Market Overview

This week, the cryptocurrency market has shown significant recovery, with the sentiment index rising from 11% to 35%. Although it is still in the panic zone, there is a clear improvement. The market capitalization of stablecoins continues to grow, with USDT reaching 137.4 billion and USDC reaching 46.5 billion, indicating that institutional funds are continuously entering the market. The market recovery is mainly driven by two factors: first, the U.S. CPI data met expectations, and second, the market has an optimistic outlook on the potential easing of cryptocurrency regulations following Trump's possible election. Small-cap tokens have overall outperformed the broader market, particularly DeFi and AI-related tokens which have seen significant gains, indicating that funds are beginning to shift from Bitcoin to small-cap tokens.

DeFi Ecosystem Development

The total locked value in the DeFi sector is ( TVL, which has slightly increased to 53.5 billion USD, showing a month-on-month growth of about 1%. It is worth noting that DeFAI, as a combination of DeFi and AI, has seen its market capitalization surge from 600 million USD to 3.2 billion USD within a week, demonstrating the market's strong enthusiasm for innovative DeFi applications.

Development of the AI Track

The AI Agent sector continues to develop strongly, shifting from simple AI token trading to deeper application scenario development. The rise of DeFAI marks the entry of AI applications in the cryptocurrency field into the 2.0 stage, mainly reflected in four directions: user-friendly AI interfaces, portfolio management, infrastructure construction, and market analysis and forecasting. Leading projects such as Griffain, Anon, and AXIBT demonstrate that the market is transitioning from the proof-of-concept stage to the practical application stage.

Meme Coin Trends

The Meme coin sector performed relatively flat this week, with market attention clearly retreating from the peak levels observed 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, with the rise in discussions related to Trump, the market anticipates a new wave of Meme coin speculation centered around political themes.

Public Chain Performance Analysis

Layer 1 public chains are showing a stable upward trend overall, but the increase is not as significant as that of the DeFi and AI sectors. Among mainstream public chains, those with advantages in AI and DeFi ecosystems are performing better, reflecting that the value of underlying public chains increasingly depends on the prosperity of their upper-level application ecosystems. It is worth noting that public chains supporting AI computing 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 influenced by the Federal Reserve's interest rate meeting in January and Trump's inauguration, with expected increased volatility. Investors are advised to focus on DeFi projects that have actual application scenarios when making selections, and to avoid chasing purely conceptual speculation. In terms of DeFi investments, opportunities for returns in liquidity pool projects can be considered, but leverage risks must be strictly controlled. Regarding timing, it is recommended to observe the policy changes brought by Trump's presidency in the short term, to avoid blindly chasing highs, and to ensure the safety of the investment portfolio.

Market Sentiment Index Analysis

• The market sentiment index has risen from 11% last week to 35%, still in the panic zone, but has improved.
• Small-cap tokens performed better than the benchmark index this week, with most tokens rising more than the market. The main reason is the CPI data released this week and the optimistic expectations for relaxed regulation on the crypto market after Trump takes office next week, driving up prices. Given the current market structure, small-cap tokens are expected to move in sync with the benchmark index in the short term.

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Overview of Overall Market Trends

• The cryptocurrency market is on an upward trend this week, with the sentiment index still in the panic zone.
• DeFi-related projects have performed prominently compared to other sectors, indicating the market's ongoing interest in enhancing base yields.
• The DeFAI project has high public sentiment this week, indicating that investors are actively looking for the next market breakout point.

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Hot Tracks

DeFAI

This week, the overall market fluctuated and rose, with all sectors increasing. Due to a significant decline in the AI sector last week, this week saw a strong rebound. The focus in the AI sector has shifted from the AI Meme issuance model to DeFAI. DeFAI has just emerged, combining AI and DeFi, and is receiving the highest attention.

The market capitalization of DeFAI has risen from $600 million to $3.2 billion, achieving more than a fourfold growth in a week. DeFAI can be divided into four categories: abstraction/user-friendly AI, yield optimization and portfolio management, DeFAI infrastructure/platform, and market analysis and prediction. Representative projects include Griffain, Anon, and AXIBT. DeFAI is currently in the proof-of-concept stage, with most features not yet realized. When investing, attention should be paid to the implementation situation, and caution should be exercised regarding speculative risks.

