1. Fair Launches and Gamified Launch Platforms

It has been about two and a half weeks since the AI Agent market bottomed out (with a total market value of about $4 billion), and the market is now fully entering a bull market led by Virtuals. Yes, this time the protagonist is only Virtuals. The current momentum is comparable to the boom in October-November last year, when Virtuals first launched the AI Agent tokenization platform, establishing its position as a pioneer in AI, providing a top-tier token distribution network for all AI projects willing to engage in a "fair launch."

The difference this time lies in the newly launched feature: Genesis Launch, which is a fairer project launch and early supporter reward mechanism. This leads us to the first trend we will discuss.

2. Hype and Trading Trump Fundamentals

As traders and speculators, you can profit from investing in average products and suboptimal teams, thanks to the launch mechanism of Genesis projects. Under this model, the likelihood of project valuations being hyped up from $200,000 is much higher than the risk of subsequent price crashes (especially when it is confirmed that there are no insiders or pre-sale rounds in the project).

If you have a unique idea, you can directly issue tokens without an actual product on the ground. There is no need to define a target user group, no need to verify market demand, and no need to care about revenue growth and user retention. Just focus on creating market hype and launching the project (a demo is better, but not necessary).

Any project that meets the basic requirements (having comprehensive documentation, an excellent product concept, and a good team image) can successfully issue tokens on the Virtuals Genesis Launchpad.

For investors, it is important to understand that investing in these new projects should be considered short-term speculation rather than medium to long-term fundamental investment. Because nine times out of ten, these AI projects touted as having good fundamentals are essentially junk.

With the emergence of a large number of low-quality projects, the opportunities and gaps for high-quality projects (AI and non-AI) have also expanded, leading us to the third industry trend.

3. Scarcity of High-Quality DeFi on Virtuals Platform

Two months ago, I had a conversation with the Logarithm\BasisOS team. I was impressed by their product (similar to Ethena's delta-neutral strategy, but not relying on stablecoins), and this team had already impressed me during the Logarithm period for building products under the LPFi narrative (products utilizing Uniswap V3 liquidity). Out of recognition for the team, I provided them with token economic model advice, issuance plans, etc. At that time, I really didn't expect the project to surge so much because, although its DeFi product had fundamentals, the so-called "AI product" was obviously too early. But in the end, none of this mattered, and the project continued to outperform the entire market.

Based on the success of BasisOS, there is still a gap in the issuance of tokens by DeFi projects on the Virtuals asset platform. Although there is a lack of traditional DeFi token economic models that release incentives to TVL through tokens, the traffic effect and market attention that come with the first launch on the Virtuals asset platform (especially when the project has a strong DeFi product) will be enough to ensure that your treasury gets ample TVL.

In addition to attracting attention, a new trend and experiment similar to the Ethereum junk project era of 2023-24 has also emerged, leading us to the fourth trend.

4. Using Trading Volume Revenue as a Growth Engine

There was a time when many Ponzi scheme-like DeFi projects emerged. These projects supported token mechanisms with 1-3% trading fees, using these funds to expand the project treasury to maintain the Ponzi mechanism and return profits to token holders. Project creators at the time could even earn millions of dollars in a week or two, thanks to the scarcity of tokens in the market and the abundance of user funds on Ethereum (at that time, people were very bold and blindly followed junk projects).

Now we see a similar situation in the AI Agent field.

Under normal circumstances, the Virtuals platform will charge a 1% fee for each transaction, 70% of which will be returned to the project creator. Other project launch platforms generally charge a transaction fee of 1%-2%, while providing project creators with a fee return ratio of 70%-100%.

The Squidllora project, which is powered by Allora Network (recently launched on the auto.fun platform), is using creator fees to expand its treasury and trade mainstream cryptocurrencies through Allora's predictive models (if you don't know Allora, it is essentially a Bittensor variant focused on finance, where many scientists compete to create the best predictive models for different time dimensions of cryptocurrency assets). The project party will repurchase its native tokens with some of the profits generated from trading.

This point has great potential for well-funded teams because they do not need to rely on transaction fees to maintain operations. These teams can now issue AI Agent tokens, using them as marketing tools and user growth funnels, providing initial momentum for launching new AI experimental projects by converging market attention and fee revenue.

However, looking back at the front line of AI Agents, although many teams are publicly launching products, there has not been much progress beyond the Virtuals ecosystem. This leads us to the fifth trend we will discuss.

