One, The Road to BTC's $100,000 Milestone
2024 is 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 has also progressed smoothly.
Even several tens of billions in liquidations and sell-offs could not stop BTC's success this year. The price of BTC in dollars has risen nearly 140% so far this year, with even greater increases compared to other fiat currencies, some of which experienced significant depreciation in 2019.
Two, U.S. Elections Stimulate Bullish Bets
The 2024 U.S. elections are of significant importance for cryptocurrency. Bitcoin and digital assets have never received so much attention on the world stage—at least not so positively.
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 November 5 election, Bitcoin saw a 'Trump trade market' among market participants. A special election contract on Deribit attracted billions of dollars in trading volume and open contracts before the election, and soon after the election, traders betting on historical highs showed significant bullish tendencies. They were right; by November, BTC trading volume had exceeded $75,000.
The overall voting results in the Senate and the final vote count are widely seen as favorable for cryptocurrency. As a result, BTC led the post-election surge in crypto assets, breaking through $80,000 by November 11.
As we have shown above, the increasingly bullish sentiment has persisted from the remaining time in November into December, with Bitcoin's current historical high exceeding $107,000.
Three, Bitcoin's Fourth Halving Drives Fees to Surge
Bitcoin's fourth halving occurred on April 19 this year. On Saturday, the average transaction fees for Bitcoin soared to 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 surprised many market participants.
Casey Rodarmor, the founder of Ordinals, announced plans to launch Runes, a protocol that makes it easier to issue fungible tokens on Bitcoin. However, users may have anticipated the increase in transaction fees based on the impact of Ordinals, 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 was carried out in a similar manner. The launch of the protocol led to an increase in demand for block space, which in turn affected fees.
Four, BlackRock Surpasses Grayscale
BTC ETF broke various records this year, with the total assets managed by 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 manages an asset size of over $55 billion, surpassing Grayscale's GBTC within a few months. GBTC, launched by digital asset management company Grayscale in 2013, has largely been a cryptocurrency-first product, with its substantial premium/discount meaning limited institutional buying. Thus, after the ETF launched 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, leading most Wall Street firms to prefer BlackRock and Fidelity over GBTC.
Five, ETH/BTC Ratio Decline
Since the merger, the ETH/BTC ratio has continued to decline, showing no signs of slowing down in 2024. This ratio compares the performance of the two assets, and it declines 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 period in March and the fourth quarter of this year. Meme tokens (which we will discuss later) are behind much of the speculation and drove Solana DEX trading volume to sometimes exceed that of Ethereum 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 has come under close scrutiny in the U.S., provoking the ire of the SEC.
Six, Slow Start: ETH ETF Launch
ETH ETF has started slowly since its launch in July. Similar to the launch of the BTC ETF, Grayscale's fund has once again put pressure on the market, as the digital asset management company maintained fees at 2%.
However, after the outflows from Grayscale's ETHE decreased, the newly launched funds began to see inflows at the end of 2024. Since the U.S. elections in November, inflows have significantly increased, and traders have flocked to CME's ETH futures. This reflects similar activity seen in May and June when traders executed arbitrage trades on BTC futures.
The open interest in ETH futures continues to grow, and the changing regulatory outlook has reversed the trend for ETH ETF, 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 exiting from ETHE.
ETH is set to be one of the biggest winners from the regime change in Washington, D.C. Although it has lagged behind Bitcoin this year, the regulatory shift brought about by the change in the U.S. government will greatly benefit the second-largest asset by market cap. The classification of ETH as a commodity or security, along with clarity on staking, could be two major drivers for growth next year.
Seven, Trendsetter MicroStrategy Buys More BTC Than Ever
In purchasing BTC, MicroStrategy has experienced its busiest year to date. The business software company has transformed in many ways this year 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 pace of purchases since the U.S. elections, with its holdings nearly doubling in the past month. The company has issued several 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 sell-offs.
Currently, this strategy is working. The rapid rise in BTC prices and the bullish market sentiment have driven MSTR's value to a historic high. MSTR has reached a new high for the first time in 24 years since the burst of the internet 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 pledged to establish a strategic Bitcoin reserve after Donald Trump wins the U.S. presidential election.
Eight, The Alameda Gap Has Narrowed Since the ETF Listing
This year, the crypto market has finally moved on from the collapse of FTX. The liquidity gap left by the collapse of FTX and its sister company Alameda Research (also known as the Alameda Gap) has narrowed this year.
Driven by rising prices and growing market share, Bitcoin's 1% market depth this year has exceeded FTX's previous level of about $120 million. The recovery of Kraken, Coinbase, and LMAX Digital is particularly notable. Of particular importance is LMAX's Bitcoin market depth, which 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, as it 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 have largely dominated trading volume on centralized exchanges. Similar to the trends before 2021, Dogecoin has once again found favor with traders—again due to post-election bullish sentiment. After the 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 rose.
One of the new tokens launched this year on Solana is PNUT, which has captured people's imagination, inspired by Peanut the Squirrel (a pet influencer from New York), whose untimely death led to massive support online (and the token issuance).
One trader even turned a $16 investment in PNUT into $3 million in realized profit. PNUT is currently traded on several major centralized exchanges, including Binance, Crypto.com, and OKX.
Ten, Regulation Triggers Changes in the Stablecoin Market
Since June, regulation in Europe has been reshaping the stablecoin market. The landmark European Market in Crypto Assets Regulation (MiCA) has triggered a wave of major exchanges delisting stablecoins and adjusting product offerings.
Throughout 2024, the 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 underwent significant changes 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) held 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, comparable to Coinbase. Nevertheless, under the push of Circle's EURC, Coinbase remains the largest market, holding a 47% share.
Conclusion
This year is pivotal for establishing digital assets as viable assets 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 next year is expected to surpass Bitcoin and extend to other assets.
