly, remaining at high levels. Additionally, since users generally have confidence in the future development of BTC, they are more determined to hold it while wanting to unlock the liquidity of their BTC holdings, leading them to choose more yield-generating projects based on BTC. This week, Babylon deepened the application of ZK scalability technology through a partnership with Layeredge and established a strategic partnership with Sui to promote the construction of a modular ecosystem.

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

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

• Latest Development: 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. They also announced strategic partnerships with 48Club_Official and defidotapp, particularly to explore new opportunities within the BNBChain ecosystem, while advancing the integration of PumpBTC as an innovative collateral through the LIP #012 proposal. Additionally, Lista DAO attracts users through weekly distributions of approximately $230,000 in veLISTA rewards 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 with a total of 7,000 USDT and provided airdrop opportunities for slisBNB and clisBNB for 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

• Stablecoin market capitalization steadily increased: USDT grew from 145.1 billion USD last week to 145.9 billion USD, an increase of 0.55%. USDC grew from 41.5 billion USD last week to 42.1 billion USD, an increase of 1.44%. It can be seen that although the market experienced a decline this week, both USDT, which is primarily non-US market-oriented, and USDC, which is primarily US market-oriented, 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 have been continuously declining due to ongoing interest rate cuts, while the arbitrage rates of on-chain DeFi projects have been steadily 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 last week to $52.9 billion now, marking the first negative growth in the past two months, with a decline of 2.21%. The main reason is the significant drop in the overall market this week, which forced many contracts and loans to be liquidated, leading to a decrease in TVL in the DeFi sector, breaking the continuous upward trend over the past two months. In the next two weeks, attention should be focused on the overall TVL changes and whether the downward trend continues.

)# In-depth Analysis

Upward driving force:

The core driving factors of this round of increase can be summarized as follows: The market enters a bull market cycle, driving an increase in liquidity demand, which in turn pushes up the level of the base lending interest rate, 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 base lending rate has increased, reflecting the market's pricing expectations for funds.

• Yield side: The yield of the cyclical arbitrage strategy has expanded, and the protocol's endogenous returns have significantly improved.

This transmission mechanism strengthens the intrinsic value support of the DeFi sector, forming a positive growth momentum.

Potential risks:

Due to the recent upward trend in the market, investors are focusing more on yields and borrowing leverage, while neglecting the risk of decline. This week, the market experienced a rapid drop after the Federal Reserve unexpectedly adjusted its forecast from four interest rate cuts next year to two, resulting in over $1 billion in contracts and borrowing assets being liquidated, causing losses for investors. This liquidation risk could likely lead to a chain reaction of liquidations, further driving prices down and liquidating more assets.

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

Performance in Other Tracks

( public chain

Pass