Written by Kaiko Research
Compiled by: Deng Tong, Golden Finance
1. BTC’s Road to $100,000
2024 is shaping up to be a successful year for Bitcoin. With the launch of the spot BTC exchange-traded fund in January, the market is maturing, and the fourth halving is going smoothly.
Even several multi-billion dollar liquidations and sell-offs couldn’t stop BTC’s success this year. The price of BTC in U.S. dollar terms is up nearly 140% year to date, and has risen even more relative to other fiat currencies (some of which experienced significant depreciation in 2019).
2. US election boosts bullish bets
The 2024 U.S. election holds huge implications for cryptocurrencies. Never before has Bitcoin or digital assets received so much attention on the world stage — at least not in such a positive way.
President Trump expressed support for progressive regulation and open dialogue with the industry over the summer. He even showed up at the Bitcoin Nashville conference shortly after an attempt was made on his life. Much of the cryptocurrency community rallied around Republican candidate and eventual Democratic nominee Kamala Harris to start making some positive moves around crypto.
Ahead of the November 5 election, Bitcoin saw a “Trump trade” from market participants. A special election contract on Deribit attracted billions of dollars in volume and open interest before the election, and traders betting on new all-time highs soon after the election saw a major bullish bias. They were right, and by November BTC volume had exceeded $75,000.
The overall Senate vote, as well as the final vote, were widely viewed as positive for cryptocurrencies. As a result, BTC led the post-election rally in crypto assets, topping $80,000 by Nov. 11.
As we have shown above, the increasingly bullish sentiment has continued throughout the rest of November and into December, with Bitcoin’s current all-time high at over $107,000.
3. Bitcoin Fees Surge Before the Fourth Halving
Bitcoin’s fourth halving took place on April 19 this year. On Saturday, Bitcoin’s average transaction fee soared to a record high of $146. This was significantly higher than Ethereum’s average fee of $3 that day.
The historic surge in Bitcoin network fees was perhaps its most significant development in the fourth quarter. Despite warning signs, it caught many market participants by surprise.
Ordinals founder Casey Rodamor announced plans to launch Runes, a protocol that makes it easier to issue fungible tokens on Bitcoin. However, while users may have expected a rise in transaction fees based on Ordinals’ impact on transaction fees, the historic increase still caught many by surprise.
Ordinals allow node operators to burn data and images onto newly created Bitcoin blocks. These so-called “registrations,” similar to NFTs, increase demand for Bitcoin block space and boost the fees earned by BTC miners.
The launch of Runes proceeded in a similar manner. The launch of the protocol led to an increase in demand for block space, which in turn impacted fees.
4. BlackRock surpasses Grayscale
BTC ETFs have broken all kinds of records this year, with total assets under management of 11 funds rising to over $100 billion.
BlackRock is the big winner, showing major institutions are interested in Bitcoin and digital assets. Its spot BTC ETF has over $55 billion in assets under management, surpassing Grayscale’s GBTC in a matter of months. Launched in 2013 by digital asset manager Grayscale, GBTC is largely a crypto-first product, and its huge premium/discount to NAV means that institutional buying is limited. As a result, it was quickly surpassed by BlackRock after the ETF was launched this year.
GBTC has been losing assets for much of this year after the firm decided to keep fees at 1.5%. In the U.S. ETF space, where firms are used to low fees, much of Wall Street prefers BlackRock and Fidelity to GBTC.
5. ETH/BTC ratio drops
The ETH/BTC ratio has continued to decline since the merger and shows no signs of slowing down in 2024. The ratio compares the performance of both assets and falls when Ethereum underperforms Bitcoin.
Other factors contributing to the decline include the rise of Solana as users migrated to cheaper networks during a period of heightened speculation in March and the fourth quarter of this year. Meme tokens (which we’ll discuss later) were behind much of the speculation and drove Solana DEX volume to surpass Ethereum at times this year.
It fell to 0.033 in November, its lowest level since March 2021. What’s behind the poor performance? Since the merger, ETH has faced significant regulatory pressure as staking has come under scrutiny in the United States, drawing the ire of the SEC.
6. Slow start: ETH ETF launch
The ETH ETF has had a slow start since its launch in July. Similar to the launch of the BTC ETF, Grayscale’s fund is once again weighing on the market as the digital asset manager keeps its fees at 2%.
However, after Grayscale's ETHE outflows decreased, the newly launched fund began to see inflows in late 2024. Since the US election in November, inflows have increased significantly and traders have also flocked to CME's ETH futures. This reflects similar activity seen in BTC futures in May and June when traders executed arbitrage trades.
