Source: Kaiko Research
Translated by: Deng Tong, Golden Finance.
One, the road to BTC's $100,000 milestone.
2024 is set to be a successful year for Bitcoin. With the launch of the spot BTC exchange-traded fund in January, the market is gradually maturing, and the fourth halving is also proceeding smoothly.
Even several billion-dollar liquidations and sell-offs could not stop BTC's success this year. The price of BTC, measured in dollars, has risen nearly 140% year-to-date, with even larger gains relative to other fiat currencies (some of which experienced significant devaluation in 2019).
Two, the U.S. elections stimulate bullish bets.
The 2024 U.S. elections hold significant implications for cryptocurrency. Bitcoin or digital assets have never received so much attention on the world stage—at least not such positive attention.
President Trump expressed support for progressive regulation and open dialogue with the industry during the summer. Shortly after an assassination attempt on him, he even appeared at the Bitcoin Nashville conference. Most of the cryptocurrency community gathered around Republican candidate and eventual Democratic candidate Kamala Harris, beginning to take some positive initiatives around cryptocurrency.
Before the elections on November 5, Bitcoin saw a 'Trump trading rally' among market participants. A special election contract on Deribit attracted billions in trading volume and open contracts before the election, and soon after the election, traders betting on a historical high showed significant bullish tendencies. They were right; by November, BTC trading volume had exceeded $75,000.
The overall voting results from the Senate and the final vote are widely regarded as favorable for cryptocurrency. As a result, BTC led the post-election rally in crypto assets, breaking through $80,000 by November 11.
As we have shown above, the increasingly bullish sentiment has persisted from the remainder of November into December, with Bitcoin's current historical high surpassing $107,000.
Three, soaring fees before Bitcoin's fourth halving.
The fourth Bitcoin halving occurred on April 19 of this year. On Saturday, Bitcoin's average transaction fee surged, reaching a historic high of $146. This is significantly higher than Ethereum's average fee of $3 on the same day.
The historic surge in Bitcoin network fees may be the most significant development in the fourth quarter. Despite warning signs, it still took many market participants by surprise.
The founder of Ordinals, Casey Rodarmor, announced plans to launch Runes, a protocol that makes it easier to issue fungible tokens on Bitcoin. However, based on Ordinals' impact on transaction fees, users may have anticipated the fee increase, but the historic surge still surprised many.
Ordinals allow node operators to inscribe data and images onto newly created Bitcoin blocks. These so-called 'registrations' are similar to NFTs, increasing demand for Bitcoin block space and raising the fees earned by BTC miners.
The release of Runes also proceeded similarly. The protocol's launch led to increased demand for block space, which in turn affected fees.
Four, BlackRock surpasses Grayscale.
BTC ETFs have broken various records this year, with total assets under management across 11 funds rising to over $100 billion.
BlackRock is the big winner, indicating major institutions' interest in Bitcoin and digital assets. Its spot BTC ETF has over $55 billion in assets under management, surpassing Grayscale's GBTC within months. GBTC was launched in 2013 by digital asset management firm Grayscale as a largely cryptocurrency-first product, with its massive premium/discount to net asset value limiting institutional buying. Therefore, after the ETF's launch this year, it was quickly surpassed by BlackRock.
After the company decided to maintain fees at 1.5%, GBTC has been losing assets for most of this year. In the U.S. ETF space, companies are accustomed to low fees, so most firms on Wall Street prefer BlackRock and Fidelity over GBTC.
Five, the ETH/BTC ratio declines.
Since the merger, the ETH/BTC ratio has continued to decline, showing no signs of slowing in 2024. This ratio compares the performance of the two assets, and it decreases when Ethereum underperforms Bitcoin.
Other factors contributing to the decline include the rise of Solana, as users migrated to the cheaper network during the speculation surge in March and the fourth quarter of this year. Meme tokens (which we will discuss later) are the behind-the-scenes driver of much speculation, pushing Solana DEX trading volumes to sometimes exceed Ethereum's this year.
In November, it fell to 0.033, the lowest level since March 2021. What is behind the poor performance? Since the merger, ETH has faced significant regulatory pressure, as staking in the U.S. has come under close scrutiny, provoking the ire of the SEC.
Six, slow start: ETH ETF launch.
ETH ETFs have started slowly since their launch in July. Similar to the launch of BTC ETFs, Grayscale's funds have again put pressure on the market as the digital asset management company maintains fees at 2%.
However, after the outflow of Grayscale's ETHE decreased, newly launched funds began to see inflows at the end of 2024. Since the U.S. elections in November, inflows have surged, with traders flocking to CME's ETH futures. This reflects similar activity that occurred when traders executed arbitrage trades on BTC futures in May and June.
