Opinion: Why does the AgentFi track still have room for 10 times growth?

Author: @xingpt

Before analyzing the AI ​​Agent track, it is better to jump out and look at what crypto has experienced in this cycle as a whole:

Decoupling Bitcoin from the Currency Circle ( Decouple

)

Before this round of Bitcoin, it was almost the same as in the currency circle. Buying Bitcoin means buying crypto assets, which means you agree with crypto and decentralization.

However, after the adoption of the Bitcoin Spot ETF, everyone from the President of the United States to listed companies buying Bitcoin and recognizing the value of Bitcoin seems to have taken over the mainstream opinion; but the significance of the existence of crypto, especially Ethereum and Altcoins, does not seem to be affected by this. Recognized by mainstream society and funds.

The reasons are complex.

The main reason is asset positioning: Bitcoin's positioning is seen as an alternative asset linked to gold, and its asset value-preserving attributes of hedging inflation and surpassing sovereign currencies are widely recognized.

Ethereum and other altcoins are still technology meme stocks without mature and sustainable business models in the eyes of old money on Wall Street. However, compared to hardcore technology companies such as Nvidia, Microsoft, and Amazon, which have users, products, and needs, the valuations of Ethereum and other currency circles are not low, and the return elasticity is not enough. From the perspective of asset allocation, the risk-return ratio is extremely low. .

As shown in the figure below, Ethereum’s Sharpe Ratio is lower than that of Meta, Google and other technology companies. Bitcoin’s Sharpe Ratio is second only to NVIDIA, which is super awesome in this cycle.

Another important factor is that the overall macroeconomic interest rate and monetary easing are still not comparable to the epidemic outbreak in the previous cycle. This, coupled with the booming development of the AI ​​industry, has resulted in crypto being less attractive to OTC funds. The reason is easy to understand. With so much money in total, if you spend it on buying AI stocks and GPUs, you can't buy altcoins and Ethereum.

 USD M2 money supply still has not recovered to 2022 highs (Data source: CEIC)

**There is a huge imbalance in the circulation ecology in the currency

circle (** Imbalance)

Since the currency circle has insufficient ability to attract off-market funds, then whether the funds on the market can leverage sufficient purchasing power.

If we roughly use the total amount of stablecoins + contract positions to estimate the funds on the market, it is not difficult to find that the current total amount of funds on the market has far exceeded the previous bull market. But with the exception of BTC, most altcoins have no new highs. What exactly is the problem?

The root of the problem is an imbalance between supply and demand. On the supply side, there are a large number of new projects financed at extremely high valuations. Most of these new projects have not found practical application scenarios (PMF) of the products, and there are not many real users.

The reason why these projects exist comes from the 22-year bull market and the excessive financing of currency circle VC. Because VCs in the currency circle have raised too much funds, and most of these funds are limited to 5 years, with an investment period of about 3 years + an exit period of 2 years, the funds ignore the quality of the projects in order to complete the investment tasks and make crazy investment arrangements.

So who will provide buying prices for these projects?

The previous exit channels were mainly centralized exchanges, but centralized exchanges became the target of public criticism after the FTX incident. The long-arm supervision of Yingjiang made centralized exchanges miserable. They not only worried about being fined huge sums of money, but also worried about founders. The risk of a person being imprisoned. As a result, the goal of centralized exchanges will change from expanding users and increasing trading volume to gaining profits.

Exchanges that are oriented towards user expansion must provide benefits to users, including lowering the valuation of new projects, sharing early project participation opportunities (IEO), and a series of offline and off-site activities to attract new users.

Under heavy regulatory pressure, exchanges have on the one hand scaled back their offline and regional expansion and new entrants, and on the other hand have actively or passively stopped profit-sharing businesses such as IEOs. This also leads to insufficient motivation for the growth of demand and buying on the market.

AI Agent has unique advantages over Meme coins

As we all know, the core application scenario of the currency circle is asset trading and asset issuance; and every bull market can only produce wealth effects by allowing users to participate in new models of asset issuance and asset trading, which in turn triggers the increase of leverage within the circle and the entry of funds from outside the circle. bull market phenomenon.

However, under the premise of high valuation of projects on the market and serious imbalance between supply and demand, Meme coin became the first track to break the situation.

