Market Recovery, DeFi and AI Tracks Lead the Trend | Crypto Market Weekly Report

Market Overview

Market Overview

This week, the crypto market has shown a significant warming trend, with the sentiment index rising from 11% to 35%. Although it is still in the panic zone, there is a notable improvement. The market capitalization of stablecoins continues to grow, indicating that institutional funds are still entering the market. The market warming is mainly driven by two factors: the US CPI data meeting expectations and the market's optimistic outlook on potential policy changes. Altcoins overall performed better than the market, especially DeFi and AI-related tokens, which saw significant gains, indicating a trend of funds starting to shift from Bitcoin to small-cap tokens.

Decentralized Finance 生态发展

The TVL of the DeFi sector has slightly increased to 53.5 billion USD, with a month-on-month growth of about 1%. It is worth noting that DeFAI, as a product of the combination of Decentralized Finance and AI, has seen its market value surge from 600 million USD to 3.2 billion USD within a week, demonstrating the market's strong demand for innovative DeFi applications.

AI track development

The AI Agent sector continues the strong development trend seen since the end of last year, shifting from simple AI token trading to deeper application scenario development. The rise of DeFAI marks the entry of AI applications into the crypto field into the 2.0 phase, mainly reflected in four directions: user-friendly AI interfaces, portfolio management, infrastructure development, and market analysis predictions. The development path of leading projects indicates that the market is transitioning from the proof of concept phase to the actual application phase.

Meme Coin Trend

The Meme coin sector performed relatively flat this week, with market attention noticeably retreating from the high point in the fourth quarter of last year. This indicates that investors' risk appetite is shifting from purely speculative Meme tokens to projects with practical application scenarios. However, as related hot topics gain traction, the market may expect a new wave of Meme coin speculation centered around specific themes.

Public Chain Performance Analysis

Layer 1 public chains are generally showing a stable upward trend, but the increase is not as significant as that of the Decentralized Finance and AI sectors. Among mainstream public chains, those with advantages in AI and Decentralized Finance ecosystems are performing better, reflecting that the value of underlying public chains is increasingly dependent on the prosperity of their upper-layer application ecosystems. It is worth noting that public chains supporting AI computation have begun to attract market attention, indicating that a new round of competition among public chains may revolve around AI computing capabilities.

Future Market Outlook

The short-term market will be affected by the Federal Reserve's interest rate meeting in January, and increased volatility is expected; investors are advised to focus on projects with real application scenarios when selecting DeFi projects, avoiding chasing purely conceptual speculation; in terms of DeFi investment, attention can be paid to the yield opportunities of machine gun pool projects, but leverage risk must be strictly controlled; regarding timing, it is recommended to observe the impact of policy changes in the short term, avoid blindly chasing highs, and ensure the safety of the investment portfolio.

Market Sentiment Index Analysis

The market sentiment index rose from 11% last week to 35%, remaining in the panic zone but showing some recovery. Altcoins performed better than the benchmark index this week, with most tokens seeing greater gains than the overall market. This is mainly due to this week's CPI data and the market's optimistic expectations for policy changes, leading to an increase in market prices. Given the current market structure, it is expected that Altcoins will remain in sync with the benchmark index in the short term.

Overview of Overall Market Trends

• The crypto market has been on an upward trend this week, and the sentiment index remains in the panic zone.

• Decentralized Finance related encryption projects have performed outstandingly compared to other track projects, showing the market's continued focus on improving basic yields.

• The sentiment around the DeFi project was relatively high this week, indicating that investors are starting to actively look for the next market breakout point.

Hot Tracks

Decentralized Finance

This week, the overall market is in a trend of fluctuating upward, and all sectors are in an upward state. Due to the significant decline in the AI sector last week, the rebound this week has been very strong. Additionally, the current hotspot in the AI sector is starting to shift from the asset issuance model of AI Meme to the DeFAI model, which combines AI with Decentralized Finance. As DeFAI is just beginning to emerge in the market, and it combines the most promising sector in the current crypto market—AI—with the sector that gathers the most funds in the crypto industry—Decentralized Finance, the attention on DeFAI in the market has been the highest recently.

This week, DeFAI has become the focus of market attention, with its market capitalization rising from 600 million dollars last week to 3.2 billion dollars, achieving more than a fourfold increase within a week. It is evident that DeFAI is currently being sought after in the market. The DeFAI sector can be divided into four categories of projects: abstract / user-friendly AI, yield optimization and portfolio management, DeFAI infrastructure or platforms, and market analysis and forecasting. DeFAI is still in an early stage at this point, with most DeFAI projects focusing only on abstract / user-friendly AI and market analysis and forecasting, among which the most representative projects are: Griffain, Anon, and AXIBT. Although DeFAI has seen rapid growth recently and garnered significant market attention, its current applications are still in the proof-of-concept stage, with most functions yet to be realized. Therefore, in the upcoming investment process, we should avoid blindly following the trend, but rather pay more attention to the implementation of DeFAI projects in various fields and be cautious of the market hype risks.

