Market Overview

Main Market Trends

• Market Sentiment and Trends: The market sentiment index dropped from 91% to 53%. Although it remains in the greed zone, BTC is maintaining high volatility while Altcoins are generally under pressure, indicating an intensifying market divergence.

• Capital Flow Analysis: The market capitalization of USDT and USDC both increased (by +2.91% and +3.23% respectively), and the total TVL of DeFi continues to rise to $54.1 billion, indicating that the market is still attracting new capital.

• DeFi Sector Performance: The DeFi sector leads the market with a weekly return rate of 16.47%, and DEX trading volume reached a new high for 2024 ($63 billion), demonstrating strong development momentum.

• Meme Coin Market: The meme sector has returned to market visibility, performing actively amid market fluctuations, bringing new liquidity and user growth points.

• Hotspot Attention: DEX projects received the highest attention, while sectors like AI and GameFi showed weak performance, reflecting that market hotspots are concentrating on infrastructure and liquidity sectors.

• Investment Advice: Investors are advised to remain cautious, focusing on re-staking projects and DEX opportunities, while closely monitoring potential market fluctuations from next week's Federal Reserve meeting.

Market Sentiment Index Analysis

• The market sentiment index fell from last week's 91% to 53%, still within the bullish range.

• Altcoins underperformed against the benchmark index this week, showing a downward trend. After a decline in the first half of the week, most assets failed to recover. Due to leveraged positions, the market saw about $2 billion in forced liquidations, with significant 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.

Overall Market Trend Overview

• The cryptocurrency market experienced wide fluctuations this week, with the sentiment index still in the bullish phase.

• DeFi-related crypto projects performed prominently, showing sustained market interest in enhancing base yields.

• DEX projects performed well this week, indicating that on-chain investors are actively participating in on-chain investment activities.

• The meme sector re-emerged this week, gaining market attention.

Hotspot Sectors

DEX

This week, due to significant overall price fluctuations in the market, many profit opportunities were created for investors, leading on-chain investors to actively trade using DEX. As on-chain capital and users continuously entered the DEX sector, it drove the growth of DEX projects this week.

On-Chain Data for DEX

The most intuitive data to observe for DEX is its TVL and trading volume, as these two indicators can directly reflect the status of the DEX sector.

• TVL: The TVL of DEX projects rose rapidly this week, increasing from $25.22 billion last week to $26.58 billion now, a growth rate of 5.39%, indicating that capital is actively entering DEX projects.

TVL of the DEX sector (Data Source: https://defillama.com/protocols/Dexes)

• DEX Weekly Trading Volume: DEX trading volume reached a mid-2024 high this week, hitting $63 billion, with nearly $7.58 billion in trading volume in the last 24 hours, indicating a surge in DEX trading volume.

DEX Trading Volume (Data Source: https://dune.com/hagaetc/dex-metrics)

The DEX sector is showing a clear trend of business model upgrades. Leading protocols like Hyperliquid and dYdX are undergoing a strategic transformation from single trading functions to comprehensive financial infrastructure. This evolutionary path is characterized by protocols based on their own chain architecture, achieving vertical integration through functional aggregation to create a one-stop DeFi service ecosystem. Such architectural innovations signify that the DEX sector is evolving from a single trading level to a comprehensive financial infrastructure, with value reconstruction underway.

SUI

The Sui ecosystem has been a hot topic in the market this week, with the SUI price rising by 7.8%, outperforming BTC and ETH. DeFi projects within the Sui ecosystem showed outstanding growth this week.

On-Chain DeFi Project Data for Sui

• TVL: The TVL of Sui rose rapidly this week, increasing from $1.598 billion last week to $1.793 billion now, a growth rate of 12.88%, indicating that on-chain capital is actively entering the Sui chain.

• Accounts: The total number of users on the Sui chain reached 66,543,317, an increase of 2,184,755 from last week's 64,358,562, a growth rate of 3.39%. Although the increase may not seem large, achieving growth amid this week's volatility indicates that the Sui chain has a certain attraction for traffic.

• DEX Trading Volume: The main DEXs on the Sui chain are Cetus, Aftermath Finance, and BlueMove DEX. This week, the total trading volume on Sui's DEX exceeded $35 billion, with an average daily trading volume of $466 million, indicating that DEXs on the Sui chain are very active.

• DeFi Project TVL Growth: The top three projects by TVL in the Sui ecosystem are NAVI Protocol, Suilend, and Aftermath Finance, which belong to the lending and DEX sectors. This week, their TVL growth rates were 1.14%, 17.22%, and 1.72% respectively. It can be seen that despite the fluctuating trend, capital is continuously entering DeFi projects within the Sui ecosystem.

