Source: Kaiko Research; Translated by Deng Tong, Golden Finance
One, The Path to BTC's $100,000 Milestone
2024 is a successful year for Bitcoin. With the launch of spot BTC exchange-traded funds in January, the market is gradually maturing, and the fourth halving is proceeding smoothly.
Even several billion-dollar liquidations and sell-offs could not stop BTC's success this year. The price of BTC in dollars has risen nearly 140% this year, with even greater increases against other fiat currencies (some of which experienced significant devaluation in 2019).
Two, U.S. Elections Stimulate Bullish Bets
The 2024 U.S. elections are of great significance for cryptocurrencies. Bitcoin or digital assets have never received such 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 crypto community gathered around the Republican candidate and eventual Democratic candidate Kamala Harris, beginning to take some positive initiatives around cryptocurrency.
Before the elections on November 5, Bitcoin experienced a 'Trump trade' among market participants. A special election contract on Deribit attracted billions in trading volume and open interest before the election, and shortly after, traders betting on a historical high showed significant bullish sentiment. They were right; by November, BTC's trading volume exceeded $75,000.
The overall voting results in the Senate and the final vote are widely seen as favorable to cryptocurrencies. As a result, BTC led the post-election rally of crypto assets, breaking through $80,000 on November 11.
As we have shown above, the increasingly bullish sentiment has persisted from the remainder of November into December, with Bitcoin currently reaching a historical high of over $107,000.
Three, Bitcoin's Transaction Fees Surged Before the Fourth Halving
The fourth Bitcoin halving occurred on April 19 this year. On that Saturday, the average transaction fees for Bitcoin 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.
Casey Rodamor, the founder of Ordinals, 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 rise in transaction costs, but the historic spike 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 fees earned by BTC miners.
The release of Runes also occurred in a similar manner. The launch of the protocol led to increased demand for block space, which in turn affected fees.
Four, BlackRock Surpasses Grayscale
The BTC ETF has broken various records this year, with the total assets managed by 11 funds rising to over $100 billion.
BlackRock emerged as a major winner, indicating significant institutional interest 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. GBTC, launched by digital asset management company Grayscale in 2013, was largely a cryptocurrency-first product, and its huge premium/discount to net asset value limited institutional buying. As a result, it was quickly surpassed by BlackRock after this year's ETF launch.
After the company decided to maintain fees at 1.5%, GBTC has been losing assets for most of the year. In the U.S. ETF space, companies are accustomed to low fees, which is why most firms on Wall Street prefer BlackRock and Fidelity over GBTC.
Five, Decline of ETH/BTC Ratio
Since the merger, the ETH/BTC ratio has been continuously declining, 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 leading to the decline include the rise of Solana as users migrated to the cheaper network during speculative activities in March and the fourth quarter of this year. Meme tokens (which we will discuss later) were behind much of the speculation, driving Solana DEX trading volumes at times above Ethereum this year.
In November, it fell to 0.033, the lowest level since March 2021. What is behind this underperformance? Since the merger, ETH has faced significant regulatory pressure as staking in the U.S. has come under close scrutiny, drawing the ire of the SEC.
Six, 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 has again put pressure on the market as the digital asset management company maintained fees at 2%.
However, after the outflow of Grayscale's ETHE decreased, the newly launched funds began to see inflows by the end of 2024. Since the U.S. elections in November, inflows have increased significantly, with traders flocking to CME's ETH futures. This reflects similar activity seen when traders executed arbitrage trades on BTC futures in May and June.
The open interest in ETH futures continues to rise as regulatory prospects change, reversing the flow of ETH ETFs, with net flows turning positive by the end of November and December. The net flows since launch have now exceeded $2 billion, including over $3 billion in outflows from ETHE.
ETH is set to be one of the biggest winners from the regime change in Washington, D.C. Although it lagged behind Bitcoin this year, the regulatory shifts brought about by the U.S. government change will benefit the second-largest asset significantly. The clarity on whether ETH is classified as a commodity or security, along with staking, could be two main drivers for growth next year.
Seven, Trendsetting MicroStrategy Bought More BTC than Ever Before
In terms of purchasing BTC, MicroStrategy has experienced its busiest year to date. The business software company has transformed in many ways from its core business this year. 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 buying pace since the U.S. elections, with its holdings nearly doubling over the past month. The company has issued several convertible bonds to fund its acquisitions, raising some concerns among market participants that a price drop could adversely affect the company and potentially lead to forced liquidations.
Currently, this strategy is paying off. 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 new highs for the first time in 24 years since the burst 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 pledged to establish a strategic Bitcoin reserve after Donald Trump wins the U.S. presidential election.
Eight, The Alameda Gap Has Narrowed After the ETF Launch
This year, the crypto market has finally put the collapse of FTX behind it. The liquidity gap left after the collapse of FTX and its sister company Alameda Research (also known as the Alameda Gap) has been narrowed this year.
Driven by rising prices and growing market share, Bitcoin's market depth of 1% this year has exceeded approximately $120 million before FTX. The recoveries of Kraken, Coinbase, and LMAX Digital have been particularly prominent. Notably, the Bitcoin market depth of the institutional-focused LMAX 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 have surged exponentially at different times this year. In particular, due to the launch of Pump dot fun, tokens on Solana have 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 volumes on centralized exchanges. Similar to the upward momentum seen before 2021, Dogecoin has once again found favor with traders—also due to the bullish sentiment following the election. After incumbent 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 has captured people's imagination, inspired by Peanut the Squirrel (a New York pet influencer), whose untimely death led to an outpouring of support online (and a token issuance).
One trader even turned a $16 investment in PNUT into $3 million in realized profits. PNUT is currently trading on several major centralized exchanges, including Binance, Crypto.com, and OKX.
Ten, Regulation Triggers Changes in the Stablecoin Market
Since June, regulations in Europe have been reshaping the stablecoin market. The landmark European Market in Crypto-Assets Regulation (MiCA) has triggered a wave of delistings of stablecoins from major exchanges and adjustments to product offerings.
Throughout 2024, the trading volume of the euro against cryptocurrencies has remained above last year's average, indicating growing demand. Three months after MiCA was enacted, the euro-backed stablecoin market experienced 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) 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, comparable to Coinbase. Nevertheless, driven by Circle's EURC, Coinbase remains the largest market, accounting for 47% of the 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 changes and shifts in market structure, next year's rally is expected to surpass Bitcoin and extend to other assets.
