Market Commentary | 11.29.

The Market Commentary provides a weekly review of major issues, along with DeSpread Research's insights on key points to watch moving forward. In the November 29 edition, we examine the trends in Korean crypto market and the booming success of Base ecosystem.

1. The Korean Crypto Market Reacts to Expectations for the Trump Administration (Feat. Upbit)

Between November 20 and 26, 2024, an analysis of the top 10 cryptocurrencies by trading volume across Korea's five major exchanges (Upbit, Bithumb, Coinone, Korbit, and Gopax) revealed that Ripple ($XRP) ranked first with approximately $16.44 billion in trading volume. Following were Dogecoin ($DOGE), Stellar Lumens ($XLM), Bitcoin ($BTC), and USDT, occupying the second to fifth positions, respectively.

Among these top five cryptocurrencies by trading volume, Stellar Lumens stands out for having a lower market capitalization compared to the others and for not having attracted significant attention from market participants over an extended period. Nevertheless, it achieved a high ranking of third place. This surge appears to reflect recent expectations among Korean investors that cryptocurrencies adhering to ISO 20022—a global standard for electronic data interchange between financial institutions, such as Ripple and Stellar Lumens—will benefit following Trump's election.

Reflecting investor optimism, the prices of Ripple and Stellar Lumens rose by up to 34.1% and 116.7%, respectively, during this period. Notably, in the case of Stellar Lumens, Korean exchanges accounted for 25.17% of global spot trading volume, highlighting the substantial purchasing power of Korean retail investors.

However, considering that the Trump administration has not made specific statements regarding ISO 20022 and has strongly opposed Central Bank Digital Currencies (CBDCs), which are expected to effectively utilize ISO 20022, it remains to be seen whether the current price surge of ISO 20022-related assets will be sustained.

The table above illustrates changes in the weekly trading volume rankings of the top 5 cryptocurrencies on Korean exchanges from November 6 to November 26, 2024. As highlighted in the previous market commentary, Dogecoin received the most attention in the Korean market following Trump’s election. Dogecoin secured the top position in the first week (November 6–12) and the second week (November 13–19) but fell to second place in the third week (November 20–26) as its price plateaued. As long as Trump maintains a pro-crypto stance and Elon Musk continues to play a significant role in Trump’s cabinet, Korean investors’ strong interest in Dogecoin is likely to persist.

Over the three weeks following Trump’s election, Dogecoin, Bitcoin, and USDT consistently garnered high interest from Korean investors. Additionally, the entries of Drift ($DRIFT) in the first week and Pepe ($PEPE) in the second week into the top 5 rankings underscore the influence of Upbit’s KRW market listings. Drift and Pepe were listed on the Upbit KRW market on November 8 and November 14, respectively, recording trading volumes of $3.6 billion and $3.1 billion during their listing weeks.

As consistently emphasized in previous articles, Upbit's dominance in the Korean cryptocurrency market continues to grow. If the bullish market trend persists, the gap in market share between Upbit and other Koran exchanges is expected to widen further.

1.1. DeSpread Comments

Following the U.S. presidential election, the trading volume ratio between Binance and Korea's top five exchanges shifted from approximately 8:2 to 7:3. On November 24, the Korean market share peaked at 34%, indicating increased cryptocurrency trading activity in South Korea.

While some suggest the cryptocurrency market is overheating, the current Korean trading volume share does not support this view. In early 2024, during a bullish market phase, Korea's market share relative to Binance reached up to 66% in January and 58% in February. This comparison shows that the recent market activity is not excessively high.

In terms of traded assets, the Korean cryptocurrency market exhibits a somewhat distinct pattern compared to the global market. An analysis of the top 10 cryptocurrencies by trading volume over the past week, as of November 28, reveals that while major assets with high market capitalizations such as $BTC, $ETH, $SOL, and $BNB dominate the global market, the Korean market shows higher trading volumes for altcoins like $XRP, $DOGE, and $XLM, surpassing even $BTC and $ETH.

Notably, The Sandbox ($SAND) and Ethereum Classic ($ETC) ranked 21st and 26th, respectively, in terms of global trading volume but managed to make it into the top 10 in Korea. Additionally, the dominance of Ripple ($XRP), Dogecoin ($DOGE), and Stellar Lumens ($XLM) over Bitcoin ($BTC) and Ethereum ($ETH) highlights the unique trading dynamics of the Korean cryptocurrency market.

The reasons for these differences remain unclear, but it suggests that unique narratives resonate with Korean investors who primarily engage in trading through centralized exchanges. This also implies that directly applying global trends to the Korean market without understanding these dynamics may lead to suboptimal outcomes.

2. Solana Down, Base Up

Following the emergence of $GOAT covered in the October 25th Market Commentary, the numerous AI agent tokens that sprouted afterward, and Solana's on-chain metrics that had shown explosive growth for weeks led by Pump.fun, have been experiencing a period of stagnation in recent days.

Two main reasons can be identified as the causes of this phenomenon:

1. Growth Struggles of the ai16z AI Agent Project

ai16z is a project being built primarily by Shaw, a developer who previously worked on the game Smolworld based on the TreasureDAO ecosystem. The project aims to create a venture capital fund where AI agents evaluate early-stage projects and execute asset deployment.

