After 49 years in the military, how is Virtuals doing now?

Authored by: Luke, Mars Financial

When Deepseek and Grok3 continue to stir up a craze in the Web2 world, the AI ecosystem of Web3 is encountering the largest historical pullback. Many AI tokens have retraced at least 80% from their peak a month ago, among which the Virtual Protocol (VIRTUAL) ecosystem has also experienced a sharp decline—VIRTUAL platform token plummeted by 8.6% in a single day, with tokens incubated such as GAME, LUNA dropping by more than 10%.

Previously, the deployment of Virtuals on Solana was seen as a positive development in the market. However, now, it can't help but remind people of a new recruit who just joined the army in 1949, carrying ambitious aspirations, but at the first moment on the battlefield, found themselves on a retreat train.

But all of this was not without warning. From the peak in January to the trough in February, Virtuals' experience was like a crypto version of "The Big Short", revealing the brutal game of speculative bubbles, technological ideals, and market cycles. As the largest AI agent platform based on the Ethereum ecosystem, Virtuals had planned to expand its business to Solana, attempting to replicate the success of AI agents in the Solana ecosystem. However, Solana's recent scandals, especially the turmoil surrounding Meme coin and conspiracy groups, have plunged the Solana ecosystem into a crisis of trust. Although Virtuals seems to be seeking new opportunities, the overall collapse of the AI agent track and the entire altcoin market indicates that the market's winter seems to be accelerating, whether it is the Solana or Ethereum ecosystem.

The opening of Solana branch encountered a cold reception: the expansion of multiple chains is not well-received

On January 25th, Virtuals announced its entry into the Solana ecosystem, and the market once viewed this move as an important step for the 'AI Agent Empire'. The team plans to replicate the success model on Base Chain through five major plans including Meteora Trading Pool, SOL Strategic Reserves (SSR), etc. However, the data from Solana's debut on February 12th burst this bubble.

AI agent graduation rate is only 8.3%: In the Solana ecosystem, only 13 out of 156 new projects have reached the graduation standard, with over half of the projects' prices close to zero, and only 5 of them have a market value of over a million US dollars;

Liquidity Dilemma: The participation of Solana on-chain users is sluggish, with less than a hundred holding addresses for most projects, which is in stark contrast to the 222,000 active wallets on Base chain.

It's like an influencer restaurant blindly expanding its branches, thinking that it would be able to conquer new markets with its signature dishes (AI agents), only to find that Solana users prefer local specialties (such as local projects such as Meme $TRUMP and ai16z). What's even more ironic is that the "inter-chain abstract swap" scheme designed by Virtuals for cross-chain is still in the white paper stage, and users can only use SOL to buy AI proxies on Base, or ETH to buy Solana proxies, which is comparable to asking a Sichuan chef to make sushi.

Two, AI Agent Ebb: From 'Tech Revolution' to 'Leek Toy'

The plight of Virtuals is essentially a microcosm of the AI agent track bubble bursting. According to data from Cookie.fun, the market value of the entire AI agent track has shrunk by 65.3% in the past month, a trend that aligns with Messari's earlier prophecy: 'The prosperity of the AI agent framework will peak in Q1 2025, due to lack of real demand support.'

During the boom, the frenzy of the AI agent track is like the 'Trump pump' in the stock market. In December 2024, thanks to AI narrative and the blessing of the 'Trump pump', the VIRTUAL token skyrocketed 500% in 30 days, with a market value once surpassing $5 billion, becoming the 'Nasdaq of AI agents'. At the same time, the platform's total revenue exceeded $37.76 million, with a trading volume of up to $67.4 billion, seemingly becoming the star of the crypto industry overnight.

However, as the bubble bursts, the cost of skinny dipping begins to show:

Token economy is overheated: the $48 million buyback plan launched in January did boost the coin price in the short term, but it also exposed the vulnerability of relying on transaction fee sharing - when the trading volume plummeted, the destruction mechanism instead became a "blood-sucking pump";

Homogenization of agents: Most of the 16,000 AI agents on the platform are social KOL tokens (such as AIXBT) or 'virtual idols' riding the trend, whose function is limited to forwarding tweets or generating cheesy pick-up lines, far from being 'disruptive AI'. At the same time, the number of new agents is rapidly shrinking, with only 4 new agents online on February 18th.

This situation inevitably brings to mind the 2021 NFT avatar craze - when speculators found that their "digital monkeys" could neither chat nor work, a sell-off became inevitable.

Three, Ethereum to the left, Solana to the right: Prisoner's Dilemma in the ecological consumption

Virtuals' cross-chain strategy was originally intended to simultaneously layout Base (Ethereum L2) and Solana, but this plan has exposed its dilemma in the competition between public chains, like a sandwich cookie.

The embarrassment of the Base chain: as the "top student" in the Ethereum ecosystem, Virtuals' expansion to Solana is seen as a "betrayal" of the main chain by the Ethereum community. This multi-chain layout has intensified the Ethereum community's anxiety about the "vampire effect" of L2, especially at a time when Ethereum itself is trying to deal with scalability and cost issues.

Solana's cold reception: Despite Virtuals incentivizing the Solana ecosystem by converting 1% of fees to SOL, Solana users clearly prefer local projects, especially homegrown competitors like ai16z (market value of $25.5 billion). Virtuals, as 'outsiders,' have always struggled to gain widespread acceptance in the Solana community, almost becoming 'paratroopers'.

This situation inevitably reminds people of a son-in-law who tries to please both his mother-in-law and mother-in-law at the same time, but in the end, neither side is satisfied, and the only possible result is to be kicked out.

Chapter Four: Revelation of Retail Investors: The 'Cognitive Collapse' of Speculation and Value

For ordinary investors, the roller-coaster market of Virtuals provides several profound warnings to the market:

Narrative≠Value: AI agents this grand vision must be supported by practical landing scenarios. If the token economy relies solely on the circulation of transaction fees, it will ultimately become a 'on-chain casino' and cannot sustain development.

Multichain ≠ Security: Although cross-chain expansion may seem to open up the market, it actually disperses the team's resources, especially during market downturns, excessive deployment will only increase the risk of fund chain fractures - the more branches, the greater the crisis.

Whales≠Allies: Despite the favor of large whale investments, VIRTUAL's sell-offs are often faster than retail investors. In the past month, VIRTUAL has fallen by as much as 46.3%, and it is these whales' rapid selling that has intensified market panic.

From this, it can be seen that there is often a huge cognitive gap between the speculative behavior of the market and the value of virtual assets. In the world of virtual assets, many investors fall into the 'value illusion', thinking that the bubble will continue to expand, only to eventually face the ruthless 'split'.