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DeFi Alpha is written by yyctrader and Squiffs, The Defiant’s degen team, who have been navigating the Web3 space since 2020, with contributions from DeFi Dad, Defiant Advisor and investor at 4RC.

Here’s today’s alpha:

• Trends to Watch (AI Memecoins)
• Chart of the Week (SOL)
• Market analysis (rangebound until proven otherwise)
• Dispatch from the trenches (How memecoins move)
• eEIGEN tutorial

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Trends to Watch

• Memecoin Rotation: The past two weeks have been all about AI memecoin euphoria, and the last few days have been littered with overinflated expectations, aggressive rugs, scams, and more fraudulent behavior than we’ve seen since the celebrity memecoin meta. At the same time, MooDeng pumped over 100% on Friday after a Binance perps listing. Between the large liquidity vacuum in the AI memecoins and MooDeng’s resurgence, there may be a flipping in the memecoin meta again soon. It could be back to animal coins, Murad’s cult coins, or something entirely new, but it is not a bad time to exercise caution in the trenches. Perhaps something new and exciting revitalizes the AI memecoin markets, but the meta feels like it's at a pivot point.
• Majors Price Action: Majors have been pretty stagnant, and BTC’s performance determines all risk in the market, especially when inter-cycle metas such as AI memecoins are in a less-certain state. With the election coming up, the volatility could potentially lead to a risk-off environment.
• Consolidating Altcoins: Another knock-on effect of the AI memecoin frenzy; most altcoins bled out compared to Bitcoin over the last couple of weeks, which could be partially attributed to people using liquidity for memecoin trading. Stronger altcoins may be in a decent buy area as there is potential for winning traders to rotate their profits back into altcoins if BTC stays strong.

Chart of the Week

Solana is our chart of the week, as it has outperformed all the other top 50 tokens by market capitalization, rising by nearly 13% this week.

SOL vs ETH and BTC

The move is likely fueled by more mindshare leaving Ethereum for Solana, as well as potentially external capital rotating into the asset after the AI memecoin craze. This continues the trend that’s been in motion for nearly a year now.

Renowned trader Izebel.eth, or Jez, summed up his thoughts in a tweet earlier this week where he said, “First time I've been structurally, not flows, bearish eth in a long time. If you can't have fun online, what's the point.”

Market Analysis

It was a volatile week for crypto markets that started with bulls in control as Bitcoin poked above $69,000 on Monday, only to reverse later in the week as macro and geopolitical concerns resurfaced.

Over 80% of the Top 100 digital assets posted losses last week, with Worldcoin the week’s worst performer after plunging 19%. AI memecoin GOAT and Solana DEX Raydium were the week’s big winners, soaring 120% and 35%, respectively.

Top Weekly Gainers

Bitcoin ETFs have been on a tear, with more than $3 billion of inflows in the past two weeks, fueling the rally and pushing BTC dominance to its highest level since April 2021 at 59.2%.

Big picture: BTC needs to hold above the key 65K level for further upside. After being rangebound between 60K and 70K since March, a larger move should be imminent, likely after the U.S. elections.

I closed my leveraged long positions in ETH, ZRO, SUI, and FTM early in the week as Bitcoin approached its range high amid short-term overbought conditions. I’m scaling back into longs over the weekend.

Levels to Watch

Bitcoin

• Resistance - $69,000, $73,000
• Support - $65,000, $62,000, $58,000,

Ethereum

• Resistance - $2550, $2700, $3000
• Support - $2400, $2300

Solana

• Resistance - $180, $190, $200
• Support - $160, $140, $120

Disclaimer: This section contains the personal opinions of yyctrader and should not form the basis for any investment decisions. For informational purposes only.

Dispatch from the Trenches

Memecoins & How They Move

Memecoins are indisputably the best way to make outsized returns in the current market. However, the highest returns yield the highest risk and require the most skill (or insider information).

Memecoins can be split into two primary categories: Established tokens and new launches.

Established tokens retain market caps of >100m over a period of months but still can be hyper-volatile. Such established tokens are ideal for swing trades or more “sound investments,” at least in the current market. They (usually) won’t rug pull you overnight while you sleep, but there are regular 20% daily swings. These tokens often align more with Murad’s “cult coin” thesis.

