Trump’s Inauguration and SEC Transition May Spark Market Rally | Frontier Lab Crypto Weekly Report
Market Overview
Overall Market Status
This week, the cryptocurrency market showed a clear warming trend, with the sentiment index rising from 11% to 35%. Although still in the fear zone, this marks a significant improvement. The market capitalization of stablecoins continued to grow (USDT reached $137.4 billion, USDC reached $46.5 billion), indicating that institutional capital is still flowing into the market. The market recovery was mainly driven by two factors: first, the US CPI data met expectations, and second, there was optimistic anticipation regarding potential relaxed crypto regulations following a potential Trump victory. Altcoins performed better than the market overall, with particularly notable gains in DeFi and AI-related tokens, signaling a shift of funds from Bitcoin to lower-market-cap tokens.
DeFi Ecosystem Development
The DeFi sector’s TVL (Total Value Locked) grew slightly to $53.5 billion, a 1% increase from the previous week. Notably, DeFAI, a combination of DeFi and AI, saw its market capitalization surge from $600 million to $3.2 billion in a single week, showing strong market enthusiasm for innovative DeFi applications.
AI Sector Development
The AI Agent sector continued its strong momentum since late last year, shifting from pure AI token trading to deeper application development. The rise of DeFAI signifies the entry of AI into the 2.0 stage of its crypto application, primarily in four areas: user-friendly AI interfaces, portfolio management, infrastructure development, and market analysis & forecasting. Leading projects such as Griffain, Anon, and AXIBT illustrate how the market is transitioning from proof-of-concept to real-world applications.
Meme Coin Trends
Meme coins showed relatively muted performance this week, with market attention retreating from the high levels seen in Q4 of last year. This suggests that investor risk appetite is shifting from purely speculative meme tokens to projects with real application scenarios. However, with the Trump-related topics gaining traction, there is a potential for a new wave of meme coin speculation focused on political themes.
Public Blockchain Performance Analysis
Layer 1 blockchains showed stable upward trends, though their gains were less pronounced than those of DeFi and AI sectors. Among major public blockchains, those with advantages in AI and DeFi ecosystems performed better, reflecting the increasing importance of the application ecosystem for the value of underlying blockchains. Notably, blockchains supporting AI computing have begun to attract market attention, signaling that upcoming blockchain competition may center around AI computing capabilities.
Future Market Outlook
In the short term, the market will be influenced by the US Federal Reserve’s January meeting and Trump’s inauguration, with increased volatility expected. Investors are advised to focus on DeFAI projects with actual application scenarios, avoiding purely speculative hype. In DeFi investments, attention can be given to yield opportunities in machine gun pool projects, but leverage risks should be strictly controlled. Regarding timing, it is recommended to watch for policy changes after Trump’s inauguration and avoid chasing highs, ensuring the safety of investment portfolios.
Market Sentiment Index Analysis
The market sentiment index rose from last week’s 11% to 35%, still in the fear zone but showing improvement. Altcoins outperformed the benchmark index, with most tokens seeing greater gains. This was largely driven by the CPI data and optimism surrounding Trump’s potential policy changes that could relax crypto regulations. Given the current market structure, it is expected that Altcoins will align with the benchmark index in the short term.
Overall Market Trend Summary
- The cryptocurrency market trended upwards this week, though the sentiment index remains in the fear zone.
- DeFi-related crypto projects outperformed other sectors, indicating continued market focus on improving base yields.
- DeFAI-related projects gained significant attention this week, as investors began actively searching for the next market breakout point.
