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2024 Crypto Market Overview: Bitcoin ETF and Trump's Victory Drive Total Market Capitalization Up 44%
1. Market Overview
1.1 Cryptocurrency Market Fundamentals
In 2024, the total market value of the cryptocurrency market grew from $2.31 trillion to $3.33 trillion, an increase of 44.2%. Key events such as the approval of spot Bitcoin ETFs and Trump's election victory drove market growth. Bitcoin's dominance rose to 56.8%, and the doubling of ETF assets reflected increased interest from institutional investors. Ethereum ETFs performed modestly, with the ETH/BTC ratio declining.
Solana performed well, with the SOL price rising by 29.3% and a net inflow of $2 billion into the ecosystem. The DeFi market share expanded, with the total locked value doubling. The DEX/CEX trading volume ratio increased to 11.05%, with an annual trading volume of $2.67 trillion. Solana and Base have significantly increased their market share in DeFi TVL.
Stablecoins have accelerated, with a market cap growth of 26.8% to over $205 billion. New projects like Ethena further drive growth. The potential approval of ETFs for XRP and SOL in the future will have a positive impact.
1.2 Macroeconomic Environment and Politics
Politics
Trump has been re-elected as President of the United States, and the Republican Party has won a majority in Congress. Trump's policies may bring uncertainty to the international situation, and countries might follow the U.S. in starting trade protectionism. Trump was friendly towards the cryptocurrency market during his campaign, but actual policies still need to be observed.
The impact of the Russia-Ukraine war has significantly strengthened the discourse power of right-wing parties in Europe. Europe is increasingly following in terms of cryptocurrency policy, and the MiCA bill clarifies the regulatory framework for stablecoins and cryptocurrencies.
The situation in the Middle East is tense, with conflicts between Israel and multiple parties such as Hamas. Several countries in South America are advancing the legalization of cryptocurrency.
Economy
In 2024, global GDP growth is projected at 2.6%, with an inflation rate of 2.5%. Inflation in the United States has been partially controlled, leading to a beginning of interest rate cuts. The Eurozone's economic growth is sluggish due to the impact of geopolitical conflicts. China is facing challenges such as weak consumption and export obstacles. Emerging market countries are affected by the rising US dollar interest rates, resulting in severe depreciation of local currencies in some nations.
The three major U.S. stock indexes surged significantly, with technology stocks performing particularly well. The Nikkei index reached a new high in over 30 years, benefiting from carry trades and the depreciation of the yen.
2. Bitcoin
2.1 Product and Agreement Design
In the second half of 2024, Bitcoin will have significant software upgrades, such as Bitcoin Core 28.0 introducing flexible transaction forwarding strategies and the Lightning Network launching BOLT12. These upgrades will impact multiple application scenarios.
Discussions about the design of the Bitcoin protocol layer are ongoing, primarily focusing on soft fork proposals. There are differences among developers, with discussions mainly revolving around new opcodes, improvements to the Lightning Network, and other solutions. No consensus has been reached yet, and progress is expected in 2025.
The implementation of BitVM is still progressing steadily, with a current focus on the design and implementation of cross-chain bridges. Some test versions of cross-chain bridges based on BitVM have already started running.
2.2 Layer 2 - Lightning Network
The total volume of Lightning Network channels remains at around 5000 BTC. The number of nodes is stable, but the number of channels has decreased, which may indicate that liquidity is concentrating towards large node service providers.
The protocol and application ecosystem are still evolving. BOLT12(offer) has been adopted by multiple clients, supporting static payment methods. Some Layer 1 networks are developing Layer 2 solutions compatible with the lightning network.
The feasibility of business models remains a key focus. Service-oriented projects, especially those utilizing the Lightning Network as a settlement layer for cross-border transactions, may receive more attention. Future development depends on the issuance of stablecoins on the Lightning Network.
2.3 Layer 2 - Side Chains
Layer 2 sidechains show varying performance. TVL exhibits alternating trends. The challenges faced by BTCFi include reliance on unsustainable TVL surges and airdrop incentives. Building a robust ecosystem to ensure lasting liquidity is key.
The key to the success of Bitcoin L2 lies in: 1) ensuring asset security; 2) pursuing a vertical integration strategy.
On-chain Assets 2.4
The overall value of on-chain Bitcoin assets has not appreciated along with the rise in Bitcoin prices, showing low activity. Assets under meta-protocols like BRC20 and Runes have performed poorly. RGB is being promoted and has technical integration with the Lightning Network. Taproot Assets was launched by Lightning Labs, and Tether has announced that it will issue stablecoins based on it.
On-chain asset tracks face challenges such as insufficient experience and liquidity on Bitcoin's on-chain DEX.
2.5 BTCFi
BTCFi can provide additional returns for Bitcoin holders, and the overall locked value is expected to grow. The types of yields have shifted from L2 to staking, liquid staking, and liquid re-staking. Babylon has attracted a large amount of TVL denominated in Bitcoin. Various LST projects have emerged, driving DeFi activities.
