Bitcoin continues to assert its dominance as the “king,” while Ethereum faces numerous challenges. Simultaneously, the rise of memecoins and the influx of large institutions have painted a vibrant picture for the crypto market in 2024.
Continuing the recovery momentum of 2023, the overall market capitalization in 2024 has doubled, reaching $3.7 trillion, proving that crypto is a reliable alternative asset.
From Runes to GameFi: New Directions for Ecosystems
Bitcoin Continues to Assert its Dominance as the “King”
In 2024, Bitcoin’s price surpassed two significant milestones: the previous all-time high of $69,000 set in 2021 and the psychological threshold of $100,000. Bitcoin also asserted its dominance in the crypto market as the BTC.D (Bitcoin Dominance) index reached 61%, its highest point since March 2021.
The Bitcoin Halving event and capital inflows from large institutional investors like BlackRock, Fidelity, and Franklin Templeton are the main reasons for this achievement.
The Bitcoin network also made significant strides in 2024, introducing exciting new functionalities and increasing network flexibility.
The first highlight is the tenfold growth of NFT collections belonging to the Ordinals protocol. Launched in early 2023, Ordinals allows for inscribing information (such as images) onto Bitcoin satoshis, creating the concept of NFTs on Bitcoin.
Following the success of Ordinals, Runes – launched in April 2024 – is a new token standard that allows for token divisibility similar to ERC-20 on Ethereum. Runes opens up the possibility of owning memecoins and “culturecoins” directly on Bitcoin.
The vibrant activity of Ordinals and Runes raises questions about programmability on Bitcoin, as the network has traditionally prioritized security and decentralization, limiting features related to smart contracts and complex transactions.
However, BitVM has offered a solution that allows for off-chain computations and verification on the Bitcoin mainnet, similar to Ethereum’s rollup mechanism. This paves the way for Bitcoin to access rollups, decentralized bridges, EVM-compatible contracts, and other functionalities common on other blockchains.
Besides BitVM, the “Bitcoin L2 Season” is underway with over 40 Layer 2 solutions being rapidly tested and developed. CORE, Bitlayer, Rootstock, and Merlin Chain are notable names in this field.
Another highlight of 2024 is the launch of Babylon – the first Bitcoin staking protocol. Babylon allows users to stake BTC to secure other networks and earn rewards while ensuring their Bitcoin remains on the mainnet and they retain control of their tokens.
Ethereum Underperforms but Maintains Core Value
Despite Bitcoin reaching a new all-time high, Ethereum appears weaker as the ETH/BTC pair declined from 0.054 to 0.037. This underperformance stems from lower capital inflows into Ethereum ETFs compared to Bitcoin ETFs and changes in the network’s economic structure.
Ethereum ETFs in the US have only raised $577 million, significantly lower than the $50 billion raised by Bitcoin ETFs. This difference may be due to the fact that most ETF investments come from traditional investors, who favor Bitcoin due to its simplicity and recognizability.
Bobby Zagotta, CEO of Bitstamp in the US market, believes that the Ethereum ETF launched at the wrong time, when “the election results were still unclear and there was much legal and political uncertainty.”
Another reason for Ethereum’s weakness is the change in its tokenomics. Previously, ETH was expected to become deflationary due to the Proof-of-Stake (PoS) mechanism and EIP-1559. However, after the Dencun upgrade, the ETH supply started to increase. This reduces ETH’s attractiveness compared to BTC, which has a fixed supply of 21 million.
However, Ethereum still has certain advantages. Transaction fees on Ethereum are burned, which theoretically helps reduce the total ETH supply. Ethereum is also the largest platform for issuing stablecoins and tokens, responsible for issuing 57% of the new stablecoin supply in 2024.
Furthermore, Solidity smart contracts on the Ethereum Virtual Machine (EVM) are still favored by many developers due to their familiarity and proven security over time.
In addition, the development of ETH restaking protocols has opened up a new path, helping to address the issue of locked liquidity when staking. Etherfi is currently the most used ETH restaking protocol, accounting for 59% of the market share.
Active validator services (AVS) – offered by restaking protocols like EigenLayer – are expected to play an important role in network security. However, whether AVS generates enough profit to attract users to restake ETH remains an open question.