Meme is characterized by its VC-free financing and fair launch. It generates wealth effects through a model of rapid and rapid growth in low market value, and has led to a new track for asset issuance (pump.fun) and asset trading (Gmgn, TG bot).

One of the most important characteristics of Meme is that it has no practical use. This kind of financial nihilism can deconstruct the VC situation and is also suitable for a small number of crypto users with IQ 50 and IQ 150. For most IQ100 practitioners and institutions, it is still too difficult to participate. It is difficult to imagine you explaining to the LP of the fund that the reason why you want to invest in Mooden is that it is too cute, and the reason for selling Mooden is that it has gained weight. Not cute anymore (I still love moodeng).

But AI Agent can gather the consensus of most people: with fund LPs, you can tell the story of investing in AI infrastructure; with IQ 50 and IQ150 Degen, you can tell the logic of memes and golden dogs on the chain; with IQ100 crypto practitioners and coins Circle VC, you can talk about the logic of investing in AI Agent track projects.

In short, AI Agent is the biggest common denominator of the web3 industry in this cycle.

What do I think about the AI ​​Agent project?

How should IQ 100 view AI Agent - From Dapp to AgentApp

IQ100 is the majority of cryptocurrency industry practitioners and investment institutions, including me, so let’s first analyze AI Agent using the investment framework I’m familiar with.

I think the most important thing for investment institutions in the currency circle is to understand that AI Agent has reshaped the upstream and downstream industry chains and valuation logic of crypto.

Through the two bull markets in the currency circle in 2017-18 and 2020-21, the industrial chain and valuation logic of blockchain projects have gradually taken shape:

The underlying public chain; the market value ceiling is Ethereum, with a current market value of US$400 billion; Solana, the market value is about 1/4 of Ethereum, and may reach 1/3 or even 1/2 in the future;

Middle layer: such as the oracle Chainlink, with a full circulation market value of US$20 billion, approximately 5% of Ethereum;

DeFi and other basic protocols, Uniswap FDV has a market value of US$13 billion; AAVE has a market value of approximately US$5 billion; respectively 3% and 1.25% of Ethereum;

The underlying logic of DeFi is based on smart contracts, and the functional limitations of smart contracts also limit the innovation of other applications in the currency circle.

Now that AI is incorporated into the underlying technology stack of the blockchain, the AI ​​layer has become the underlying technology in parallel with smart contracts, the so-called full-chain Agent layer. (Fully-onchain AI Agent Layer).

 Image source: ( <https://x.com/karsenthil/status/1874471383066984706> )

This can also explain another question: why AI Agent’s previous AI projects failed to lead a new narrative, because whether it is using tokens to incentivize projects such as sharing GPU, data, data annotation, etc., the blockchain is still used as an incentive The layer does not jump out of the category of smart contract applications (DAPP), but the application of AI Agent exists as a glue and a better UX interface between the bottom layer of the blockchain and off-chain data. (Reference https://x.com/jolestar/status/1872935141326373237 )

Then we look at the valuation based on this logic. If Chainlink, the head middleware of DeFi, can account for 5% of the market value of Ethereum; by analogy with the framework of AI Agent, we boldly assume that the head framework of AI Agent can also account for 5%; currently The market value of ai16z is about 2.5 billion US dollars, and there is still room for 8-10 times; here is ai16z as an example, of course, there may be other better Agent frameworks.

A launch platform similar to Virtual's own framework is equivalent to Chainlink + Uni. Chainlink + Uni's current market value is US$33 billion, and there is still 6 times the space for Virtual's US$5 billion.

Freysai (FAI) is a bit like AAVE. It is low-key but delivers extremely high-quality products. The verifable application of AI TEE will also become the standard for future AgentApps . The market value ceiling is 1.25%-3% of Ethereum, corresponding to 5 to 10 billion US dollars.

Other top benchmarks are similar to Spore, which is equivalent to last cycle's Calculation or Launchapad, and aixbt is analogous to DeFi's aggregator 1inch, etc. The lower limit is a valuation of US$1 billion, and the upper limit depends on market development.

You can compare other AI projects by yourself, so I won’t go into details here.