The increase in ETH futures open contracts, along with changing regulatory outlooks, has reversed the trend of ETH ETFs, with net flows turning positive at the end of November and December. The net flow since launch has now exceeded $2 billion, including over $3 billion flowing out from ETHE.
ETH is set to be one of the biggest winners from the regime change in Washington D.C. While it lagged behind Bitcoin this year, the regulatory shift brought about by the U.S. government transition will greatly benefit the second-largest asset by market cap. The clarity regarding ETH classification—whether as a commodity or security—and staking may be two major drivers of growth next year.
Seven, trendsetter MicroStrategy purchased more BTC than ever before.
In purchasing BTC, MicroStrategy has experienced its busiest year to date. The business software company has transformed in many ways this year away from its core business. Chairman and former CEO Michael Saylor even referred to his company as the world's first 'Bitcoin financial company' in the third-quarter earnings report in November.
Since January, MicroStrategy has purchased over 249,850 Bitcoins, accelerating its purchasing pace since the U.S. elections, nearly doubling its holdings in the past month. The company has issued multiple convertible bonds to fund its acquisitions, raising concerns among some market participants that a price crash could adversely affect the company and even lead to forced selling.
Currently, this strategy is working. The rapid rise in BTC prices and the bullish sentiment in the market have led to MSTR's value soaring to an all-time high. MSTR has reached a new high for the first time in 24 years since the bursting of the dot-com bubble in March 2000.
While MicroStrategy is a pioneer in corporate Bitcoin purchases, some Republican lawmakers hope the U.S. government will follow suit. Senator Cynthia Lummis has promised to establish a strategic Bitcoin reserve after Donald Trump wins the U.S. presidential election.
Eight, the Alameda Gap has shrunk post-ETF listing.
This year, the crypto market has finally moved past the collapse of FTX. The liquidity gap (also known as the Alameda Gap) left behind by the collapse of FTX and its sister company Alameda Research has narrowed this year.
Driven by rising prices and increasing market share, Bitcoin's 1% market depth this year has surpassed the approximately $120 million level before FTX. The recovery of Kraken, Coinbase, and LMAX Digital is most notable. Notably, LMAX's Bitcoin market depth, which is institutional-focused, reached a record $27 million this week, briefly surpassing Bitstamp to become the third-largest liquidity Bitcoin market.
Nine, meme token frenzy.
As mentioned above, meme tokens surged exponentially at different times this year. In particular, due to the launch of Pump dot fun, tokens on Solana experienced significant growth, which is a protocol for launching meme tokens that allows anyone to issue tokens and build liquidity from scratch through word of mouth and participation.
However, familiar assets largely dominated trading volume on centralized exchanges. Similar to the pre-2021 surge, Dogecoin regained favor among traders—again due to bullish sentiment following the elections. After incoming President Donald Trump revealed plans to establish a 'Department of Government Efficiency' (D.O.G.E.) led by Elon Musk and Vivek Ramaswamy, Dogecoin surged.
One of the new tokens launched on Solana this year is PNUT, which captured people's imagination, inspired by Peanut the Squirrel (a New York pet influencer), whose untimely death led to significant online support (and token issuance).
One trader even turned a $16 investment in PNUT into $3 million in realized profits. PNUT is currently traded on several major centralized exchanges, including Binance, Crypto.com, and OKX.
Ten, regulation sparks changes in the stablecoin market.
Since June, European regulations have been reshaping the stablecoin market. The landmark European Market Crypto Asset Regulation (MiCA) has triggered a wave of major exchanges delisting stablecoins and adjusting product offerings.
Throughout 2024, trading volume of euros against cryptocurrencies has remained above last year's average, indicating growing demand. Three months after the enactment of MiCA, the euro-backed stablecoin market has undergone significant transformation, driven by the rise of MiCA-compliant alternatives. By November 2024, MiCA-compliant euro stablecoins (including Circle's EURC, Société Générale's EURCV, and Banking Circle's EURI) have captured a record 91% market share.
After Binance listed EURI at the end of August, it has become a major player in the euro stablecoin market, on par with Coinbase. Nevertheless, propelled by Circle's EURC, Coinbase remains the largest market, holding a 47% share.
Conclusion.
This year is significant for establishing digital assets as a viable asset for Wall Street investors. Time will tell if the industry can sustain growth in the coming months and years, but this rebound feels different.
The rebound in 2024 is built on the arrival of established companies with risk frameworks (currently including BTC and ETH). With regulatory shifts and changes in market structure, the upward momentum expected next year will surpass Bitcoin and extend to other assets.