New launches are where people can make life-changing gains, but “the trenches” are the hardest game to play in all of crypto. The meta-games in the trenches are always changing, are subject to incredible manipulation, and can result in 80%+ losses in a matter of minutes. However, the inverse is also true, and trading coins below a $5 million market cap is where users can consistently enjoy 10, 20, 50, or even 100x returns.

Metrics like volume can help you gauge market interest in coins early, but wallet analysis is also required to ensure that tokens are not being manipulated, which they very often are. For lack of a better term, so-called “cabal” groups are very good at masking side wallets, creating “fake” volume, and shaking out traders with violent price swings.

The recent AI meta produced some of the most interesting runners the market has seen in a very long time, with nearly a token per day or more, running from zero to 8-figure market capitalizations. This is a sign of excess money flowing into the memecoin space, as opposed to just the usual suspects who move liquidity around.

Situations like this can make for some of the best trading environments, but as we’ve seen over the last few days, high-opportunity markets lead directly to a rise in scams, which often results in a lot of the new money that flows in ending up in the hands of malicious actors.

Tutorial

eEIGEN: Unlocking Liquid Restaking for EIGEN Tokenholders

Disclaimer: This is neither a recommendation nor an endorsement to buy or trade any token(s) mentioned.

With EIGEN becoming transferrable on October 1st, the long-anticipated token launch is finally here, commanding an FDV of nearly $6 billion.

Many new EIGEN tokenholders are looking to optimize yield. eEIGEN offers a powerful new opportunity by combining liquid restaking and auto-compounding rewards. With eEIGEN, users can deposit EIGEN tokens to mint eEIGEN, representing their staked position in the vault. As the vault earns rewards through restaking, these returns are automatically reinvested, increasing the value of eEIGEN over time. The result is a growing balance that reflects both the principal stake and the cumulative rewards, similar to how yield-bearing tokens like stETH work in other protocols.

A key advantage of eEIGEN is its seamless access to multiple point programs, including Veda, LRT², and ether.fi points, which further enhance a user's rewards. Beyond points, stakers also earn LRT² tokens, which represent a share of the pooled restaking yield. This model simplifies the complexities of staking and allows tokenholders to stay liquid—meaning they can withdraw or manage their positions without locking up their assets indefinitely. Though withdrawals may take up to 10 days to process, this mechanism adds an extra layer of safety, helping the vault maintain balance across deposits.

By leveraging the eEIGEN vault, EIGEN tokenholders not only benefit from steady yield growth but also gain exposure to a diversified stream of rewards through partnerships with protocols like Veda. For the latest estimates on yields and different points being earned with eEIGEN, we turn to this helpful thread below by DeFi analyst DeFi Dojo.

With $13M TVL already deposited, eEIGEN is becoming a popular solution for those looking to compound their restaking rewards while maintaining the flexibility to participate in DeFi. For tokenholders seeking both liquidity and optimal yield strategies, eEIGEN serves as a practical and rewarding product.

Today, I’ll show how I can deposit EIGEN into eEIGEN by ether.fi.

Please be aware of these risks.

• Smart contract risk in any related protocols, including ether.fi
• Front-end spoof attack on any app frontend
• An economic design exploit
• Colluding signers on any multisig
• Systemic risk across DeFi

Step 1: I go to the ether.fi app and connect my Ethereum Mainnet wallet here.

Step 2: Then, I specify how much EIGEN to deposit, click Stake and follow the prompts to Approve and Stake my EIGEN tokens.

Disclosure: DeFi Dad invested in ether.fi and holds ETHFI tokens.

DeFi Alpha is a weekly newsletter published for our premium subscribers. It aims to educate traders, investors, and newcomers about investment opportunities in decentralized finance, as well as provide primers and guides about its emerging platforms. It is meant to be highly actionable and shareable.

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Any information covered in DeFi Alpha should not form the basis for making investment decisions nor be construed as a recommendation or advice to engage in investment transactions. Any mention of a token or protocol should not be considered a recommendation or endorsement.