Author: Daren Matsuoka, a16z crypto partner; Edited by: 0xjs@Golden Finance
2024 is likely to be the most exciting year in the history of the crypto industry. Crypto activity and usage rates are hitting all-time highs. Blockchain infrastructure has significantly improved, and transaction fees have decreased. Stablecoins have found product-market fit. The inevitable intersection of crypto and AI is becoming clearer. Bitcoin and Ethereum ETPs have been approved. The legislative and regulatory environment now provides a positive path forward for the industry. All of this sets the stage for another exciting year.
As we consider the next steps for cryptocurrency, we will closely monitor the following five metrics to track the ongoing development of the industry. (For additional metrics, you can also check our Cryptocurrency Status Index, published in 2023, which tracks broader industry innovation and adoption forces.)
1. Monthly number of mobile wallet users
To attract the next wave of cryptocurrency users, we need to bring the user experience (UX) closer to that of web2 applications. Mobile wallets will play a key role here: hundreds of millions of 'passive' cryptocurrency owners (those who own crypto but do not engage in on-chain transactions regularly) can transition into active cryptocurrency users. To achieve this, developers need to continue building new consumer applications, while consumers need wallets to engage.
Last month, the number of mobile wallet users hit a historic high, surpassing 35 million for the first time. This growth is thanks to well-known brands like Coinbase Wallet, MetaMask, and Trust Wallet, but also driven by some new players like Phantom and World App.
Consumer wallets pose one of the toughest challenges for developers in the industry—finding the right balance between security, privacy, and usability is no easy task. But now that blockchain infrastructure can handle hundreds of millions or even billions of on-chain users, it is the best time to build the next generation of mobile wallets. We will closely monitor these developments in 2025.
Tracking monthly mobile wallet users here.
2. Adjusted stablecoin trading volume
As infrastructure development significantly reduces transaction costs, stablecoin activity saw a rebound in 2024. Notably, stablecoins are not only used for cryptocurrency trading but also for cross-border payments and remittances; purchasing goods and services; and as a store of value, especially in countries with rampant inflation. Stablecoins have already become the cheapest way to remit, and we expect businesses to increasingly accept stablecoin payments.
Driven by these favorable factors, on-chain value settlement should continue to grow in 2025. While we can easily measure trading volume using on-chain data, isolating true organic stablecoin usage can be difficult. Transactions can be initiated manually by end-users or programmatically by bots, with some of these on-chain transactions not resembling traditional settlements.
Fortunately, Visa has created a clear and simple way to showcase how stablecoins are used while adjusting for inorganic activity from bots and other human inflation behaviors.
If the adoption of stablecoins (one of the most obvious use cases for cryptocurrencies) takes off in 2025, this metric will be worth watching.
Tracking stablecoin trading volumes here.
3. Net inflow of (Bitcoin and Ethereum) ETP
The US SEC approved exchange-traded products (ETP) for Bitcoin and Ethereum last year. This is a significant milestone that makes it easier for both individual and institutional investors to access cryptocurrencies. However, activating distributors (such as Goldman Sachs, JPMorgan, and Merrill Lynch, who can incorporate these products into retail investors' portfolios) will take time.
One way to measure ETP activity is through 'net inflow,' which represents the amount of BTC or ETH flowing into or out of ETPs. (Excluding existing products like Grayscale Bitcoin and Ethereum trusts that eventually convert to ETPs.) So far, there has been a net inflow of 515,000 BTC (with an on-chain holding value of $110 billion) and 611,000 ETH (with an on-chain holding value of $13 billion).
As more institutional investors seek exposure to crypto assets, this should translate into increased net inflows of ETP. Tracking on-chain deposits and withdrawals from addresses identified as ETP custodians allows us to monitor this data in real-time.
Tracking ETP net inflows here and here.
4. Spot trading volume of DEX relative to CEX
As more people join the blockchain, we expect the usage of decentralized exchanges (DEX) in cryptocurrency trading to exceed that of centralized exchanges (CEX). After all, the core premise of cryptocurrency is decentralized finance or DeFi. As the DeFi ecosystem develops, the share of spot trading on DEX has steadily increased to about 11% over the past few years, and we expect this trend to continue into 2025.
Recently, with new users entering the space, trading volumes on high-throughput chains like Coinbase's Base and Solana have surged, driving DEX trading volumes to record highs.
With more and more new consumer applications coming online, the importance of decentralized exchanges may continue to grow, further promoting the growth of DEX.
As we monitor the ever-changing balance between decentralized, crypto-native activities and centralized crypto trading, this will be an important indicator to watch.
Tracking spot trading volume of DEX relative to CEX here.
5. Total transaction fees (demand for block space)
The total transaction fees measured in dollars reflect the total demand for block space on specific chains, which is the actual economic value.
However, due to most projects explicitly trying to reduce user fees, this metric has many nuances. This is why it's also important to consider unit transaction costs (i.e., the cost of a given amount of blockchain resources). Ideally, overall demand (total transaction fees) grows while gas fees (cost per unit of resource usage) remain low.
In November 2024, Solana's fees exceeded Ethereum's for the first time (see below). Notably, this milestone was achieved with Solana's unit transaction costs being significantly lower; sending USDC on Ethereum costs about $5, while sending USDC on Solana costs less than 1 cent. This is an important milestone that we will continue to monitor.
Many ecosystems and their associated fee markets are maturing, making it a good time to begin measuring the economic value brought by various blockchains. In the long run, demand for block space (measured by the total dollar value of fees paid) may be the most important metric for tracking the progress of the crypto industry. Why? Because it reflects participation in valuable economic activity and the willingness of users to pay for these activities.
Tracking demand for block space through transaction fees here.
We track several metrics for the industry, including our annual cryptocurrency status report—but this year we will closely monitor these five metrics. As investor channels expand, the industry will conditionally attract more users and builders; as infrastructure matures, it paves the way for compelling new applications; with the emergence of more popular products (like stablecoins). Let's see what other products are developed this year that drive the evolution of these metrics.
