The cottage season is coming. Are these tracks still salvageable?

1. Background: After the leverage wash, the altcoin season continues

On December 10th, the cryptocurrency market experienced a crash, with Bitcoin dropping by 5%. Excluding the altcoins of Bitcoin and Ethereum (3 in total), the rest faced a more significant decline, reaching as high as 14%.

At that time, WOO X Research published an article on this situation, defining the decline as ‘long leveraged liquidation, bullish market structure unchanged’, and the market also showed strong resilience, with Bitcoin rebounding to $100,000 and Ethereum once again challenging the $4,000 mark.

At the same time, the altcoin season we are most concerned about can be judged by BTC.D. During the market decline on 12/10, BTC.D rose to 58%, and after the decline was repaired, BTC.D also dropped to 56%, indicating that the altcoin season is still established and ongoing.

The logic of the rise of altcoins is: when external funds enter the cryptocurrency market, such as investors who have not been in contact, traditional financial institutions, Web 2 companies, national pension funds, etc., the first choice must be Bitcoin, and then some funds will flow into the lower market value of the altcoin sector.

Now, in addition to the recently popular AI Agent track, other sectors including Meme, DeFi, RWA, L1/2 have also shown strong upward momentum in token prices, and the overall altcoin market seems to have a bright future.

But some tracks seem to be forgotten by the market, while other sectors are surging. BTC ecology, NFT, and GameFi seem indifferent. Do these tracks still have a future? What is the recent development? Let WOO X Research take a look.

Reference: coingecko

2.BTC Ecological Related

The BTC ecosystem refers to the BTCFi, Mingwen, Rune and other related protocols and assets, with the core narrative point being:

Liberating Bitcoin Liquidity: The DeFi market is dominated by Ethereum, while Bitcoin is mostly idle, not pursuing capital utilization efficiency. Compared to ecological applications, transaction speed, and other needs, the Bitcoin ecosystem places far greater emphasis on security than other public chains. Therefore, the user profile of Bitcoin is different from other public chains, mostly consisting of institutions and large holders with higher demands for security, holding large amounts of Bitcoin, thus focusing on long-term, stable, and deterministic passive income.

During the period from April to July this year, the protocol that triggered the Bitcoin pledging craze was Merlin Chain. The protocol’s highest total lock-up amount reached 2.64 billion US dollars, and it accepts assets in addition to Bitcoin, also supporting top inscriptions, NFT projects such as ORDI, RATS, etc. However, after Merlin was launched, the coin price did not meet expectations, and there were many controversies at that time. Currently, the total value locked in the entire chain is plummeting rapidly, and the market attention has faded. The EVM cross-chain mapping technology has been proven false.

Reference: DefiLlama

The relevant protocol that can currently be expected is the Bitcoin re-mortgaging protocol Babylon, which has completed three rounds of public financing, totaling 96 million US dollars. The current TVL is 5 billion US dollars, ranking first in the Bitcoin ecosystem and 12th in overall protocol ranking. It can be seen that the market still expects the “Bitcoin interest-bearing” model to operate successfully. The focus of observation is whether Babylon can safely and continuously generate income after officially launching, further boosting TVL, and thus driving the overall ecosystem to erupt.

Bitcoin native meme assets: In May 2023, the appearance of Bitcoin inscriptions, due to their technical characteristics, made asset issuance have the property of openness and transparency. At that time, VC coins were deeply resented by the market, and the inscription assets undoubtedly launched a “grassroots” revolution from the bottom up, enabling retail investors to trade in a fair environment. Whether the asset price can maintain momentum depends on the consensus and cohesion of the community, and it is a natural place for the issuance of meme coins. Inscription assets such as ORDI, SATS, RATS, etc. have all experienced thousands of times of increase.

However, the inscriptions have also been criticized for wasting Bitcoin block space and creating on-chain garbage. Runes can be seen as an evolved version of inscriptions, allowing for more efficient transfers, bundling multiple tokens into a single transaction, and setting multiple transfer destinations (BRC-20 can only transfer one type of token at a time), mitigating issues such as Bitcoin UTXO inflation and network congestion caused by using token standards like BRC-20.