What should IQ 100 think about AI Agent - How to change the ecology of the currency circle

This cycle started with Meme, and almost all wealth effects occurred on the chain. However, the operating threshold of Meme on the chain is still too high for outside users and IQ100 institutions, and most users are still accustomed to trading on exchanges.

But the biggest advantage of Agentapp is interaction

Buying assets : In the past - from the centralized exchange APP and website, recharge and place orders to buy coins;

Agent Era - Agent applications can directly buy coins using natural language, and can even intelligently assist transactions and investment advisory decisions;

Financing : In the past - coming up with a concept, gathering a team to package it, looking for VCs to raise seed rounds, gathering leading VCs or exchanges to take over and pull valuations;

Agent era - go directly to github and products, spread them to the community, and the community directly sends money;

Coin issuance: In the past- Go to the testnet, announce the high valuation information of VC financing half a year ago, attract the studio to brush the testnet, go to the exchange to negotiate the terms and get slashed, and then issue a coin dump to recover the blood;

Agent Era - AI automatically issues coins, Agent controls the private key, Agent adds funds to the pool, and Agent goes to the community to place orders;

The entire cycle follows several important criteria:

• The project is open source, the application is real and visible, and the code can be queried and verified.
• Funds are relatively safe, and the private key is in the hands of the Agent to prevent Dev from withdrawing from the pool.
• Transparent financing and currency issuance to avoid problems such as exchange-listed currency rat positions, opaque airdrop rules, and VC core circle cliques.

Of course, Agent currency issuance also has problems such as front-running on the chain and KOL information advantages, but it has obviously made great progress compared to the black-box operation methods of the past.

And the Agentapp that can win the user 's trading entrance is very likely to benchmark the valuation of the exchange 's platform currency.

How should IQ150 view AI Agent?

Since I am Mid-Curve, here is a quote from my friend Alen over a month ago (

https://x.com/qiqileyuan/status/1858357959807635854), he believes that AI

Agent will form a new AI society in the future. The AI ​​population in the AI ​​society will create a social economy exceeding one trillion US dollars. In this AI economy, Bitcoin and crypto will become important assets in the currency and economic cycle.

For AI life forms, AGI is the brain, robots are the body, and crypto gives them autonomous identities and economic systems.

To sum it up in one sentence: Don’t think about what AI can do for you, but think about what you can do for AI.

How should IQ50 view AI Agent?

Which one has bigger breasts?

At what stage has the Agent project developed?

According to cookie.fun data, the total market value of AI Agent is approximately US$18.6 billion; approximately 64% of the total market value of DeFi projects of US$29 billion; 75% of the total market value of GameFi track projects of US$24.6 billion, and all Layer 2 projects with a market value of US$30 billion. 62%. (Track classification according to Coingecko)

 Data source: [cookie.fun](https://cookie.fun/)

Although market value statistics are relatively rough, judging from market sentiment, AI Agent has just passed half-time, which is equivalent to the sun around 12 to 1 o'clock noon, and is in its prime.

The general trend of this chart made by Messari is more optimistic. The AI ​​Agent is close to the midfield, but the subsequent increase is even more impressive.

Reference document: https://x.com/Defi0xJeff/status/1873272066834841699;

So, what are the possibilities for subsequent hype?

I use the Garnter development chart, which is the favorite of IQ 100 people, to analyze various types of Agent applications as follows, drawn by ChatGPT:

In addition to the currently popular Launchpad and Framework models, the directions I am personally optimistic about include: Agent powered crypto exchange: an agent-driven exchange that includes intent transactions, on-chain data analysis and intelligent investment advisory; fully realizes decentralized listing and decentralization Decentralized asset custody, decentralized token issuance, investment and financing are all driven by Agent. Different types of Agent exchanges may differ in terms of the agent's degree of participation in investment decisions, risk preferences, etc.

Agent powered Stablecoin: Similar to the evolved version of stablecoin, it uses AI to automatically rebase, maintain pegging and other operations;

Application Agentization, similar to tokenisation, allows different types of applications + agents to run, such as games, NFTs, physical assets, etc.; all applications will eventually add Agent services to their core functions. (The bubble formed by excessive agentization can also be seen as an indicator of escape from the top. For example, every chain starts to use AIAgent.

To sum up, the era of AgentFi has just begun.