Solana is the Rising Star of the Year
Solana has had an explosive year in 2024, thanks to its advantages in transaction speed, low fees, and a rich dApp ecosystem. The network has emerged as a leading DEX hub, with trading volume starting to surpass Ethereum in Q4 2024.
Unlike Ethereum, DEX trading volume on Solana does not have a strong correlation with trading volume on centralized exchanges (CEXs), demonstrating the independent trading trends of this network
Memecoins are the main reason for Solana’s growth. In November 2024, over 85% of DEX trading volume on the network was attributed to memecoins, up from 40% at the beginning of the year.
Solana is currently a fertile ground for newly launched memecoin projects. Pump.fun, Solana’s leading launchpad platform, has birthed over 4 million coins, with over 20,000 coins created daily.
Telegram and TON: Community Creates Strength
The Telegram and TON ecosystem unexpectedly emerged thanks to trading bots and GameFi. Telegram trading bots were one of the most profitable segments in the crypto market in 2024, surpassing even DeFi giants like Aave and MakerDAO.
The strength of Telegram bots lies in their ease of use and support for various features such as price alerts and quick purchases of newly launched tokens. Even though bot trading fees can be as high as 1%, users are still eager to use them due to the volatile nature of memecoins.
It is estimated that top trading bots generated $210 million in fees in 2024, almost equal to the revenue of major memecoin launchpads.
GameFi on TON – the Layer 1 blockchain developed by the Telegram team – has exploded, creating a new wave of users for the crypto market. With simple gameplay, social networking features, and attractive referral programs, Notcoin and Hamster Kombat have attracted 40 million and 200 million users, respectively. Hamster Kombat even reached 35 million subscribers on YouTube.
Despite operating mainly off-chain, GameFi on TON demonstrates the potential to attract millions of new users, thanks to Telegram’s existing community advantage.
“Platforms like Telegram and TON will help Web3 become widely popular because they are unrestricted. Games like Hamster Kombat are prime examples of the first generation of games belonging to this trend,” said Yat Siu, co-founder and chairman of Animoca Brands.
Overview of Major Trends in 2024
Derivative DEXs Rise, Polymarket Dominates Election Betting
2024 marked the rise of spot and derivative DEXs. Spot trading volume on DEXs grew by 171% during the year, peaking at $375 billion in November.
New DEXs like Raydium, Orca, Aerodrome, and Velodrome are gaining market share from Uniswap, Pancakeswap, and Curve. The Raydium DEX on Solana currently leads the market in spot trading volume.
Speculative activity in the crypto market also returned as trading volume on derivative DEXs increased by 328% year-on-year. March 2024 was the most active month, with a total trading volume reaching $316 billion, coinciding with Bitcoin’s surge after the launch of Bitcoin ETFs.
In the perpetual derivatives sector, emerging names are gradually challenging the dominance of dYdX, which held the throne throughout 2023. After migrating to its own appchain (v4) on Cosmos, dYdX has somewhat lost its advantage.
Hyperliquid – a perpetual derivatives protocol and Layer 1 blockchain – emerged as the winner, capturing 40% of the market share by the end of the year. Its user-friendly interface and active community are key factors in Hyperliquid’s success, even after the conclusion of its points program
Perpetual futures exchanges on Solana, such as Jupiter and Drift Protocol, also recorded impressive growth in 2024. Polymarket, the leading decentralized prediction market, achieved great success this year. Polymarket’s trading volume surged thanks to the US election.
Using a central limit order book (CLOB) on Polygon, Polymarket became the leading election betting platform of 2024, with total trading volume exceeding $2 billion in October and November.
Stablecoins: Popular Payment Methods and New Yield-Generating Products
The total stablecoin supply reached a new peak of $193 billion in November 2024, a 48% increase from the beginning of the year. This is a positive sign that capital is returning to the crypto market, increasing liquidity and supporting trading activities.
The growth of stablecoins is not only driven by payment needs but also by their flexible programmability. Stablecoins are increasingly used in international payments, with a total transaction value reaching $27.1 trillion in the first 11 months of 2024, three times higher than the same period last year.
Besides fiat-pegged stablecoins, the “synthetic yield” model is attracting attention.
