2024 Cryptocurrency Market Review and Outlook: Bitcoin ETF Approval Leads to a 44.2% Rise in Market Capitalization

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%. This growth is attributed to factors such as the approval of spot Bitcoin ETFs and Trump's election victory. Bitcoin's dominance rose to 56.8%, primarily due to the doubling of ETF assets under management. Ethereum ETFs performed relatively flat, with institutional investors still preferring Bitcoin.

Solana performed well, with the price of SOL rising by 29.3% and a net inflow of $2 billion into its ecosystem. The DeFi market share expanded, with total locked value doubling. The DEX/CEX trading volume ratio increased to 11.05%, with an annual trading volume reaching $2.67 trillion. Solana and Base saw significant growth in DeFi TVL market share.

Stablecoins have accelerated, with a market value growth of 26.8% to over $205 billion. New entrants like Ethena are driving this trend. The potential approval of ETFs for assets such as XRP and SOL in the future will have a positive impact.

1.2 Macroeconomic Environment and Politics

Politics

In the 2024 U.S. presidential election, Trump emerged victorious, and the Republican Party controls both houses of Congress. Trump's policies may bring uncertainties to the international situation. Whether his crypto-friendly policies can be implemented remains to be seen. Europe is affected by the Russia-Ukraine war, with the rise of right-wing forces. Many countries are implementing strict crypto regulations.

The situation in the Middle East is turbulent, with ongoing conflict between Israel and Hamas. Many countries in South America are advancing the legalization of Bitcoin.

Economy

In 2024, global GDP growth is projected to be 2.6%, with an inflation rate of 2.5%. Inflation in the United States has been partially controlled, leading to interest rate cuts. The Eurozone is experiencing sluggish growth due to geopolitical conflicts. China faces challenges such as weak consumption and export obstacles. Emerging markets are affected by the U.S. dollar's interest rate hikes, with some countries experiencing severe currency depreciation.

The three major U.S. stock indices surged, with technology stocks performing particularly well. AI shows great potential in multiple fields. The Nikkei index reached a 30-year high, benefiting from international capital inflows and export advantages.

2. Bitcoin

2.1 Product and Agreement Design

In the second half of 2024, Bitcoin underwent significant software upgrades, including Bitcoin Core 28.0 and the Lightning Network BOLT12. The community has been discussing the soft fork proposal, mainly concerning new opcodes and improvements to the Lightning Network. Consensus has not yet been reached, and progress is expected in 2025.

The implementation of BitVM is progressing steadily, with a focus still on the design and implementation of cross-chain bridges. Some test versions of cross-chain bridges based on BitVM have already begun to operate.

2.2 Layer 2 - Lightning Network

The scale of the Lightning Network remains stable at about 5000 BTC. The number of nodes is stable, but the number of channels has decreased, which may indicate a concentration of liquidity. New features such as BOLT12 have enhanced user experience. Some Layer 1 networks are developing Layer 2 solutions compatible with the Lightning Network.

Lightning network projects need to focus more on performance metrics. Projects supporting cross-border transaction settlements may gain more attention. Future development depends on the issuance of stablecoins.

2.3 Layer 2 - Side Chains

Sidechain projects vary in performance, with TVL exhibiting alternating trends. BTCFi faces sustainability challenges and needs to establish a robust ecosystem. The key to success lies in asset security and a vertical integration strategy.

On-chain Assets 2.4

The overall performance of on-chain assets in Bitcoin is mediocre. Assets of meta-protocols like BRC20 and Runes have underperformed. CSV protocols such as RGB and Taproot Assets are still under development. The on-chain asset sector faces challenges such as DEX experience and insufficient liquidity.

2.5 BTCFi

BTCFi provides additional returns for Bitcoin holders and is expected to grow with the improvement of infrastructure. Staking, liquid staking, and other models have driven the growth of the BTCFi project. Babylon has attracted a significant amount of TVL. LST projects have emerged, drawing on mature DeFi design concepts.

The challenges faced by BTCFi include issues such as sustainability and profit realization. The future development depends on whether a robust ecosystem can be built to enhance the practicality of BTCFi.

3. Ethereum

Despite the launch of the ETH ETF, its performance is not as good as that of the Bitcoin ETF. The ETH/BTC ratio has dropped to 0.037. Layer 2 has attracted a significant inflow of funds, while Ethereum has seen a net outflow. EVM remains the most dominant virtual machine.

3.1 L2s

After the Dencun upgrade, transaction fees for mainstream rollups decreased by over 90%, and usage significantly increased. Base, OP Mainnet, and Arbitrum achieved net inflows of $3.5 billion, $2.1 billion, and $1.7 billion respectively. Daily trading volume on Layer 2 grew by 325%, reaching 16.86 million transactions.