The $ai16z token, which represents fund shares issued through Daos.fun, quickly reached a market cap of $100M following a16z CEO Marc Andreessen's "Gauntlet Thrown" tweet on October 27. However, due to rumors about the possibility of additional token issuance through Daos.fun's contract format, the market cap decreased to $50M within half a day.

Subsequently, the ai16z team clarified that direct token issuance by the team was impossible, and Shaw demonstrated his commitment by conducting live coding sessions for project development on Discord. Through these efforts, ai16z regained community trust, and the $ai16z price steadily increased over about 20 days, reaching a market cap of approximately $500M as of November 18.

During this period, the ai16z community created an AI agent of Eliza, the character featured in ai16z's logo. The token representing shares in this agent, $eliza, also gained market attention, achieving a market cap of $50M.

On November 18, when market interest in ai16z peaked, Shaw suddenly announced a new Eliza AI agent and launched a new token $ELIZA. This caused the original $eliza token price to drop by about 71% within an hour. Additionally, evidence emerged suggesting that another ai16z developer, Logan, had sold $eliza before Shaw's announcement and purchased the newly issued $ELIZA early on. These issues drew criticism from the community that had been supporting ai16z, and the $ai16z token price fell by about 80% over two days.

Subsequently, the ai16z team removed Logan from the team and announced their intention to focus solely on development. While $ai16z's price partially recovered, as of November 28, it remains at $210M, less than half of its peak market cap of $500M. Due to these developments with ai16z, Solana's most prominent AI agent project, the prices of all AI agent projects that collaborated with ai16z or involved Shaw showed weakness, resulting in an overall decline in market participants' trust in AI agents with development teams.

2. Indefinite Suspension of Pump.fun Streaming Service

Pump.fun is a meme coin issuance platform on the Solana network. The platform prevents token issuers from arbitrarily distributing supply or conducting presales, and token prices are determined through a bonding curve mechanism based on demand. When the market cap reaches $69K, a liquidity pool for the meme coin is automatically created on Raydium using some of the $SOL collected through the bonding curve.

Recently, more than 50,000 meme coins have been launched daily through Pump.fun, including tokens like $GOAT, the pioneer of AI agent meme coins, and $CHILLGUY, the first TikTok meme coin, both reaching market caps exceeding $500M. In November, Pump.fun became a core infrastructure of the Solana network, accounting for 62% of all transactions on Solana.

However, side effects of the platform's rapid growth have emerged recently. The token issuer live streaming feature introduced in June, combined with the bull market in meme coins, led to an increase in cases where some issuers streamed unethical content including explicit content, animal abuse, and self-harm to pump token prices. As community criticism of Pump.fun's platform operation without guidelines and sanctions grew, on November 25, Pump.fun indefinitely suspended its streaming feature with an announcement stating they would strengthen censorship of inappropriate content and streams.

Former Binance CEO CZ also commented on this situation, tweeting "Not against memes, but memes are getting a bit weird. Let's build some real applications using blockchain," joining the growing number of users expressing criticism of the overheated meme coin market based on Pump.fun.

Meanwhile, this stagnation in the Solana ecosystem has benefited the Base ecosystem. According to on-chain data analysis platform Artemis, Base network's net inflow over seven days reached $225M, triple the level of Solana network's net inflow.

In this context, Virtual Protocol's $VIRTUAL token, covered in the November 1st Market Commentary, along with aiXBT, an AI agent tweeting alpha information on X based on Virtual Protocol, and $CLANKER of Clanker, an AI agent issuing meme coins, have shown significant price increases benefiting from the Base net inflow trend. Notably, $CLANKER rose by more than 15x in the week from November 20 to 27, reaching a market cap of $140M, showing the best performance among Base ecosystem tokens.

2.1. DeSpread’s Comments

Liquidity rotation from the Solana ecosystem to the Base ecosystem has been observed recently. However, it is hard to deny that both Solana and Base will continue to be the most prominent ecosystems now and in the future.

This perspective is supported by the on-chain metrics of the leading DEXs within these ecosystems. Excluding protocols operating as multi-chain DEXs, Solana’s Raydium and Base’s Aerodrome maintain dominant positions in the DEX rankings based on TVL. Despite being single-ecosystem protocols, they have achieved remarkable TVLs of $2.35B and $1.57B, respectively.

Particularly in terms of transaction fee revenue, Raydium has outperformed even Uniswap, a representative DEX protocol. Over the past seven days, Uniswap recorded $33.38M in fee revenue, while Raydium achieved $56.61M. This highlights Solana’s significantly higher on-chain activity compared to the Ethereum ecosystem.

The rise of Solana and Base can be attributed to their high scalability, the presence of robust token issuance platforms (e.g., Solana's Pump.fun and Base's Clanker and Virtual), and strong community foundations. Such a playbook cannot be artificially replicated; it is the result of long-term efforts and is therefore challenging for other ecosystems to emulate.

As a result, the growth of these two ecosystems is expected to continue. Furthermore, this growth opens opportunities for other layers capable of executing similar playbooks to emerge and thrive.