Ethena, with its stablecoin USDe, is the first “synthetic dollar” protocol on Ethereum. It employs a strategy of longing liquid staked ETH and shorting ETH on perpetual futures platforms, then paying out returns based on ETH staking rewards and funding rate fees. However, reliance on funding rates is a potential risk of this model.
Layer 2: Increasingly Diverse Solutions
Ethereum is leading the Layer 2 trend, with most activity taking place on these new networks. Daily transactions on Layer 2s have increased by 289% since the beginning of 2024, accompanied by a 108% increase in the number of daily active addresses. Layer 2s, with their low transaction fees and high speed, are rapidly attracting users.
Base and Arbitrum are the two dominant Layer 2s in terms of total value locked (TVL) and transaction volume, but many other Layer 2s are also experiencing growth. Layer 2s on Ethereum compete with each other by offering unique features, from innovative block creation mechanisms to different execution environments and higher returns for bridged assets.
The Layer 2 alliance model using shared development toolkits is also a prominent trend. Optimism’s Superchain, Arbitrum’s Orbit chain, and ZKsync’s Elastic Chain are the leading ecosystems in this trend. Optimism has also built a mechanism for sharing revenue from transaction fees, which is then reinvested to develop the ecosystem across the entire Superchain.
Bitcoin is also learning from Ethereum, with dozens of Layer 2 projects based on the Ethereum Virtual Machine (EVM) in development. However, the challenges of liquidity fragmentation and user adoption that Layer 2 faces on Ethereum may be replicated on Bitcoin due to the lack of a unified scaling vision and a central research hub like the Ethereum Foundation.
Not only Ethereum and Bitcoin, but Solana also has a similar scaling solution called “network extensions,” focusing on extending the network for specific tasks. Layer 2 on Solana supports custom functionalities that Layer 1 cannot accommodate.
The rollup-as-a-service (RaaS) trend is growing, with platforms like Caldera and Conduit making it easy for projects to deploy their own Layer 2s. Avalanche subnets are also predicted to grow thanks to the AvaCloud subnet customization service.
AI x Crypto: A Convergence of Trends
The convergence of AI and crypto is one of the hottest topics of 2024. Total investment in this sector has exceeded $1 billion, and the total market capitalization of AI-related protocols has increased from $5 billion to $60 billion. Bittensor is currently the leading AI protocol with a market capitalization of over $3 billion.
A prominent trend this year is Decentralized Model Training. Projects like Akash and IO.net provide decentralized GPU computing at a lower cost compared to building infrastructure independently. Meanwhile, GenSyn and Prime Intellect focus on developing optimized platforms for AI model training.
Bittensor is a prime example of an AI coordination platform. It provides a framework for decentralized AI model development through an ecosystem of subnets, each with its own AI building goals. Bittensor acts as a sponsor for open-source AI groups, encouraging rapid experimentation and innovation.
The result of a mature infrastructure is the emergence of AI agents with exceptional capabilities:
- Zerebro can create its own tokens, compose music, and paint.
- Luna is the first AI agent to recruit personnel on the blockchain.
- AiXBT analyzes on-chain data and predicts the crypto market like a real research team.
- ai16z is a venture capital fund managed by AI, making investment proposals and allocating capital autonomously.
Platforms that support agent building, such as Virtuals Protocol, are also gaining attention. Virtuals’ model has generated strong FOMO, pushing the price of the VIRTUAL token up 60x in the last three months of the year.
The Memecoin Frenzy
The memecoin craze has shown little sign of stopping in 2024, with many projects generating substantial profits. Although they only account for 3% of the market capitalization among the top 300 largest crypto projects (excluding stablecoins), memecoins accounted for 11% of weekly trading volume in October 2024.
This frenzy is driven by speculative sentiment, excess capital, and the user-friendly interfaces of exchanges.
In Q1 2024, memecoins exploded with political memes like Joe Boden, followed by memecoins from TikTok (Moodeng, Chill Guy), and most recently, GOAT from the AI agent Truth Terminal.
The emerging memecoin PEPE, inspired by the popular green frog meme in the crypto community, has grown continuously throughout 2024 and even surpassed Uniswap’s market cap at one point.
The ideal environment for memecoins is networks with high speed and low transaction fees, such as Solana and Base. Exchanges with simple interfaces like Pump.fun and Moonshot also make it easier for newcomers to participate. Notably, Moonshot also attracts new users with its feature allowing memecoin purchases using ApplePay, PayPal, and USDC on Solana.