Hot Sectors
DeFAI
This week, the market showed a rising trend, with all sectors seeing upward movement. Due to the large drop in the AI sector last week, the rebound this week was particularly strong. The focus in the AI sector is shifting from AI meme token issuance models to DeFAI, which combines AI with DeFi. With DeFAI emerging rapidly and combining the most promising sectors — AI and DeFi — market interest in DeFAI reached an all-time high this week. Its market capitalization rose from $600 million last week to $3.2 billion, marking a more than fourfold increase in one week. DeFAI projects can be categorized into four areas: abstracted/user-friendly AI, yield optimization and portfolio management, DeFAI infrastructure/platforms, and market analysis & forecasting. DeFAI is still in its early stages, with most projects focusing on abstracted/user-friendly AI and market analysis/forecasting. Representative projects include Griffain, Anon, and AXIBT. While DeFAI has grown rapidly and gained significant market attention, its applications are still in the concept verification stage, with most features not yet realized. Therefore, investors should avoid blindly following trends and focus on the actual implementation of DeFAI projects in various domains, being cautious of market speculation risks.
Top 5 DeFAI Projects by Market Cap
DeFi Sector
TVL Growth Rankings Top 5 DeFi Projects by TVL Growth this Week (excluding projects with a TVL below $30 million, sourced from Defilama):
Folks Finance (Unlaunched Token): Recommendation: ⭐️⭐️⭐️
A decentralized finance platform based on the Algorand blockchain offering a range of permissionless DeFi tools, including lending, deposits, staking, and trading. This week, Folks Finance focused on ecological cooperation and community incentives, including a partnership with DeBank for cross-chain account monitoring and a governance incentive program with rewards up to 4x.
Beets (Unlaunched Token): Recommendation: ⭐️⭐️⭐️
A DeFi platform built on the Sonic chain focused on liquidity staking. It saw a dramatic increase in staked assets and expanded ecological collaborations with PaintSwap and SolvProtocol, offering new liquidity pools and significant rewards.
AlphaFi (ALPHA): Recommendation: ⭐️⭐️⭐️
An automated yield optimization platform based on the SUI blockchain. This week, AlphaFi focused on technical optimization and ecosystem expansion, launching liquidity solutions and strengthening its Sui integration.
Echelon Market (Unlaunched Token): Recommendation: ⭐️⭐️
A decentralized financial market project based on the Move language. This week, Echelon focused on ecosystem development and recruitment, alongside the announcement of attractive lending rates to draw in more users.
Astherus (Unlaunched Token): Recommendation: ⭐️⭐️⭐️
An innovative multi-asset liquidity center aiming to maximize real yield from digital assets. Astherus launched the USDF stablecoin and saw rapid growth in TVL, reaching $100 million, and partnered with BNB Chain for new minting capabilities.
In summary, we can observe that this week, projects with the fastest TVL growth are primarily concentrated on the “Vault strategies” projects.
Sector Performance Overview
- Liquidity in DeFi projects has been increasing, with arbitrage rates rising as cryptocurrency asset values increase. DeFi remains a strong sector with good return potential.
- Capital Situation: The TVL of DeFi projects increased from $53 billion last week to $53.5 billion currently, with a growth rate of 0.94%. This marks the end of the negative TVL growth trend across DeFi sectors seen last week. The market experienced a downward spike on Monday, followed by an overall upward trend, especially after the release of the U.S. CPI data on Wednesday, which triggered a broad market rally. This, in turn, attracted funds back into DeFi projects. Additionally, the market sentiment toward next Monday’s inauguration of President Trump is generally optimistic, leading to a surge in capital entering the DeFi sector, which contributed to the rise in DeFi market TVL.
Other Sector Performance
Public Chains
Top 5 Public Chains by TVL Growth Over the Past Week (Data Source: DefiLlama)
Sonic: This week, Sonic launched a DeFi application supporting various cryptocurrencies, including USDC, USDT, and ETH, and innovatively introduced a real-time deposit feature, allowing users to avoid the limitations of pre-deposits and indefinite lock-ups. Additionally, Sonic partnered with RedotPay to develop a global payment solution based on $S and stablecoins. It also secured approval from the Uniswap DAO to offer a total of $750,000 (including $250,000 in UNI and $500,000 in $S) in liquidity mining rewards. This week, the $S token was successfully listed on Bybit, and the first NFT series “Umans on a Sonic Trip” created by WorldofUmans was launched. Furthermore, Sonic introduced a new points dashboard and is about to integrate Lombard Finance’s $LBTC.