To determine whether a public chain is favored by the market, the most direct criterion is the increase or decrease in its TVL. Based on the above data, we can see that the Sui chain is maintaining rapid development. Due to the strong performance of the SUI price relative to the market, the underlying assets of the Sui ecosystem are continuously rising, driving the growth of APY for its on-chain DeFi projects. Additionally, with significant fluctuations in the overall market, there are profit opportunities, attracting a large number of on-chain users to participate, thus promoting the development of the entire Sui ecosystem.

DeFi Sector

TVL Growth Ranking

In the past week, the top 5 projects by TVL growth (excluding projects with a TVL below $30 million) are as follows, data source: Defilama

Synthetix (SNX): (Recommendation Index: ⭐️⭐️⭐️⭐️)

• Project Introduction: Synthetix is a decentralized synthetic asset protocol based on Ethereum, aimed at providing on-chain exposure to real-world assets through blockchain technology. The core functionality of Synthetix includes allowing users to mint synthetic assets by collateralizing their SNX tokens.

• Latest Developments: This week, Synthetix increased the APY for LP users by implementing SCCP-373, raising the trading fee share for V3 LP from 40% to 60%. Additionally, Synthetix Treasury plans to charge some integrator fees to increase V3 LP revenue. Furthermore, Synthetix announced the completion of its acquisition of the leveraged token platform TLX this week, intending to integrate TLX's leveraged token functionality, improve parameters, redeploy contracts, and launch a leveraged token incentive program.

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

• Project Introduction: The Babylon project aims to enhance the security of other proof-of-stake blockchains by leveraging Bitcoin's security. 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-yield projects.

• Latest Developments: Although the market price fluctuated significantly this week, BTC performed very strongly, remaining at high levels. Coupled with users' generally optimistic outlook on BTC's future development, there is a stronger desire to hold while also wanting to unlock the liquidity of held BTC, leading to more choices for yield-generating projects based on BTC. Additionally, Binance announced this week that users can directly stake BTC on Babylon from their Binance accounts to earn rewards, bringing significant new capital to Babylon. During the promotional period, participating Binance users can receive up to a 12% points boost, incentivizing a large number of Binance users to participate.

Usual Money (USUAL): (Recommendation Index: ⭐️⭐️⭐️)

• Project Introduction: Usual Money is a stablecoin project supported by Binance, aimed at providing a new stablecoin solution through decentralization. The core mechanism of the project includes three main tokens: the stablecoin USD0, the bond product USD0++, and the governance token USUAL.

• Latest Developments: Recently, Usual Money underwent a Checker upgrade, after which the annualized yield for USD0++ bond holders reached 48%. The average APY for USD0/USD0++ in Curve was 54%, and the average annualized yield for USD0/USDC was 52%. At the same time, the minting volume of USUAL was reduced by 17%, increasing the price of USUAL. This attracted many users to participate in Usual Money to obtain high annualized arbitrage returns.

BounceBit (BB): (Recommendation Index: ⭐️⭐️⭐️⭐️)

• Project Introduction: BounceBit is a restaking infrastructure layer built on the Bitcoin ecosystem. It is designed in close collaboration with Binance to create high-yield CeDeFi components; additionally, it has built the BounceBit Chain to establish specific use cases for Restaking.

• Latest Developments: Recently, BounceBit increased the staking rates for various tokens, with a 30-day annualized yield of 54.25% for USDT, 24.55% for BTC, 37.13% for BNB, and 37.7% for ETH, attracting a large number of users to stake their assets in BounceBit. This week, BounceBit also partnered with Ondo to introduce tokenized RWA into BounceBit, marking its entry into the RWA sector.

Equilibria (EQB): (Recommendation Index: ⭐️⭐️⭐️)

• Project Introduction: Equilibria is a yield farming project primarily aimed at generating high returns for users. It utilizes the veToken yield enhancement model adopted by Pendle, providing higher yields for LPs through the tokenized version of vePENDLE, ePENDLE, and offering additional rewards for PENDLE holders.

• Latest Developments: This week, Equilibria strengthened its collaboration with Curve by launching the first enhanced pool - the scrvUSD pool, to increase user yields. Subsequently, it added SolvBTC, cmETH, and ePENDLE enhanced pools, raising users' APY to a maximum of 59%, attracting a large number of users to participate in arbitrage.

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

Overall Sector Performance

• Stablecoin Market Capitalization Steady Growth: USDT increased from $141 billion last week to $145.1 billion, a growth rate of 2.91%. USDC grew from $40.2 billion to $41.5 billion, a growth rate of 3.23%. It is evident that both USDT, primarily in non-U.S. markets, and USDC, primarily in U.S. markets, experienced growth this week, indicating that the entire market continues to see sustained capital inflow.

• Liquidity Gradually Increasing: The risk-free arbitrage rates in traditional markets are continuously declining due to ongoing interest rate cuts, while the arbitrage rates in on-chain DeFi projects are increasing due to the rising value of cryptocurrency assets, making a return to DeFi a very good choice.

