After a recent flash crash under $99,000, Bitcoin (BTC) caused an even deeper drawdown for other assets. Previously hot narratives like AI agents and DeFAI were the hardest hit by the correction. 

The AI agent narrative and especially DeFAI were the hardest hit during the recent market correction. As Bitcoin (BTC) dipped under $99,000 briefly, recently hot narratives erased even more value. 

The two narratives lost their momentum in January, despite expectations for becoming the leading source of gains in 2025. The two narratives outperformed all assets with a year-end rally in 2024, but the momentum was not sustainable. 

The AI token space as a whole had a correction, affecting even legacy AI coins and tokens. The market for infrastructure AI and older shared computing projects lost more than 13% to a market capitalization of $36B.

DeFAI declined after top AI agent personalities losses

DeFAI is one of the newest categories of tokens, currently building up its market capitalization. Top DeFAI tokens are led by AIXBT and GRIFFAIN, which dragged down the whole sector. DeFAI lost more than 21% of its market capitalization in 24 hours, down to $2.1B.

Based on other metrics, the sector lost more than 29% of its value, with accelerated selling. DeFAI is still a small-scale sector of tokens, similar to DeSCI, offering both bigger gains and sharper corrections.

The loss of enthusiasm for DeFAI follows general weakness in the AI agent sector. After becoming over-saturated, the market for AI agents could not hold the initial inflows. Most of the value accumulated in several top AI agent tokens, while less liquid assets crashed even faster.

The AI agent space corrected from peak valuations above $17B, down to $9.59B toward the end of January. Agents on Ethereum, Solana, and Base were all mostly in the red, despite aiming to be cult tokens with minimal selling. 

AIXBT, the leading token in the space, lost nearly 50% of its value within days, down to $0.50 from a peak close to $1. GRIFFAIN posted a similar loss from $0.60 to $0.30. Most other tokens lost between 20% and 40% in 24 hours. 

Even the cult token, FARTCOIN, continued to slide, down to $0.94. FARTCOIN accelerated its slide after the news that Truth Terminal, its AI agent owner, started divesting its holdings through an OTC deal. FARTCOIN was down 25.9% in 24 hours, as the asset continues to see frequent trading from whales. 

DeepSeek disrupts the AI agent space

All current AI agents were created with older LLMs, while the focus was on their social media success and speculative trading. The emergence of the newly trained DeepSeek is also disrupting the AI agent space. Projects are scrambling to add the new model, or completely replace their previous tools for launching agents.

Crypto projects are trying to tokenize the trend, by adding a new batch of agents based on the DeepSeek trend. The earliest risky AI agent tokens based on DeepSeek’s training have already emerged on Solana. SwarmNode has also adapted, allowing all agents to switch to DeepSeek, aiming to re-spark the agent narrative. As usual, Solana builders almost immediately responded with an unofficial DeepSeekAi token on Solana, also a risky bet. 

Agent creators on Internet Computer also posted an example of a new AI personality built on ICP, posted directly to the DeepSeek GitHub repository. 

Smart money rolls over to other assets

Net buying pressure for AIXBT and AI16Z has decreased, as smart money and whales are accumulating other assets. 

After boosting AI agents, funds are now flowing back into infrastructure tokens. Virtuals Protocol (VIRTUAL) was the most widely bought asset, with $200K advantage of buyers over sellers. 

Instead of tokens, traders also rolled over into cbBTC, Coinbase’s wrapped version of BTC. As the market consolidates and traders switch to safer assets, the AI space now has to show its projects can survive beyond the initial hype. 

Traders are also turning back to meme tokens, as AI agents are seen as a similar type of asset. Trading accelerated for Base meme tokens TOSHI, MIGGLES, and MOCHI. Some of the funds flowed back to DeFi tokens like Aerodrome (AERO).

Cryptopolitan Academy: Are You Making These Web3 Resume Mistakes? - Find Out Here

The entire cryptocurrency market was seen bleeding. Several assets were witnessing a major drop in price. Amidst this, Solana (SOL) emerged as one of the day’s biggest losers. The fifth-largest cryptocurrency is currently 22% below its all-time high of $294.33. SOL achieved this peak earlier this month. The altcoin is quite far from this mark. Despite this, the community is expecting SOL to reach a new high this quarter. Even though the odds of this seem low right now, find out the altcoin can surge to $400 in Q1.

Also Read: Cardano (ADA) & Dogecoin (DOGE) Price Prediction For Early February 2025

Solana Records Double-Digit Drop

Throughout the past 24 hours, the Solana market took a huge hit. The asset dropped from a high of $259.57 to a low of $226 after a dip of 12%. At the time of writing, SOL was priced at $227.62. Despite this decrease, the altcoin’s monthly gains are at a positive 22%.

The Solana market looked bleak. But a popular analyst planted hope. More recently, Elon Musk revealed that the United States is exploring the use of blockchain technology. Even though this idea is in the early stages, blockchain technology could be employed to track government spending. Amidst this, Ali Martinez noted the possibility of the Solana network being the “chosen one.” He suggested that SOL could witness a “take off” and reach a high of $4,700.

Also Read: What is a Liquidity Pool?

Q1 Prediction

The Solana market will move slowly over the next few weeks. Data from CoinCodex revealed that the highest price level that SOL will trade at is $290. This is in the month of February. In addition, it marks a 28% spike from its current price level. The asset will mostly fail to reach $400. But if Solana emerges as the “chosen one” the altcoin could change the fate of its investors over the next few months.

Also Read: Chainlink: New Price Prediction Puts a $47 Cap on LINK