A Comprehensive Review of the Crypto Market from the Macroeconomic Environment to Vertical Tracks in the Second Half of 2024

1. Market Overview

I.1 Crypto Market Fundamentals

The crypto market experienced significant growth in the second half of 2024, with the total market capitalization rising from $2.31 trillion to $3.33 trillion, an increase of 44.2%. This growth was driven by key events such as the approval of the spot Bitcoin ETF and Trump's election victory. Bitcoin's dominance rose to 56.8%, primarily due to the doubling of ETF assets under management, reflecting increased interest from institutional investors.

The performance of the Ethereum ETF has been relatively flat, with institutional investors showing a clear preference for Bitcoin. Solana has performed remarkably well, with the SOL price rising by 29.3% and a net inflow of $2 billion into its ecosystem.

The share of the DeFi market has expanded, with the total locked value growing by more than double. The ratio of DEX/CEX trading volume has risen to 11.05%, with an annual trading volume of 2.67 trillion USD. The DeFi TVL market share of Solana and Base has more than doubled, respectively.

The market cap of stablecoins has grown by 26.8%, reaching a historic high of over $205 billion. New entrants like Ethena are further driving growth with competitive yields.

I.2 Macro Environment and Politics

Politics

The US election saw Trump emerge victorious, with the Republican Party securing a majority in both houses. Trump's policies may bring uncertainty to the international situation. Whether his encryption-friendly policies can be implemented remains to be seen.

Europe is influenced by the Russia-Ukraine war, with right-wing parties gaining more discourse power. The crypto policy follows the United States and implements the MiCA regulatory framework.

The situation in the Middle East is tense, with ongoing conflicts between Israel and Hamas. Several countries in South America are advancing the legalization of Bitcoin.

Economy

In 2024, global GDP growth is 2.6%, and the inflation rate is 2.5%. The Federal Reserve has cut interest rates by 25 basis points three times in a row. The Eurozone is experiencing slow growth due to the impact of geopolitical conflicts. China is facing deflation and real estate risks. Emerging markets are affected by the dollar's interest rate hikes.

The U.S. stock market performed strongly, with the Nasdaq rising over 28%. Advances in AI technology have driven significant increases in the stock prices of related companies. The Nikkei index has reached a 30-year high.

2. Bitcoin

2.1 Product and Protocol Design

In the second half of 2024, Bitcoin underwent some important software upgrades, including Bitcoin Core 28.0 and the Lightning Network BOLT12. The community has disagreements regarding the soft fork proposals, mainly focusing on new opcodes, improvements to the Lightning Network, and other aspects. The implementation of BitVM is progressing steadily, with a continued focus on cross-chain bridge design and implementation.

2.2 Layer 2 - Lightning Network

The number of lightning network channels has not changed much, with a total of about 5000 BTC. The number of nodes remains stable, but the decrease in the number of channels may indicate liquidity concentration. Protocol improvements such as BOLT12 have enhanced user experience. Some Layer 1 networks are developing Layer 2 solutions compatible with the lightning network.

2.3 Layer 2 - Side Chains

Layer 2 sidechains show uneven performance, with TVL displaying alternating trends. BTCFi faces challenges such as reliance on unsustainable incentives and needs to build a robust ecosystem to ensure lasting liquidity. The key to future success lies in ensuring asset security and pursuing a vertical integration strategy.

2.4 On-chain Assets

BRC20, Runes and other meta-protocol assets are performing poorly. RGB is still being promoted, and progress has been made in integrating with the Lightning Network. Taproot Assets, launched by Lightning Labs, enables low-cost minting of stablecoins. The on-chain asset track faces challenges such as DEX experience and insufficient liquidity.

2.5 BTCFi

BTCFi can provide additional returns for Bitcoin holders, and the overall locked value is expected to grow. The types of returns are shifting from L2 to staking, liquid staking, and other methods. Babylon attracts a large amount of TVL, showing the community's demand for enhancing the utility of BTC. LST projects are emerging, unlocking liquidity and driving DeFi activities.

