The AI and PayFi sectors are accelerating development, and the MOVE crash has triggered industry reflection.

This week, the market experienced a significant rally as the trend of tariff trade improved, with the Ethereum ecosystem and AI sectors rising over 20%. At the same time, the crypto market faced turmoil again, as Movement suffered a price crash due to issues with its market-making agreement, prompting reflections on industry integrity and regulation. Meanwhile, the AI and PayFi sectors are accelerating their development, with a certain public chain promoting the MCP standard and multiple exchanges laying out payment ecosystems. Coupled with policy trends, this indicates that the crypto market is facing a new round of reshuffling and opportunities.

1. Movement Event - Market Making Protocol Triggered Crash

This week, Movement trading was suspended and airdrop postponed, once again becoming the focus of public opinion. The project previously raised over $40 million and was included in a certain cryptocurrency portfolio.

The manipulation suspicion is at the core of the event, involving an alleged market-making agreement with a certain company that is said to incentivize price manipulation. It has been revealed that the Movement Foundation's contract with the company would allow the other party to control about half of the circulating MOVE tokens, incentivizing them to drive up the token valuation to $5 billion before selling for profit, leading to the sale of 66 million tokens the day after the launch, causing a sharp price drop.

Interestingly, after the sell-off event, the Movement Network Foundation announced a buyback of MOVE worth 38 million USDT within three months in an attempt to stabilize community sentiment, but a few days later, it deposited 17.15 million MOVE to a certain exchange.

Role and Contract Disputes of a Company:

• The company has almost no digital footprint, yet it sold a large amount of tokens after the MOVE launch. The disclosed contracts indicate that it played a dual role in the transactions, suspected of self-trading.
• The contract includes an incentive mechanism: if the valuation of MOVE exceeds 5 billion USD, the company may liquidate the tokens and share the profits with the foundation. Experts criticize this clause for encouraging price manipulation through artificial inflation followed by selling, posing a potential risk of manipulation.
• The legal advisor of the Movement Foundation initially referred to the agreement as "the worst agreement," and the board also refused to sign it. However, the co-founders pushed for a revised version to be signed, removing some controversial clauses while retaining the core incentive structure.
• The company claims to be a subsidiary of a certain market maker and has proposed to provide $60 million in collateral assets, which somewhat impressed the foundation. It is worth noting that the company's domain name was registered on the day the agreement was signed, indicating the temporary and questionable nature of the operation.

Even more shocking is that a certain market maker signed a similar agreement with the company as early as November 25, bypassing the foundation's review. This indicates that key arrangements had already been made through informal channels, laying the groundwork for subsequent explosions.

Typically, cryptocurrencies should have a lock-up period to prevent early selling; however, in this incident, a certain market maker obtained tokens through an agreement and immediately sold them, becoming the core issue of external suspicion regarding insider trading.

After the incident broke out, various parties blamed each other for the responsibility. The project side claimed to be misled, while the other party insisted that the agreement was permitted. Currently, the project has commissioned an auditing agency to investigate the abnormal market making, and several executives and legal advisors are under scrutiny, with the project's reputation and governance facing serious challenges.

This incident has revealed in detail the issues of regulatory deficiencies in the market-making mechanism and the lack of transparency in the legal framework, but it may just be the tip of the iceberg. Theoretically, market makers should provide liquidity for new tokens, maintain price stability, and ensure market depth. However, in practice, if there is a lack of regulatory or transparent mechanisms, market makers may be abused as tools for manipulating the market and secretly transferring large amounts of tokens, harming the rights of ordinary investors and undermining market fairness.

2. AI and PayFi

A certain public chain officially pushed articles on MCP and the AI revolution, hoping to provide developers with a standardized and secure AI integration framework through MCP and a series of AI support programs, to promote AI innovation in the Web3 ecosystem and address blockchain data access and security challenges.

The public chain will support AI through three parts: AI hackathon, AI agency solutions, and AI-focused incubators. This initiative has received widespread attention.

In the previous review of the Hong Kong conference, we also discussed that AI has always been a hot topic. Not only is AI in Web2 booming, but various AI meme projects or those capitalizing on AI concepts are emerging in the Web3 world, highlighting the important role of AI in mainstream narratives.

2024 is a breakthrough year for AI company financing. Nearly one-third of global venture capital is flowing into AI-related fields, making it the leading area for financing. Data shows that funding for AI-related companies exceeds $100 billion, a year-on-year increase of over 80%, surpassing every year in the past decade.

In the late financing of the fourth quarter of 2024, it reached $61 billion, with a month-on-month growth of over 70% and a significant year-on-year increase. The biggest change is the increase of $1 billion rounds, involving multiple fields such as AI, applied AI, energy, semiconductors, banking, security, and aerospace.

Additionally, data from May 2024 shows that AI startups have higher VC funding in the seed, Series A, and Series B rounds compared to non-AI startups.

According to informed sources, a certain country's government plans to lift previous restrictions on artificial intelligence chips as part of a broader effort to revise semiconductor trade restrictions, which have faced strong opposition from major tech companies and foreign governments.

A certain country dominates AI financing, accounting for 46.4% of the country's VC transaction value in 2024, totaling approximately $97 billion, with nearly 4,000 transactions. According to the development situation, the number of Web3 AI projects is expected to experience explosive growth this year, potentially bringing new wealth opportunities and value creation space to the market.

Currently noteworthy AI projects with undistributed tokens: 0G (financing 105 million USD), Sentient (financing 85 million USD).

In the PayFi sector, a certain exchange has launched a service focused on stablecoin payments, initially supporting USDT and USDC, with plans to integrate more stablecoins in the future. Another exchange has partnered with a certain country to launch the world's first national-level crypto tourism payment system. The strategies of these two major exchanges seem to confirm the potential of the PayFi sector, especially in the context of regulatory compliance for stablecoins.

The previously recommended PayFi project’s deposit activity was very popular, and its team claims to issue tokens in Q2. The project has raised a total of 46.3 million USD in two rounds of financing, receiving investments from several well-known institutions.

3. Policy Regulation

1. 【5.7】A certain state passed a strategic Bitcoin reserve bill, authorizing state treasurers to purchase Bitcoin.

• The state became the first to pass such a bill, authorizing state treasurers to directly or through ETP purchase Bitcoin.
• The bill allows for up to 5% of funds (approximately $280 million to $770 million) to be invested in precious metals and cryptocurrencies with a market capitalization exceeding $500 billion, currently only Bitcoin meets the criteria.
• This move marks the country's entry into the compliant investment field of cryptocurrencies, signaling that more states may follow suit. The bill will take effect in 60 days.
• It is worth noting that the Bretton Woods system also originated in this state. In 1944, representatives from 44 allied nations held a conference here to establish the IMF and the World Bank, setting up a fixed exchange rate system based on the US dollar and gold, which collapsed in 1971.

2. 【5.9】The Senate of a certain country rejected the "Stablecoin Innovation and Security Act" (GENIUS Act)

• The bill aims to create a clear federal regulatory framework for stablecoins in the country, defining payment stablecoins and requiring 1:1 reserve backing.
• The bill stipulates regulatory methods for issuers of different market capitalization sizes, requiring regular liquidity reports and reserve disclosures.
• The failure of the bill has resulted in the country's stablecoin market maintaining its existing state-level regulations, lacking a unified federal framework, which may limit market growth and weaken the country's competitiveness in global digital finance.
• If passed, ETH may benefit. Ethereum is the primary issuance platform for USDC, and the bill could increase the use of stablecoins, driving up the demand for ETH, especially in the DeFi and payment sectors.