Hyperliquid: This week, Hyperliquid successfully launched the SOLV token, the first-ever “Day 1 Triple Sync” (simultaneously listed on centralized exchanges, Hyperliquid spot markets, and multi-chain deployment). SOLV was launched on both Hyperliquid L1 and BNB Chain, and plans are in place for seamless asset connection between two chains on the upcoming HyperEVM. Hyperliquid also formed a key strategic partnership with NFT project Azuki to endorse the open anime universe token ANIME, with HYPE stakers set to receive a TGE airdrop of ANIME tokens.
Algorand: This week, Algorand completed a major upgrade to version 4.0 and introduced the NodeKit tool to simplify node operation in preparation for the upcoming staking rewards mechanism. Algorand also forged strategic partnerships with Mastercard and PeraAlgoWallet to advance real-time settlement functionality. The platform has collaborated with several DeFi platforms, such as Tinyman and Pact.Fi, to enrich its financial applications ecosystem. Additionally, Algorand announced significant real-world use case progress, with over 112 million transactions processed through the TravelX platform in 2024.
BSquared: This week, BSquared made significant advancements in both technology and ecosystem development. As a Bitcoin Layer-2 solution, the platform has successfully processed over 101 million transactions and strengthened the BTCFi ecosystem through strategic cooperation with Segment Finance. Notably, B² is actively promoting the transformation of Bitcoin into an AI innovation hub to support AI-driven agent development. Additionally, in the DeFi sector, the platform is offering higher yield opportunities for users through innovative token economics and optimized liquidity solutions.
Mode: This week, Mode showed strong momentum in the DeFAI sector. It launched the Season 4 “Agentic Economy” plan, offering up to 2 million OP in ecosystem incentives and introduced the Agentic Staking mechanism. In terms of technical development, Mode announced the comprehensive DeFAI tech stack roadmap for 2025 and further improved its ecosystem infrastructure through collaboration with Matcha. To foster ecosystem growth, Mode also launched the $100,000 AI Agent Founders School project to attract developers.
Top 5 Tokens by Growth in the Past Week
(Excluding tokens with low trading volume and meme coins. Data Source: CoinMarketCap)
ANON: This week, Hey Anon focused on technological innovation and governance structure promotion. The platform released the AUTOMATE TypeScript framework for DeFAI, which not only simplified the integration process for DeFi protocols but also successfully integrated with the Arbitrum ecosystem and launched a fast-track review mechanism. In terms of governance, Hey Anon initiated its first DAO governance proposal and enabled the circulation of $ANON tokens across multiple chains, including Base, Arbitrum, and Ethereum. These efforts laid a solid foundation for building a more robust DeFAI ecosystem.
BUZZ: Hive AI won first place in the Solana AI Hackathon this week, showcasing its technological strength. The platform also introduced several key feature updates, including an AI-native token analytics dashboard, liquidity agent tools, and the innovative Worker Bees automated agent system. Additionally, Hive AI added support for Apple Pay and Google Pay, enhancing user experience. In just 10 days, Hive AI reached a milestone of 10,000 new users and continuously optimized product features based on feedback from its Discord community, such as the USD value calculation for token inputs and interactive transfer tools.
CGPT: This week, ChainGPT made significant breakthroughs in both ecosystem expansion and technological innovation. In terms of ecosystem growth, the $CGPT token was successfully listed on Binance spot trading, and it also launched perpetual contract trading on KuCoin and Bybit, significantly improving market liquidity. On the innovation front, ChainGPT introduced a smart contract auditing tool and a new AI agent system and partnered with ChainAware to launch an anti-fraud solution, further enhancing platform security. ChainGPT was also recognized as a top AI project on BNB Chain and launched a monthly rewards program to encourage community participation.
ARC: This week, AI Rig Complex focused on technological collaboration and ecosystem expansion, forging strategic partnerships with three major partners: AbstractChain to introduce EVM compatibility into its Rust-based AI framework “Rig,” Shuttle_dev to integrate cloud infrastructure for improved developer experience, and CryptoEternal AI to advance the adoption of decentralized AI.