In addition to being assets in the Bitcoin ecosystem, inscriptions and runes are also classified as meme coin tracks. However, the iteration speed of the meme coin track is extremely fast. The current mainstream narrative is meme coins that cooperate with AI agents, and the trend of inscriptions and runes is no longer there. In addition, major exchanges have canceled support for the inscription asset format, which means that if the relevant assets want to make a comeback, the difficulty is quite high.

Reference: Magic Eden

3. Web 3 Games

In 2021, driven by the concepts of DeFi Summer and the metaverse, GameFi, which combines finance and blockchain games, has become a major narrative in the industry and has attracted a large number of traditional game companies to develop GameFi games. Even in 2024, Web3 practitioners still place their hopes for Massive Adoption on games, which is the biggest narrative in the game track and the biggest consensus that VCs and traditional game companies are always willing to invest in this area. Secondly, surrounding Massive Adoption is the blockchain technology behind chain games, which can give players asset ownership, and this is still the main driving force for the majority of chain games to continue the X to Earn model.

But until 2024, Web 3 Gaming has not yet solved the death spiral caused by the Ponzi-like token economic model. As the space for profit shrinks, the incentive for users to play also decreases. This can also be seen from the following data:

• The growth rate of trading volume is negative: Compared with 2021 and 2022, the daily trading volume of chain games this year has also dropped to between 20-30 million US dollars, with a negative growth rate.

Reference: Footprint

• Daily number of transactions: The daily number of transactions in the blockchain game this year has also significantly decreased compared to two years ago. Previously, it averaged between 20-30 million, but now it is less than 10 million.

Reference: Footprint

The current situation of Web 3 Gaming is that the existing problems cannot be solved, and the overall usage of the sector is poor. If this situation continues, even if the crazy copycat season comes, it will be difficult to win the favor of investors.

The key project to focus on in the current Web 3 Gaming is Xterio, which is incubated and invested by the well-known Web 2 game company FunPlus, and is about to be issued recently. This project is a game infrastructure platform, emphasizing the use of AI technology on the platform and aiming to connect with AI in storytelling. If you expect the possibility of a revival in Web 3 Gaming, you can first refer to the trend after the issuance of Xterio.

4.NFT

In fact, NFT appeared as early as 2017, but it didn’t fully explode until 2021. In addition to the improvement of infrastructure with the release of the ERC-721 standard, the market also realized that NFTs are unique compared to fungible tokens and can be applied in personal digital identity, art, and other fields. However, the initial driving force behind this is still the celebrity effect.

When NBA Top Shot was launched in the form of NFT, it allowed players to collect exciting moments of NBA stars on the court, attracting active participation from many crypto enthusiasts and fans. Among them, a famous player, LeBron James, had a dunk in the 2020 Finals with a transaction value as high as $230,000.

Subsequently, blue-chip NFT projects such as BAYC, Azuki, Doodles, Pudgy Penguins, etc. emerged, ushering in the NFT Summer of 2021.

Due to the low liquidity and scarcity of NFTs themselves, it is easy for prices to rise, making it easy to have a wealth effect in a bull market. The myth of Free Mint to financial freedom is everywhere. However, with the bear market in 2022, liquidity is drawn out of the currency circle, and NFTs have even scarcer liquidity compared to general currencies, leading to significant capital flight. The overall liquidity of NFTs is being drained away.

From the figure below, we can also see that the overall number of transactions on Opensea has slowed significantly in 2022, mainly due to the lack of competitiveness of Opensea products and the continued unpopularity of the NFT market.

Reference: Dune

So is there still hope for NFTs? What narratives and actions have been taken recently?

• Opensea is about to launch a new product
• Magic Eden Issuing Coins
• Pudgy Penguins Coin Issuance

Recently, we can see frequent activities in the NFT space, both on platforms and blue-chip projects. Whether on Ethereum or Solana, blue-chip NFT projects have shown signs of price recovery. Is the NFT market really coming back?

Reference: Magic Eden

In addition to observing whether the price trend of head NFT is stable and growing, you can also pay more attention to the use cases of NFT combined with AI. For example, the well-known Solana-based AI Agent Zerebro, who previously created 299 images on Polygon, and founder Jeffy also launched 5500 NFTs for Zerebro, and holders can become core members of the community.

The above is just a basic case of AI Agent collaborating with NFT. The characteristic of the cryptocurrency circle has always been to speculate on new projects and not on old ones. NFT is expected to rebound again with the help of AI Agent.