DeFi Sector TVL (Data Source: https://defillama.com/categories)

Funding Situation: The TVL of DeFi projects rose from $53.2 billion last week to $54.1 billion, with new capital reaching 1.69%. This week, it continued to maintain positive growth and sustained an upward trend for nearly two months, proving that capital is continuously entering DeFi projects.

In-Depth Analysis

Driving Forces of the Rise:

The core driving factors of this round of increase can be summarized in the following transmission path: the market entering a bull cycle drives up liquidity demand, which in turn pushes up the base lending rate level, amplifying the profit space of arbitrage cycle strategies in DeFi protocols. Specifically:

In Detail:

• Market Environment: The bull cycle brings an overall increase in liquidity demand.

• Interest Rate Side: The base lending rate rises, reflecting market expectations for capital pricing.

• Yield Side: The yield of cycle arbitrage strategies expands, significantly improving the endogenous yield of protocols. This transmission mechanism reinforces the intrinsic value support of the DeFi sector, forming a positive growth momentum.

Other Sector Performances

Public Chains

In the past week, the top 5 public chains by TVL growth (excluding smaller public chains) are as follows, data source: Defilama

Hyperliquid: Due to significant market fluctuations this week, the number of users participating in on-chain trading surged, especially those engaging in contract trading. This week, Hyperliquid's open interest reached $3.5 billion, quickly surpassing the traditional Perp DEX leader DYDX, becoming the largest Perp DEX on-chain. Consequently, Hyperliquid's trading volume rapidly expanded, especially after the launch of the popular project ME, further increasing its trading volume.

Sui: This week, the Movement token was launched, driving up the Move ecosystem, with Sui, as the leader of the Move ecosystem, receiving widespread market attention. This week, Sui partnered with Backpack, which will support SUI tokens, and also reached an agreement with Phantom wallet for integration. Additionally, a popular meme coin, KAPI, emerged on the Sui chain this week, attracting a wave of traffic and capital to the Sui ecosystem. The daily trading volume on Sui's DEX exceeded $466 million this week, demonstrating the rapid development of Sui's on-chain ecosystem.

Algorand: This week, the meme coin project MONKO on the Algorand chain gained popularity, attracting some attention and capital to the Algorand chain. At the same time, Algorand announced strong support for RWA sector projects on the Algorand chain. This week, Coinbase announced to European customers that it would no longer support stablecoins that do not comply with MiCA standards, while Algorand's two main stablecoins, USDCa and EURD, comply with MiCA standards and can continue to provide on-chain stablecoin services to European users.

PulseChain: This week, meme coin projects on the PulseChain chain became active. Although there were no particularly outstanding projects, they still brought a certain wealth effect on-chain, contributing some attention and new capital to PulseChain. The largest DEX on PulseChain, PulseX, saw its trading volume increase by 62% this week, bringing incremental growth to PulseChain's TVL. Additionally, the market's outflow of PulseChain's token PLS will be listed on Binance, prompting on-chain users to enter the PulseChain ecosystem to earn PLS.

Bitcoin: This week, the market experienced a correction in the first half, with significant declines in overall market prices. However, BTC performed well during this period, with a smaller drop, and returned to historical highs in the second half of the week. Users are increasingly optimistic about BTC's future rise and are more determined to hold BTC. Therefore, while holding BTC, users are choosing to invest in BTCFi projects to earn additional returns, leading to an increase in Bitcoin's TVL.

Overview of Growth Rankings

In the past week, the top 5 tokens by market growth (excluding tokens with very low trading volume and meme coins) are as follows, data source: Coinmarketcap

This week's growth rankings show a concentration of sectors, with most rising tokens belonging to the public chain sector.

USUAL: Recently, Usual Money underwent a Checker upgrade, after which the annualized yield for USD0++ bond holders reached 48%. The average APY for USD0/USD0++ in Curve was 54%, and the average annualized yield for USD0/USDC was 52%. At the same time, the minting volume of USUAL was reduced by 17%, increasing the price of USUAL. This attracted many users to participate in Usual Money to obtain high annualized arbitrage returns.

BGB: Recently, Bitget has been continuously listing tokens with high market popularity, especially some meme tokens, bringing in a certain number of users and capital, helping Bitget increase its trading volume. This week, Bitget's CEO announced that they are reconsidering entering the U.S. market, planning to expand their business under the potentially pro-crypto policies of the Trump administration. This week, Bitget's trading volume has surpassed OKX, becoming the third-largest exchange in the CEX space.

SUSHI: Recently, Sushi launched the Dojo Agent and Tweet Token features, which allow users to tokenize their favorite tweets or create their own meme coins directly from Twitter. This functionality significantly increased Sushi's trading volume. This week, Sushi Dao proposed a diversified funding strategy, shifting assets from 100% SUSHI tokens to 70% stablecoins, 20% blue-chip cryptocurrencies, and 10% DeFi tokens, aiming to reduce volatility, enhance liquidity, and generate returns through staking, lending, and liquidity provision.