3. Ethereum

The performance of the Ethereum ETF has fallen short of expectations, with the ETH/BTC ratio dropping to 0.037. Layer 2 fees are significantly lower than those of Ethereum, leading to a capital flow towards Layer 2 projects. Networks like Base and other Layer 2 have seen significant net inflows.

3.1 L2s

After the introduction of blob data storage, rollups transaction fees have decreased by over 90%. The daily transaction volume on Layer 2 has increased by 325%, reaching 16.86 million transactions. Mainstream rollups such as Base, OP Mainnet, and Arbitrum have seen significant capital inflows.

3.2 Re-staking

The amount of staked Ethereum has increased overall, while the yield has dropped to 3%. Re-staking protocols like Eigenlayer are attracting a large TVL. The TVL of Symbiotic has seen significant growth, increasing more than 5 times.

3.3 Ethereum Future Roadmap and EIP Proposals

The Pectra upgrade is expected to be completed in the first quarter of 2025, and will include several important EIP proposals:

• EIP-7691: Expand Blobs target capacity, further reduce L2 costs
• EIP-7702: Implement EOA account smart contract functionality
• EIP-7251: Optimize validator management, reduce network load

The long-term roadmap aims for a significant upgrade in 2029, introducing technologies such as zero-knowledge proofs and post-quantum cryptography.

4. Solana

Solana performed exceptionally well in 2024, with a price increase of approximately 75%. Its unique SVM architecture offers lower fees and higher throughput, attracting a large number of innovative applications. The market value of stablecoins grew more than threefold, reaching $5.1 billion. The number of developers adopting it has significantly increased, surpassing other blockchains.

The main focus of the Solana ecosystem in 2024 will be on areas such as DePIN, meme, and PayFi.

DePIN: Leading projects such as Helium and Render Network are migrating to Solana, driving ecosystem development.

Meme: Platforms like Pump.fun have significantly boosted the trading volume of Meme coins on Solana.

PayFi: Infrastructure such as Solana Pay drives payment innovation.

Future development direction:

• Pay attention to the launch of the Firedancer client and the potential release of the SOL ETF.
• Explore SVM and Layer 2 development
• Focus on community-driven applications and breakout applications

5. Alt-L1s

In 2024, Alt-L1 continues to receive strong attention, mainly including:

Berachain: Introduced a liquidity proof mechanism, with a TVL exceeding $1.5 billion.

TON: Rapid growth thanks to the Telegram user base, but the growth rate slowed down after Q4.

Kaia: Formed by the merger of Klaytn and Finschia, integrating LINE and KakaoTalk users.

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

MegaETH: A high-throughput EVM-compatible chain that introduces a specialized architecture for nodes.

Monad: Adopts optimistic parallel transaction execution and integrates MonadDB to optimize data storage.

6. Other tracks

Meme: The best performing crypto market in 2024, with an increase of 218%. Ethereum, Base, and Solana are the three most active public chains.

AI: From infrastructure to the explosion of agents, covering the upstream and downstream industries of AI. Virtuals Protocol successfully positions agents as assets.

RWA: Market value increased by 63%, reaching $13.67 billion. Private credit and U.S. Treasury bonds are the main asset classes.

Trading Bots: Market competition intensifies, with emerging platforms like Trojan and GMGN.AI on the rise.

DeSci: About 100 projects are distributed across fields such as biotechnology and space, but still face challenges such as insufficient funding.

DePIN: The total market capitalization has reached $50 billion, with the number of projects increasing to 295. Energy networks, wireless networks, geospatial networks, and computing networks are the main sub-sectors.

Game: The daily active wallets exceed 7.6 million, which is 5 times that of 2023. The main gaming chains include opBNB, Ronin, Xterio, etc. Financing still faces difficulties, but the industry remains resilient.