GRIFFAIN: This week, GRIFFAIN focused on the release of three key features. First, it partnered with Metaplex to launch the “Agent GM” feature, simplifying the digital asset minting process. Second, it released the “Agent Moby” whale monitoring assistant, integrating AssetDash and WhaleWatchAlert to enhance market monitoring capabilities. Lastly, the platform launched the “Agent Backpack” feature, which integrates with the Backpack Exchange platform for trading. GRIFFAIN is continuously improving its ecosystem through strategic collaborations with well-known projects.
Meme Token Gains Ranking
This week, the market experienced a broad range consolidation. After Tuesday, the entire market entered a rebound mode, with projects in the Meme sector following the market’s upward trend. The biggest rebound this week was seen in AI Meme projects, which are related to AI. This sparked a wealth creation effect, attracting both market attention and capital into AI Meme projects.
Social Media Hot Topics
Based on the data from LunarCrush and Scopechat, the most frequently mentioned theme this week (1.11–1.17) was Layer 1 (L1) blockchains, with the following insights:
According to data analysis, the Layer 1 projects had the highest social media attention this week. The overall market showed a broad range consolidation, and after the CPI data was released on Wednesday, the market began to rebound. Due to the significant pullbacks in various Altcoin sectors previously, many of these projects saw substantial gains during this rebound. As the price of coins increased, the APY of various DeFi projects on the chains also rose, attracting more on-chain users to participate. Moreover, most DeFi projects use tokens from Layer 1 projects, which led the market to shift its attention and capital back to various public chain projects.
Overall Market Themes Overview
According to weekly return rate statistics, the PayFi sector performed the best, while the RWA sector performed the worst.
- PayFi Sector: In the PayFi sector, XRP, BCH, and XLM make up a large share, with respective weights of 83.37%, 3.96%, and 6.92%, totaling 94.74%. This week, XRP, BCH, and XLM performed very strongly, rising by 44.58%, 8.16%, and 23.86%, respectively. The price of XRP surged quickly after Trump indicated that XRP and SOL would be prioritized as strategic reserves, which in turn drove the entire PayFi sector upward.
- RWA Sector: In the RWA sector, OM, ONDO, and MKR have the largest share, accounting for 87.85%. This week, their prices dropped by -2.98%, -1.19%, and -6.93%, with a decline greater than that of other sectors, leading to the RWA sector’s worst performance this week.
Upcoming Crypto Events Next Week
- Monday (January 20): SEC Chairman Gary Gensler steps down; Trump is sworn in as U.S. President; CFTC Chairman Rostin Behnam steps down; Web3Hub Davos 2025.
- Wednesday (January 22): WAGMI 2025.
- Thursday (January 23): U.S. Weekly Initial Jobless Claims.
Outlook for Next Week
- Macroeconomic Factors
Next week, there are not many macroeconomic data releases. The primary market factor will be Trump’s inauguration as U.S. President on Monday, which coincides with the departure of SEC Chairman Gary Gensler and CFTC Chairman Rostin Behnam. It is likely that Trump will mention cryptocurrency policies during his inauguration speech or announce new cryptocurrency legislation. If such announcements are made as expected, it would greatly boost market sentiment. However, if cryptocurrency is not mentioned, it could have a negative impact on market sentiment and potentially lead to a market decline. Therefore, increased volatility is expected next week.
- Sector Rotation Trends
DeFi Sector: Although market sentiment is weak after weeks of repeated fluctuations, investors generally expect the market to experience a broad rally in Q1 after Trump’s inauguration. As a result, most investors are hesitant to sell their tokens. To increase their holdings’ yield, many are participating in gunpool projects to boost returns.
AI Sector: The AI Agent sector has continued to receive attention, with the market size reaching $15.9 billion, a nearly 16.65% increase from last week. This rapid growth is significant. This week, market attention within the AI sector has gradually shifted toward DeFAI. Investors generally believe that AI is the most promising sector in the crypto space, while DeFi is the sector that gathers the most funds. Combining AI with DeFi could consolidate funds and liquidity in the crypto market, with a high likelihood of creating a competitive new sector.