Author: Nancy, PANews

Every crypto cycle brings forth dominant narratives, and AI+ is undoubtedly one of the main threads of this bull market, especially as the AI Agent frenzy is capturing a significant portion of on-chain liquidity. Discussions in the market about crypto AI being in a similar cycle to the DeFi Summer are increasing. This article by PANews will compare the market development scale of crypto AI and DeFi, and explore the similarities and differences in the development of these two fields.

$48 Billion Market Cap Surpassing DeFi Summer, Can It Replicate DeFi's Success?

According to data from CoinGecko, as of January 2, the market cap of the crypto AI sector has reached $48.8 billion, a figure that far exceeds the market cap during the "DeFi Summer" period. Data from The Block shows that after the explosive growth phase of DeFi in 2020, its market cap peaked at $6.04 billion, only breaking the $50 billion mark in mid-April 2021, when the market had gradually matured and diversified. This comparison indicates that the explosive power of crypto AI has surpassed the early development stage of DeFi, demonstrating a stronger advantage in market appeal and growth potential.

In particular, the AI Agent sub-sector has been continuously surging during this period. CoinGecko data shows that as of January 2, the market cap of AI Agents has reached $16.93 billion, accounting for 34.7% of the entire crypto AI sector, a figure equivalent to the total market cap of DeFi protocols in January 2021. Taking leading projects like Virtuals Protocol ($5.02 billion) and ai16z ($2.7 billion) as examples, the combined market cap of these two has already surpassed the total market cap of all DeFi protocols at the end of 2020, further highlighting the rapid development of the AI sector. In contrast, leading DeFi projects Uniswap and Aave had peak circulating market caps of $22.05 billion and $6.58 billion, respectively, during the last bull market.

From the perspective of capital investment, DeFi attracted a large influx of venture capital after its rapid development, and crypto AI is currently in a similar phase, with increasing amounts of funding flowing into the AI sector, leading to a surge in investments around crypto AI. According to PANews' 2024 financing report, DeFi secured $1.69 billion in 296 financing events in 2024, while AI projects, as an emerging category, have rapidly grown this year, with nearly 100 disclosed financing events, of which 15.2% received tens of millions of dollars in funding, totaling around $600 million.

Despite the impressive data performance of the crypto AI sector, there are differing opinions in the market about whether its development cycle can be similar to that of DeFi. For instance, Messari's latest report points out that AI Agents will peak in the first quarter of 2025 and will not recover. The reasons are as follows: (1) AI Agent proxies have yet to prove their product adaptability to support market speculation; (2) The success of Alt-L1 is based on a clear demand for block space during the DeFi boom, but AI Agents lack both demand and a clear user base; (3) The launch of AI Agents relies on market speculation, but when the market realizes they will remain mere toys in the foreseeable future, this speculative cycle will collapse.

There are also viewpoints suggesting that AI has similar development potential to DeFi. For example, crypto KOL @0xWizard stated that 2020 could be called the "Cambrian Explosion of DeFi," and 2025 is likely to be the "Cambrian Explosion of AI Agents." Various Ai+Crypto play styles are expected to take shape next year. Researcher Haotian believes that the arrival of AI Agents is akin to the DeFi Summer in 2020, generating a massive new "bubble" narrative cycle of Build+Speculation. Although the AI Agent ecosystem does not yet have dedicated infrastructure conditions, from the perspective of ecological plasticity, the narrative opportunities brought by AI Agents are much grander than those of DeFi.

Former Spartan Group member @0xJeff predicts that 2025 will be known as the Agentic era, with Agentic-type L1 reaching a market cap of $100 billion, similar to the L1 valuation cycle of 2020-21; DeFi, with the help of AI Agents, will reach a TVL peak of over $200 billion from the previous cycle.

Regarding the valuation of AI MEME coin projects, crypto KOL @Rui stated that in the early MEME market, project valuations were closely tied to whether they could be listed on exchanges, especially top exchanges. However, with the rise of AI Agents and market changes, the previous valuation system based on exchange logic for large-cap MEMEs has become ineffective. Expectations for project valuations are no longer based on which exchanges they will be listed on, but rather on what kind of ecosystem they will generate. For projects that already have an ecosystem, valuations can be determined based on their ecological share; for standalone projects or "wild system" projects, the key to valuation is whether they can break the $100 million market cap, as valuations below this rely more on dissemination, community, and early funding support.

Four Commonalities from Cultural Influence to Capital Efficiency

The combination of technology and capital is the core driving force behind the development of the crypto industry. In the last bull market, DeFi reshaped the crypto financial world through decentralized platforms and smart contracts. Now, crypto AI is changing the operation of the crypto market in a more intelligent and automated way. Currently, both share similarities in cultural influence, technological foundation, entry barriers, and capital efficiency.

Meme Culture

As one of the core narratives of the last crypto bull market, DeFi embodies a spirit of rebellion against traditional finance. Many DeFi projects attract attention through humorous and playful naming (such as various food series) while providing real financial functions. Initially, the market often viewed DeFi as a liquidity game rather than purely financial tools, but this culture of breaking the "seriousness" of traditional finance unexpectedly sparked reflection and discussion about the traditional financial system, quickly accumulating a large number of developers and user participation.

