Article Review: The Meme Coin Craze and the Market’s Vulnerability
The focus of this week’s market observation is undoubtedly the meme coins!
One of the meme coins that experienced a tremendous surge within a week is the Troll token, thanks to Elon Musk changing his personal introduction to Chief Troll Officer (CTO). Its value skyrocketed by over a thousand times!
But it’s not just the Musk-related meme coins that saw a surge. Zuzalu, previously mentioned by Vitalik Buterin, was also seen as an opportunity for speculative trading and saw a 20-fold increase in just three days.
What does the surge in meme coins mean for the market?
Before answering that question, let’s briefly review the rotation of sectors in the crypto market over the past three months:
Bitcoin, altcoins → Layer 1 (SOL, Avax) → New concept L1 (Sei, Inj, Tia) → ETH ecosystem (Arb, Op, Metis, Pendle) → Meme coins (Troll, Smiley)
Meme coins are usually seen as the last sector to surge. The reason behind this is that investors can’t find any other avenues for speculation. When funds flow into meme coins, it also indicates an increase in risk appetite within the market, making it more dangerous for the overall market trend.
In industry news this week:
ETF approval leads to a market sell-off? $800 million worth of Bitcoin transferred from Grayscale addresses to Coinbase Prime
On January 17, a total of 18,638 BTC (approximately $798 million) was transferred from Grayscale Trust addresses to Coinbase Prime. Since the approval of the BTC spot ETF on January 10, Grayscale Trust addresses have continuously transferred a total of 31,638 BTC (approximately $1.366 billion) to Coinbase Prime during the three trading days following the ETF approval.
Ethereum developers deploy the London upgrade on the Goerli test network
The London upgrade is a significant positive development for Ethereum, as it allows for cheaper gas fees and faster transaction speeds on Layer 2. On January 17, Ethereum core developers deployed the London upgrade on the Goerli test network, marking the prelude to the official upgrade.
Following the success of the Solana smartphone airdrop frenzy, Saga Chapter 2 smartphone is launched
The first generation of Saga smartphones had little demand initially. However, due to the airdrop value exceeding the price of the phone, it sold out quickly. Capitalizing on the hype, Solana quickly released the second generation “Saga Chapter 2” smartphone, which received over a million pre-orders and payments within a week, a remarkable feat.
️ Further reading:
Solana’s second-generation smartphone sells out 30,000 units in 30 hours, surpassing pre-orders for Vision Pro. What makes it so attractive?
Observations on the ETH and BTC ecosystems:
ETH/BTC exchange rate tracking: A significant increase this week, just the beginning
The ETH/BTC exchange rate is approximately 0.059, with a 4.5% increase this week. As mentioned in last week’s report, the breakthrough of the ETH/BTC exchange rate is just the beginning.
BTC ecosystem development: Weak trend after ETF approval
Bitcoin’s price fell by approximately 7.7% this week. Surprisingly, altcoins like Ordi and Rats showed strong performance and did not fall alongside Bitcoin, while Bitcoin ecosystem tokens remained relatively weak.
DeFi market changes: Remains stable
With a 1.17% increase, the overall DeFi TVL remained relatively stable this week.
Layer 2 total value locked (TVL) changes: Slight decline
The TVL in USD terms experienced a slight decline of 3.5% this week.
The best-performing Layer 2 protocol in the top 10 TVL this week was Metis, with a 13.09% increase in the past seven days. Despite the scarcity of its ecosystem, Metis remains an essential focus in Layer 2, with its founder being V God’s mother, excellent price performance, and the narrative of a decentralized sorter.
Race growth this week: Major sectors mostly declining
LSD: 36.34 b → 35.49 b → -2.33%
Lending: 23.75 b → 22.85 b → -3.7%
Decentralized exchange tokens: 14.86 b → 14.9 b → +0.27%
Overcollateralized stablecoins: 10.43 b → 10.2 b → -2.2%
Emerging potential protocols this week: Yield Farming takes the crown
I have selected three protocols that have seen the most significant TVL growth in the past seven days and have at least $10 million TVL. Sui occupies three of the top spots.
Notable mentions include:
Renzo, a protocol related to the Eigenlayer concept, allows users to deposit ETH and receive ezETH, rewarding them with staking APR, platform points, and Eigen points. Renzo recently raised $3.2 million in funding.
Dojo, the first native AMM Dex on the Inj chain, has seen a three-fold increase in token price from its lowest point.
The 8th to 10th spots are occupied by Sui ecosystem protocols, which have seen a strong rise in Sui token price recently. These protocols are worth paying attention to.
Market financing situation: DeFi accounts for 30% of the total
This week, most of the financing projects were focused on Web 3 and infrastructure, accounting for over 60%.
The highest funding amount this week was received by MAP Protocol, which secured a strategic investment of $50 million from Bitrise Capital’s Bitcoin Ecosystem Growth Fund.
MAP Protocol is a Layer 2 solution for Bitcoin. It provides infrastructure for enhanced operability between assets, storage, and computation. Users and developers can use and build anything cross-chain in a peer-to-peer manner.
Stablecoin market capitalization: Continues to rise despite market corrections
Stablecoins saw a slight increase of 0.21% this week, with a total market capitalization of $133.8 billion. USDT remains the dominant stablecoin, accounting for over 70%.
Stablecoins continue to increase in value for two consecutive months, regardless of market ups and downs.
Data interpretation: To determine whether the overall market surge is due to external hot money flowing in, one can observe the changes in stablecoin market capitalization.
If the market is rising and stablecoin market capitalization is increasing, it is possible that off-market funds are flowing in, pushing up token prices.
If the market is rising and stablecoin market capitalization is not increasing or decreasing, it is more likely that the bears are at a disadvantage in the bull-bear battle.
This article presents diverse opinions and does not represent the stance of “WEB3+.”
Proofread and edited by: Gao Jingyuan