Base attracts a large number of users due to its good user experience and popular applications. Arbitrum launched Stylus, which supports development in multiple languages. The OP Superchain continues to expand, with 56 chains based on the OP-Stack by the end of the year.

3.2 Re-staking

The amount of staked Ethereum has overall increased, with the yield dropping to 3%. Re-staking protocols like Eigenlayer are attracting substantial TVL. Symbiotic TVL has grown more than five times, reaching $2.12 billion. Future development depends on the introduction of reduction mechanisms and balancing flexibility.

3.3 Ethereum Future Roadmap and EIP Proposals

The Pectra upgrade is scheduled to be completed in Q1 2025 and includes several important EIP proposals:

• EIP-7691: Expand Blobs capacity to further reduce L2 costs
• EIP-7702: Introduce smart contract functionality for EOA accounts
• EIP-7251: Optimize validator management, reduce network load

Ethereum's long-term roadmap aims for a significant upgrade in 2029, introducing zero-knowledge proofs and post-quantum cryptography.

3.4 Other Infrastructure

Decentralized sequencers are attracting attention, with Metis leading the way. In 2025, multiple large Rollup plans will implement decentralized sequencers.

The data availability track is still dominated by Ethereum Blobs, Celestia, and other solutions. Plans like EigenDA continue to optimize performance.

The Chain Abstraction Alliance has been established to promote cross-chain liquidity integration. The ERC-7683 proposal aims to build a universal filling network.

AI agents and intent-driven DeFi trading are being explored, such as projects like Griffain.

4. Solana

In 2024, Solana performed excellently, with a price increase of 75%, and the SOL/ETH ratio rising to 0.06. It demonstrated competitiveness in multiple fields such as DeFi and NFTs. The market value of stablecoins grew more than three times, reaching 5.1 billion USD. The number of new developers surpassed that of Ethereum. Collaborations with institutions like Shopify and Visa further strengthened.

The Solana ecosystem mainly focuses on areas such as DePIN, meme, and PayFi.

• DePIN: Multiple leading projects such as Helium are migrating to Solana
• Meme: Platforms like Pump.fun are boosting the Solana meme coin craze.
• PayFi: Infrastructure like Solana Pay drives payment innovation

Future Development Prospects:

• The activation of Firedancer will further enhance performance.
• Solana plugin enhances token issuance flexibility
• The potential approval of ETFs and the growth of stablecoins may bring positive catalysts.

5. Alt-L1s

In 2024, Alt-L1 continues to gain attention, with major projects including:

Berachain: A unique liquidity proof mechanism, which jumped to eighth place in TVL after launch.

TON: Achieved rapid growth leveraging the Telegram user base, but momentum slowed after Q4.

Kaia: Integrating LINE and KakaoTalk, launching the Kaia Wave program to promote ecosystem development.

Move Ecosystem: Sui and Aptos are the main representatives, with Sui leading in several metrics.

MegaETH: Provides high performance through node specialization.

Monad: Adopts optimistic parallel execution, supporting up to 10,000 TPS.

The competition is becoming increasingly fierce, and these Alt-L1s are expected to gain a larger market share by 2025.

6. Other tracks

6.1 Meme

The meme sector saw an overall increase of 218% in 2024. Ethereum, Base, and Solana are the three most active public chains. Platforms like Pump.fun have significantly boosted Solana meme coin trading volume. Various tools such as Kaito and Photon have emerged.

6.2 AI

AI is developing rapidly in the crypto space, from infrastructure to agents applications. Virtuals Protocol is promoting AI agents as assets. Development frameworks for agents, such as ElizaOS, are gaining attention. The combination of AI tokens and memes has become a hot topic.

6.3 RWA

The RWA market value increased by 63% to $13.67 billion. Private credit and U.S. Treasuries are the main asset classes. Institutional participation has increased, such as BlackRock launching the BUIDL fund. Decentralized protocols like Ondo are developing rapidly.

6.4 Trading Bot

The competition in the trading bot market will intensify in 2024. Emerging bots like Trojan and GMGN.AI are performing impressively. The market share is showing a dynamic trend of change.

6.5 DeSci

The number of DeSci projects is approaching 100, covering fields such as biotechnology and space. Biotechnology is dominant. It still faces challenges such as insufficient funding and legal risks.

6.6 DePIN

The total market value of DePIN has reached 50 billion USD, growing by 176%. The number of projects exceeds 295. Sub-sectors such as energy networks, wireless networks, geospatial networks, and computing networks are worth paying attention to. However, challenges such as equipment deployment and user adoption remain.

6.8 Game

The gaming industry shows resilience, with an average of over 7.6 million active wallets per day. Platforms like Forge play a key role in game distribution. opBNB and Ronin are major gaming public chains. Financing still faces challenges, but the industry remains resilient. The future looks promising for games with diversified distribution channels and unique gameplay.

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