Decentralized Finance赛道

TVL Growth Ranking

The top 5 projects by TVL growth in the market over the past week (excluding public projects with a smaller TVL, with a threshold of over $30 million):

1. Folks Finance (Token not yet issued): (Recommendation index: ⭐️⭐️⭐️)

2. Beets (Not Issued): (Recommendation Index: ⭐️⭐️⭐️)

3. AlphaFi (ALPHA): (Recommended Index: ⭐️⭐️⭐️)

4. Echelon Market (Not Issued Tokens): (Recommendation Index: ⭐️⭐️)

5. Astherus (not yet issued): (Recommendation Index: ⭐️⭐️⭐️)

In summary, we can see that the projects with rapid TVL growth this week are mainly concentrated in the machine gun pool projects.

Overall performance of the track

• Liquidity is gradually increasing: The arbitrage rates of on-chain Decentralized Finance projects are continuously rising due to the appreciation of cryptocurrency assets, making a return to Decentralized Finance a very good choice.

• Capital situation: The TVL of DeFi projects has risen from 53 billion USD last week to 53.5 billion USD now, an increase of 0.94%. This ends the negative growth situation of TVL in various DeFi tracks last week, mainly because the market showed an overall upward trend after a downward spike on Monday this week, especially after the U.S. CPI was released on Wednesday, leading to a broad market rally. This attracted funds to re-engage in DeFi projects, and the market generally showed an optimistic attitude towards policy changes, prompting funds to flow into the DeFi industry, which in turn boosted the TVL of the DeFi market.

Performance in Other Tracks

public chain

The top 5 public chains by TVL growth in the past week (excluding smaller public chains):

1. Sonic
2. Hyperliquid
3. Algorand
4. BSquared
5. Mode

Overview of the Rise Rate List

The top 5 tokens with the highest price increase in the past week (excluding tokens with very low trading volume and meme coins):

1. ANON
2. BUZZ
3. CGPT
4. ARC
5. GRIFFAIN

Meme Token Price Increase Ranking

This week, the market has been in a wide range of fluctuations. After Tuesday, the entire market began to rebound, and projects in the Meme sector also followed the market's rebound trend. This week, AI-related AI Meme projects showed the strongest rebound, leading to a wealth creation effect, which attracted both attention and funds into AI Meme projects.

social media hotspot

According to data analysis, the Layer 1 projects had the highest attention on social media this week. The overall market experienced significant fluctuations, and after the CPI data was released on Wednesday, the market began to rebound. Due to the large retracement of Altcoin projects in various sectors previously, there has been a good increase during this rebound. The rise in coin prices has led to an increase in the APY of various on-chain DeFi projects, attracting more on-chain users to participate. Moreover, most DeFi projects use tokens from various Layer 1 projects as their underlying assets, which has shifted the market's attention and funds back to various public chain projects.

Market Theme Overview

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

• PayFi Track: In the PayFi track, XRP, BCH, and XLM have a large market share, accounting for 83.37%, 3.96%, and 6.92% respectively, totaling 94.74%. This week, XRP, BCH, and XLM performed very strongly, rising by 44.58%, 8.16%, and 23.86% respectively. Among them, due to market expectations of potentially favorable policies for XRP, XRP surged rapidly, driving the entire PayFi track.

• RWA track: In the RWA track, OM, ONDO, and MKR have a large share, totaling: 87.85%. This week, their declines are: -2.98%, -1.19%, -6.93%, which are larger compared to other track projects, resulting in the RWA track performing the worst this week.

Next Week's Crypto Market Major Events Preview

• On Monday (January 20), SEC Chairman Gary Gensler stepped down; the new president was sworn in; CFTC Chairman Rostin Behnam stepped down; Web3Hub Davos 2025.

• Wednesday (January 22) WAGMI 2025

• On Thursday (January 23), the number of initial unemployment claims in the United States for the week

Outlook for Next Week

macroeconomic factors assessment

Next week, there will not be much macro data released. The main influencing factor for the market will be the inauguration of the new president on Monday, the same day SEC Chairman Gary Gensler will step down, along with CFTC Chairman Rostin Behnam. From the current perspective, there is still a high probability that the new president will mention policies regarding encryption or announce new encryption policy legislation during the inauguration speech. If it is announced as the market expects, it will greatly boost market sentiment. However, if the cryptocurrency industry is not mentioned, it could have a negative impact on market sentiment, potentially leading to a decline. Therefore, it is expected that market volatility will increase next week.

sector rotation trend

• Although the DeFi sector is currently experiencing poor sentiment after several weeks of repeated fluctuations in the crypto market, investment...