Similar to the meme culture in early DeFi narratives, the popularity of crypto AI also leverages the power of MEME culture. The rise of AI Agents relies not only on technological innovation and application value but also on quickly gathering sentiment through humorous and satirical MEME formats, thereby stimulating interest and participation from on-chain users, including attracting new groups such as external developers and researchers in a more relaxed and interactive manner.

Technological Foundation

With support in smart contracts, token standards, and developer ecosystems, Ethereum's flexibility provided a strong technological foundation for the rise of DeFi, allowing developers to innovate financial products based on demand. Its decentralized and open-source mechanisms also provided users with a fair and transparent financial platform.

The rise and popularity of the current crypto AI narrative also began with explosive advancements in AI technology, particularly the emergence of large language models (like ChatGPT), which revealed the immense potential of combining artificial intelligence technology with blockchain. At the same time, the rapid enhancement of AI large model capabilities has empowered more intelligent on-chain applications, such as trading strategies, market predictions, smart contract automation, and data analysis, providing new perspectives and momentum for innovation in crypto technology.

Entry Barriers

Compared to traditional financial systems that require complex procedures, bank accounts, and credit checks, DeFi offers a way to provide financial services that are open and transparent without intermediaries through blockchain and smart contracts. Users can freely engage in lending, trading, and liquidity provision activities with just a crypto wallet and a small amount of crypto assets, unrestricted by geographical and economic backgrounds.

In contrast to traditional crypto tools and platforms, AI Agents provide a more intelligent and automated operation method, allowing users to easily get started without needing to deeply understand complex technical details or possess professional trading knowledge and experience. Additionally, high-quality AI Agent projects have lowered participation barriers and streamlined operational pathways, breaking the high thresholds of previous platforms like VCs and centralized exchanges (CEX), not only providing more opportunities for individual investors but also opening up lower-cost and more decentralized innovation channels for developers and project parties.

Moreover, the combination of AI Agents with MEME culture has lowered the cognitive barriers for people regarding crypto AI technology, especially for users without a technical background, breaking the high-threshold image of technical projects and making participation in this field more diverse, relaxed, and entertaining.

Capital Efficiency

In the DeFi narrative, capital efficiency has always been one of the core driving forces. DeFi significantly improves capital utilization efficiency through decentralized platforms, utilizing smart contracts and automation mechanisms. These platforms attract a large amount of institutional capital and retail users into the market by offering high APY and capital returns. Without the need for intermediaries and traditional banking processes, capital can flow in a shorter time and achieve higher returns, greatly enhancing the market's capital efficiency.

AI Agents, through the automation and intelligent processing of artificial intelligence technology, can help users achieve more efficient capital operations in the crypto market. Unlike traditional manual intervention methods, AI Agents can automate tasks such as trading, asset management, and risk control based on real-time market data, helping users seize market opportunities and avoid emotional decision-making and human errors, thereby significantly improving capital operation efficiency. Furthermore, AI Agent projects provide more users with opportunities for profit redistribution through on-chain execution mechanisms, allowing participants to enjoy the growth dividends of projects with low barriers to entry.

Four Key Differences from Technology-Driven to User Participation

Although DeFi and crypto AI demonstrate similar dynamics and potential in driving innovation in the crypto market, they exhibit significant differences on multiple key levels. These differences are reflected not only in the complexity of technology and the breadth of application scenarios but also in the different ways market driving forces and user participation manifest.

Application Scope

The main focus of DeFi is on on-chain finance, with innovations primarily concentrated on the construction of financial tools such as decentralized exchanges (DEX), automated market makers (AMM), and lending protocols. While these innovations have disrupted traditional financial systems, their application scenarios are relatively concentrated and clear. In contrast, the application scope of crypto AI is much broader, involving multiple fields such as on-chain finance, AI-generated content (AIGC), NFTs, smart contract automation, and data analysis. Although the complexity of technological integration in crypto AI is higher, it also allows it to address a wider range of market and user needs. In the future, the technological development of large AI models will drive more cross-domain innovations and applications.

Technological Driving Force

The technological innovation of DeFi is primarily based on blockchain and smart contracts, driving the innovation of decentralized financial ecosystems. Its core motivation comes from decentralized trading, permissionless financial innovation, and the automatic execution of smart contracts. The narrative of crypto AI, on the other hand, has complex and diverse technological driving forces, ranging from financial areas such as trading strategies and risk management to broader applications like content generation, personalized recommendations, and data analysis.

User Base

The main user base of DeFi consists of on-chain native users, who typically possess strong financial operational experience. In addition to attracting crypto natives, crypto AI can also engage a large number of users without technical backgrounds, including content creators, developers, and technical researchers, giving it a significant advantage in terms of popularity and market coverage.

Market Cap Drivers

The market cap of DeFi projects is primarily determined by factors such as the amount of assets locked, listings on exchanges, and liquidity, relying more on the frequency of use of the platform's financial tools and the level of user participation, making market operations relatively direct and transparent. In comparison, the market cap logic of crypto AI projects is more complex and carries higher uncertainty, as it not only depends on the depth and breadth of technological innovation but also requires consideration of the project's ecological impact and the development potential of actual application scenarios. This also means that the sustainability of the crypto AI narrative depends on the combination of technological advancement and user demand, presenting higher risks and potential.

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