Rising open interest in ETH futures and a changing regulatory outlook reversed the trend for the ETH ETF, with net flows turning positive in late November and December. Net flows since launch now exceed $2 billion. This includes more than $3 billion in outflows from ETHE.
ETH will be one of the biggest winners from a regime change in Washington, D.C. While it has lagged behind Bitcoin this year, the second-largest asset by market cap will benefit greatly from regulatory shifts brought about by a change in the U.S. government. Clarity on ETH classification, commodity or security, and collateralization could be two of the main drivers of growth next year.
7. Trend-setting MicroStrategy buys more BTC than ever before
MicroStrategy has had its busiest year yet when it comes to buying BTC. The business software company has in many ways transformed itself from its core business this year. Chairman and former CEO Michael Saylor even referred to his company as the world’s first “Bitcoin Finance Company” during its third-quarter earnings report in November.
MicroStrategy has bought more than 249,850 bitcoins since January, with purchases accelerating since the U.S. election and nearly doubling its holdings in the past month. The company has issued multiple convertible bonds to finance its acquisitions, sparking concerns among some market participants that a price crash could have an adverse impact on the company and could even lead to forced selling.
Currently, this strategy is working. The rapid rise in BTC prices and the bullish sentiment in the market have caused the value of MSTR to surge to a new all-time high. Since the bursting of the Internet bubble in March 2000, MSTR has hit a new high for the first time in 24 years.
While MicroStrategy is a pioneer in corporate bitcoin purchases, some Republican lawmakers want the U.S. government to follow suit. Senator Cynthia Loomis pledged to build a strategic bitcoin reserve after Donald Trump won the U.S. presidential election.
8. Alameda Gap Has Narrowed After ETF Listing
This year, crypto markets finally put the FTX debacle behind them. The liquidity gap, or Alameda Gap, left by the collapse of FTX and its sister company Alameda Research has closed this year.
Driven by rising prices and growing market share, the market depth of 1% of Bitcoin has risen above FTX's previous level of about $120 million this year. Kraken, Coinbase and LMAX Digital have recovered the most. Notably, the Bitcoin market depth of the institution-focused LMAX reached a record high of $27 million this week, briefly surpassing Bitstamp to become the third largest liquid Bitcoin market.
9. Meme Token Frenzy
As mentioned above, meme tokens have surged exponentially at different times this year. In particular, tokens on Solana have experienced significant growth due to the launch of Pump dot fun, a protocol for launching meme tokens that allows anyone to issue tokens and start from scratch through word of mouth and participation Build liquidity.
However, familiar assets largely dominated the trading volume on centralized exchanges. Similar to its previous rallies in 2021, Dogecoin has once again found favor with traders - again due to post-election bullish sentiment. Dogecoin rose after President-elect Donald Trump revealed plans to establish a "Department of Government Efficiency" (D.O.G.E.) led by Elon Musk and Vivek Ramaswamy.
One of the new tokens launched on Solana this year is PNUT, which has captured people’s imagination and is inspired by Peanut the Squirrel, a New York pet influencer whose untimely death led to an outpouring of support (and token issuance) online.
One trader even turned a $16 investment in PNUT into $3 million in realized profits. PNUT is currently traded on several large centralized exchanges, including Binance, Crypto.com, and OKX.
10. Regulation triggers changes in the stablecoin market
Regulation in Europe has been reshaping the stablecoin market since June, when the landmark European Market for Crypto Assets (MiCA) regulation triggered a wave of stablecoin delistings and product offering adjustments on major exchanges.
Throughout 2024, euro-to-cryptocurrency trading volumes remained above last year’s average, indicating growing demand. Three months after MiCA was enacted, the euro-backed stablecoin market experienced a significant transformation, driven by the rise of MiCA-compliant alternatives. By November 2024, MiCA-compliant euro stablecoins (including Circle’s EURC, Societe Generale’s EURCV, and Banking Circle’s EURI) had captured a record 91% market share.
Binance has become a major player in the euro stablecoin market, on par with Coinbase, after listing EURI in late August. Still, Coinbase remains the largest market, with a 47% share, driven by Circle’s EURC.
in conclusion
This year has been a big one for establishing digital assets as viable assets for Wall Street investors. Time will tell if the industry can continue to grow in the months and years ahead, but this rally feels different.
The 2024 rally is built on the arrival of established firms with risk frameworks that currently include BTC and ETH. As regulation shifts and market structure changes, the rally is expected to extend beyond Bitcoin and into other assets next year.