5. Dominance of Virtuals and Weakness of Other Ecosystems

The continuous rise in the valuation level of the Virtuals ecosystem is driven by Genesis Launches. This wave of new project launches does not necessarily mean substantial improvements in fundamentals or technology; the main driving factor comes from significant optimizations in transaction structure. In essence, it is more participants flocking to the Virtuals ecosystem because they are confident they can profit from it. This trend may continue until the prices of existing projects reach local peaks.

Once this happens, some attention will naturally turn to other ecosystems, such as Creator.Bid, Arc.fun, auto.fun, especially those low-market-value projects with significant improvements in fundamentals (such as new features, new product launches, new partnerships, etc.).

Creator.Bid and Arc are probably the two best ecosystems at the moment, and there are also some undervalued potential projects that have not yet exploded (such as the 3-4 targets in the Creator.Bid ecosystem that are deeply integrated with subnets or focused on building Bittensor products, and the handshake projects contributing to Arc's Ryzome network).

Of course, the best investment strategy is to accumulate these tokens before most people realize their value.

6. Limited Investment Opportunities for Institutions in the AI Field

Despite the continued surge in token prices in important AI Agent ecosystems such as Virtuals and AI16Z, many institutional investors can only watch because these surging assets are only suitable for small retail investors or high-risk speculators. The liquidity in the relevant markets is extremely scarce, and the LP mechanism has structural vulnerabilities (especially evident on the Virtuals platform).

The lack of proper liquidity infrastructure, coupled with the rise of interest in decentralized AI, is prompting institutions to invest in decentralized infrastructure, autonomous intelligent L1 blockchains, decentralized AI labs, etc., rather than current AI Agent tokens.

Are you curious about what these tokens are?

They include GRASS, TAO (and its subnets), VANA, FLOCK, PROMPT, and a series of tokens that have not yet been issued, such as Nous Research, Pluralis, Prime Intellect, and other projects. These teams are building a truly Web3 AI moat, giving ownership of high-performance models to the public (rather than centralized AI labs). In short, these projects focus on truly complex artificial intelligence technology, which ordinary people find difficult to understand and are not sure how to participate in because they represent the cutting edge of innovation in the field of decentralized AI.

How to develop the best investment strategy according to trends?

My strategy is to gradually invest the profits from short-term small AI Agent transactions (especially with average teams in the Genesis project) into the field of decentralized AI. Those AI projects with fundamental value need time to grow because they are mostly infrastructure-oriented and lack consumer-facing products. As we have seen, models such as ChatGPT, Grok, Anthropic, etc., have suddenly become very good at completing daily tasks, real-time research, programming, etc. In the future, decentralized Web3 models will also become powerful when performing some Web2 native and Web3 native tasks.

Does this mean you should heavily invest in decentralized AI infrastructure?

Not necessarily, success in the crypto field is mainly driven by market hype and marketing strategies. Whether a project can succeed in the long term depends 90% on marketing and 10% on model design. The key to success is to create products that meet market demand, provide a smooth user interface and experience, formulate and accurately execute a detailed launch plan, design a sustainable token economic model, and plan effective user growth and retention strategies. These elements together form a winning marketing system.

My core investment philosophy has always been to bet on teams that know how to combine marketing channels with technology. This logic is similar to the strategy of venture capital institutions investing in vertical SaaS companies in the Web2 era, which focus on solutions for specific scenarios. Although they may use general basic models behind the scenes, they combine them with their own unique proprietary data.

I believe this view will be very durable in the medium and short term, especially in the Web3 field, because everything is driven by hype and community, and things that are easy to understand will be easier to promote.

The transaction structure of the crypto market is also moving in this direction, with the fair launch model gradually becoming the market norm. At the same time, more and more teams in other ecosystems are beginning to integrate technology and marketing more deeply. They are investing more time in establishing technical cooperation with infrastructure projects and focusing on marketing and market entry strategies to transform market attention into attention to actual AI technology.

Quick Summary

The Genesis Launch model of Virtuals has achieved a double harvest in market attention and return rates.

Hype is still more than fundamentals, mostly just short-term operations.

DeFi projects with solid fundamentals are discovering growth potential through the Virtuals ecosystem.

Creators' revenue from trading volume is starting a new wave of experiments.

The Virtuals ecosystem is currently leading, but other alternative ecosystems may soon attract market attention and investment.

Institutional investors are on the sidelines, preferring to invest in decentralized AI infrastructure rather than AI Agent tokens.