Crypto is No Longer a “Wild West”: TradFi and Governments Join the Game
Institutions All-in on Crypto
2024 marked the strong entry of traditional financial institutions (TradFi) into the cryptocurrency market. This is a significant turning point, demonstrating recognition and strong demand for this promising market.
A prime example is the emergence of money market funds (MMFs) on the blockchain, supported by traditional DeFi projects like Sky (formerly MakerDAO) and newcomers like BlackRock.
Blockchain-based money market funds have attracted nearly half a billion USD in investment due to their strengths, such as high 24/7 liquidity, support for real-time trading, and fractional ownership of assets.
BlackRock’s launch of the BUIDL fund on Ethereum is a historic moment, proving that blockchain can bring real and tangible value to the financial world,” said Edwin Mata, co-founder and CEO of Brickken.
“BlackRock’s launch of the BUIDL fund on Ethereum is a historic moment, proving that blockchain can bring real and tangible value to the financial world.” – Edwin Mata, co-founder and CEO of Brickken
Furthermore, institutional involvement is blurring the lines between crypto, payments, and fintech. Paypal, a giant in the payments sector, launched the PYUSD stablecoin on Solana.
Other financial institutions such as JPMorgan, Goldman Sachs, Deutsche Bank, Robinhood, Revolut, Stripe, and Visa are also actively participating in the market by building blockchain infrastructure, providing trading services, and issuing stablecoins.
Read more: Real World Assets: The Battle for Market Share and the Next Steps
$110 Billion Flows into Bitcoin ETFs: A Record Number Demonstrating Crypto’s Appeal
Capital from both individual and institutional investors quickly flowed into the market after Bitcoin ETFs began operating on January 10, 2024. By the end of 2024, the total value of these funds reached $110 billion, holding 5.5% of BTC’s circulating supply.
BlackRock’s IBIT (iShares Bitcoin Trust) alone achieved a record net inflow of $3 billion in its first 30 days of launch and $40 billion within 200 days. Several derivative products for IBIT were also launched, helping institutions manage risk more effectively.
Although not as popular as Bitcoin ETFs, Ethereum ETFs have attracted a net inflow of $577 million since their launch in July 2024 – a success compared to other ETFs.
“The combination of crypto and ETFs is the most exciting thing happening in the asset management industry. This area involves the largest asset management institutions, politicians, lawmakers, and everyone,” said Nate Geraci, President of the ETF Store consultancy.
“ETFs are the bridge that connects the traditional world to crypto. Once that bridge is built, there’s no going back,” he added.
America promises to become the crypto capital of the world
The crypto industry saw positive developments in regulatory policy in 2024. The MiCA regulation in Europe came into effect, making the EU a leading region in cryptocurrency regulation.
In Asia, Hong Kong is granting licenses to exchanges serving both retail and institutional investors, while Singapore continues to lead in crypto regulation with its stringent rules.
The biggest regulatory hotspot is the United States. In the first half of 2024, the Securities and Exchange Commission (SEC), led by Chairman Gary Gensler, intensified its crackdown on major players in the industry, sparking backlash from the crypto community.
With the support of Congress, the crypto industry in the US called for clear and appropriate legislation and sought legal interventions to limit excessive regulation by the SEC.
The price paid for this support was not cheap. It is estimated that in 2024, crypto companies in the US spent up to $200 million to influence policymakers.
By the end of the year, the victory of the individual who frequently publicly supports the crypto market and the Republican party brought hope for a more favorable regulatory environment for cryptocurrencies. Many members of the US Congress and the cabinet support this market.
Sharing his views on crypto and Bitcoin, President-elect Donald Trump warned that if the United States does not focus on developing new areas, “China will do it, other countries will do it, they will dominate, and we cannot let China dominate.”
Therefore, he proposed a plan to “ensure that America becomes the crypto capital and Bitcoin superpower of the world.”
“My administration will retain 100% of the Bitcoin that the United States government currently holds or acquires in the future, which will contribute to the creation of a national strategic Bitcoin reserve,” Trump said.
However, whether Trump and his new administration will be able to fulfill these promises will require time to answer.