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DeFi Track

TVL Growth Ranking

The top 5 projects with the highest TVL growth in the market over the past week (TVL over 30 million USD):

1. Folks Finance (Token not yet issued): Algorand lending platform, in collaboration with DeBank, launched gALGO liquidity staking incentives.
2. Beets (Unreleased Token): Sonic chain's liquidity staking hub, stS staking volume exceeds 88.99 million, in collaboration with PaintSwap.
3. AlphaFi (ALPHA): A yield optimization platform on the SUI chain, optimizing liquidity solutions and contributing about 10% of the trading volume on the Sui chain.
4. Echelon Market (Token Not Yet Issued): The Move language DeFi market is about to launch, offering high APY to attract users.
5. Astherus (Token not yet issued): A multi-asset liquidity hub that launched the USDF stablecoin, with a TVL exceeding $100 million.

This week's projects with rapid TVL growth are mainly concentrated in the machine gun pool project.

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Overall Performance of the Track

• Liquidity is gradually increasing: On-chain DeFi arbitrage rates rise with the value of crypto assets.
• Funding situation: DeFi TVL increased from $53 billion to $53.5 billion, a growth of 0.94%. The main reasons are the overall upward trend of the market and optimistic expectations regarding Trump's presidency.

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Performance in Other Tracks

Public Chain

The top 5 public chains by TVL growth in the past week:

1. Sonic: Launching multi-currency DeFi applications with innovative real-time deposit features.
2. Hyperliquid: Launch of the SOLV token to achieve "Day 1 tri-end synchronization".
3. Algorand: Completed the 4.0 version upgrade and launched the NodeKit tool.
4. BSquared: Processed over 101 million transactions, driving Bitcoin's transformation into an AI innovation hub.
5. Mode: Launch the "Agentic Economy" program, providing 2 million OP ecological incentives.

![Market recovery, DeFi and AI tracks lead the trend｜Frontier Lab Cryptocurrency Market Weekly Report])https://img-cdn.gateio.im/webp-social/moments-711504cd24fe0f57c6f116e9ec853ecb.webp(

Overview of the Rising List

The top 5 tokens with the highest price increase in the past week:

1. ANON: Launched the AUTOMATE framework and initiated DAO governance.
2. BUZZ: Won first place in the Solana AI Hackathon, launching multiple feature updates.
3. CGPT: Launched on multiple exchanges, introduced smart contract auditing tools.
4. ARC: Reached strategic cooperation with multiple parties to promote the popularization of decentralized AI.
5. GRIFFAIN: Launched multiple new features to strengthen cooperation with well-known projects.

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Meme Token Price Increase Ranking

This week, the market rebounded significantly after a wide fluctuation, with AI Meme projects showing the strongest rebound, attracting market attention and funds.

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Social Media Hot Topics

This week (1.11-1.17), the Layer 1 projects have the highest attention on social media. After a broad market fluctuation, the rebound has driven the APY of various on-chain DeFi projects to rise, attracting user participation.

Overall Market Overview

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

• PayFi track: XRP, BCH, and XLM performed strongly, especially XRP which surged due to Trump's remarks.
• RWA track: OM, ONDO, and MKR have seen significant declines, resulting in poor overall performance.

![Market Recovery, DeFi and AI Tracks Lead Trends｜Frontier Lab Crypto Market Weekly Report])https://img-cdn.gateio.im/webp-social/moments-c9e569fb86c8bf9024bb6aa8335b6103.webp(

Next Week's Major Crypto Events Preview

• January 20: SEC Chairman Gary Gensler steps down; Trump is sworn in; CFTC Chairman Rostin Behnam steps down.
• January 22: WAGMI 2025
• January 23: Initial jobless claims in the United States for the week are announced.

Outlook for Next Week

Macroeconomic Factors Analysis

The main influencing factors next week are Trump's inauguration and related personnel changes. The market expects that Trump may mention cryptocurrency policies, which, if in line with expectations, will boost market sentiment; conversely, it may trigger a decline. Increased market volatility is anticipated.

Sector Rotation Trend

• DeFi Sector: Investors generally expect a market-wide surge in the first quarter, participating in machine gun pool projects to increase returns.
• AI Sector: Market focus has shifted to DeFAI, with a scale reaching $15.9 billion and a weekly increase of 16.65%. DeFAI is seen as an emerging track that combines AI potential with DeFi capital advantages.