The challenges faced by BTCFi include issues such as the method of calculating TVL and the realization of promised returns. Protocols that can more flexibly mobilize Bitcoin liquidity and support a wider range of asset classes will have a better chance of success.
3. Ethereum
In July 2024, the US launched an ETH ETF, but its performance failed to replicate the success of the Bitcoin ETF. The ETH/BTC ratio declined, highlighting institutional investors' preference for Bitcoin. Layer 2 gas fees are lower than Ethereum's, leading to a flow of funds into Layer 2 projects.
EVM remains the most dominant virtual machine in the ecosystem. Ethereum and its EVM ecosystem are expected to maintain their dominant position in 2025, although competitive alternatives may gradually erode its market share.
3.1 L2s
After the Dencun upgrade, rollups transaction fees decreased by over 90%. The daily transaction count on Layer 2 increased by 325%, and the number of daily active addresses grew by 120%. Leading Layer 2 solutions like Base, OP Mainnet, and Arbitrum have seen significant net inflows.
The success of Base can be attributed to a smooth user experience, collaboration with Coinbase, and the launch of popular applications. The activity level in DeFi has significantly increased.
Arbitrum has launched Stylus, allowing the use of multiple languages to write smart contracts. The future roadmap includes several improvement measures.
OP Superchain continues to grow, reaching a total of 56 chains based on the OP-Stack by the end of the year.
L2 networks with unique positioning and value propositions are expected to further integrate and enhance user stickiness, becoming important competitors to alt-L1 networks.
3.2 Re-staking
The number of staked Ethereum in 2024 has increased overall, with the yield dropping to 3%. Re-staking protocols like Eigenlayer are attracting a large amount of TVL. Symbiotic's TVL has seen significant growth.
Future catalytic factors will depend on the successful launch of the reduction mechanism, as well as the flexibility provided to AVS, stakers, and node operators.
3.3 Future Roadmap of Ethereum and EIP Proposals
The Pectra upgrade is expected to be completed in the first quarter of 2025 and will introduce several important EIPs. The main proposals include:
The Ethereum core research team has restructured its long-term development roadmap, aiming for a significant upgrade in 2029, introducing technologies such as zero-knowledge proofs and post-quantum cryptography.
Ethereum needs to adjust the staking reward issuance curve in the future, while attracting high-throughput applications to create greater value for holders.
Other Infrastructure
4. Solana
In 2024, Solana performed excellently, with a price increase of about 75%. Developments in DeFi include the launch of cbBTC, PYUSD incentive programs, and more. The market value of stablecoins increased more than threefold, reaching $5.1 billion. Developer adoption has seen significant growth, and institutional adoption is becoming increasingly apparent.
The focus of the Solana ecosystem in 2024 will mainly be on areas such as DePIN, meme, and PayFi.
DePIN: Multiple leading projects such as Helium and Render Network are migrating to Solana, leveraging the platform's advantages to provide services.
Meme: The Memecoin craze has made Solana the preferred platform. Platforms like Pump.fun have achieved great success.
PayFi: Infrastructure such as Solana Pay brings innovation to payments.
Looking to the future:
5. Alt-L1s
Berachain
Berachain introduces the Proof of Liquidity ( PoL ) mechanism, and the BeaconKit modular consensus client is compatible with EVM. Before launch, the TVL exceeded $1.5 billion, and after launch, it jumped to become the eighth largest network by TVL.
TON
With the active user base of Telegram, TON attracted a lot of attention in 2024. Daily active users grew from 27,725 to 293,539. DeFi TVL increased over tenfold. However, the performance in Q4 fell short of expectations, and future growth will rely on closer collaboration with Telegram.
Kaia
Kaia is formed by the merger of Klaytn and Finschia, integrating LINE and KakaoTalk users. It offers optimization measures such as account abstraction and gas fee proxy payments. TVL has grown from $37 million to $60 million. The Kaia Wave program has been launched to promote ecological prosperity.
Move
The number of developers in the Move ecosystem has grown to over 1,500. Sui outperforms Aptos on several key metrics. The market value of Sui stablecoins has significantly increased, and DEX trading volume has surged. Aptos TVL has increased more than 8 times, and the market value of stablecoins has grown more than 12 times.
Movement launched the Ethereum expansion solution M2 based on the Move language.
MegaETH
MegaETH is a high-performance blockchain compatible with EVM, which addresses transaction throughput and computational power limitations through node specialization.
Monad
Monad achieves optimistic parallel transaction execution across multiple EVM instances, maintaining compatibility with Ethereum bytecode. It integrates a proprietary database, MonadDB, which supports asynchronous I/O.
Competitive Landscape
The narrative in 2024 is no longer limited to the competition between Ethereum and Solana. More alternative L1 projects are emerging, and they are expected to gain a larger market share in 2025.
6. Other Tracks
6.1 Meme
The overall increase in the Meme track in 2024 is 218%. Ethereum, Base, and Solana are the three most active public chains in the Meme ecosystem. Pump.fun has been launched.