ORCA: ORCA strengthened its collaboration with Binance this week, with Binance Wealth Management, one-click token purchase, flash trading platform, leverage, dollar-cost averaging platform, and Binance contracts all integrating ORCA. Additionally, ORCA launched a new token creation tool this week, supporting Solana and Eclipse networks, allowing users to customize tokens without coding. ORCA also partnered with HawkFi and NATIX Network to enhance the DeFi experience and support the Solana AI Hackathon.

ACX: This week, Across Protocol announced an important partnership with Binance, launching the ACX token without any listing fees. Additionally, ACX is now available on Binance Wealth Management, one-click token purchase, flash trading platform, leverage, dollar-cost averaging platform, and Binance contracts. The project has also partnered with HTX Global and Bitvavo exchanges, collaborated with Yodl to provide cross-chain payment services, and continued to deepen its cooperation with Uniswap.

Meme Token Growth Rankings

Data Source: coinmarketcap.com

This week, meme projects have returned to the market's spotlight. The overall market experienced wide fluctuations, but meme projects performed well, creating a wealth effect on-chain and attracting more users to participate in meme projects.

Social Media Hotspots

Based on the top five daily growth statistics from LunarCrush and the top five AI scores from Scopechat for the week (12.7-12.13):

The most frequently mentioned topic was DEX, with the following tokens listed (excluding tokens with very low trading volume and meme coins):

Data Source: Lunarcrush and Scopechat

According to data analysis, the DEX projects received the highest attention on social media this week, generally showing an upward trend and performing better than other sector projects. The overall market was in a wide fluctuation trend, with significant price volatility, leading to many trading opportunities. As a result, on-chain users actively participated in trading, causing a substantial increase in trading volume across various DEXs, which was also reflected in the prices of DEX sector projects.

Overall Market Topic Overview

Data Source: SoSoValue

According to weekly return rate statistics, the DeFi sector performed the best, while the AI sector performed the worst.

• DeFi Sector: There are many projects in the DeFi sector. In the sampling from SoSoValue, LINK, UNI, and AAVE accounted for the largest shares, reaching 36.93%, 22.33%, and 11.12%, respectively, totaling 70.38%. This week, LINK, UNI, and AAVE rose by 13.71%, 19.92%, and 42.85%, respectively, leading to the largest increase in the entire DeFi sector compared to other sectors. Additionally, the significant price fluctuations this week created many arbitrage opportunities on-chain, resulting in the best performance of DeFi sector projects.

• AI Sector: In the AI sector, FET, RENDER, WLD, and TAO have a significant share, totaling 80.75%. This week, their declines were -4.16%, -2.59%, -9.79%, and -11.85%, respectively, resulting in the worst index performance for the entire AI sector. Although the AI sector did not perform well this week, it has maintained a high growth rate in recent weeks, and despite the poor price performance this week, it remains a hot topic of discussion in the market, mainly focused on AI Agents.

Next Week's Major Crypto Events

• Tuesday (December 17): U.S. November Retail Sales Month-on-Month
• Wednesday (December 18): Submission of Hong Kong's "Stablecoin Regulation Draft" for first reading in the Legislative Council
• Thursday (December 19): Federal Reserve Interest Rate Decision (Upper Limit), Federal Reserve Rate Resolution and Economic Outlook Summary
• Friday (December 20): U.S. November Core PCE Price Index Year-on-Year, Asia Blockchain and AI Week Hainan International Blockchain Week

Outlook for Next Week

Macroeconomic Factors Assessment

• The market has fully digested the expectation of a 25 basis point rate cut at the Federal Reserve's December meeting.
• Focus will shift to Chairman Powell's speech and the economic outlook summary to assess the direction of monetary policy in January 2025.
• In the short term, the Microsoft shareholder meeting resolution and macro data may dominate market sentiment, and the crypto asset market is expected to maintain a fluctuating pattern.

Sector Rotation Trends

• DeFi sector restaking projects benefit from rising risk aversion, with a preference for capital allocation towards DEXs. In the context of increased market volatility, arbitrage demand drives on-chain activity, improving the sector's prosperity.
• The AI sector's Agent sub-sector maintains high attention, with the market size reaching $6-7 billion. The integration of Web2 and Web3 ecosystems is accelerating, and the integration process of data networks and functional AI Agents with existing crypto products is speeding up.

Investment Strategy Recommendations

• Maintain a defensive allocation, focusing on the risk-averse properties of leading assets BTC and ETH.
• While hedging risks, consider strategically positioning in high-quality DeFi sectors with endogenous yields.
• Investors are advised to remain cautious, strictly control positions, and manage risks effectively.

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