Author: Daren Matsuoka, a16z crypto partner; Compiled by: 0xjs@Golden Finance
2024 is likely to be one of the most exciting years in the history of the crypto industry. Crypto activity and usage hit 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 has become 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 in the evolution of cryptocurrency, we will closely monitor the following five indicators to track the ongoing development of the industry. (For other indicators, you can also check our Cryptocurrency Status Index, published in 2023, to track broader industry innovation and adoption forces.)
1. Monthly mobile wallet user count
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 holders (who own cryptocurrency but do not transact on-chain regularly) can be transformed into active cryptocurrency users. To achieve this, developers need to continue building new consumer applications, and consumers need wallets to participate.
Last month, the number of mobile wallet users hit an all-time high, surpassing 35 million for the first time. This was driven by growth in well-known brands like Coinbase Wallet, MetaMask, and Trust Wallet, but also boosted by some new players like Phantom and World App.
Consumer wallets present one of the toughest challenges for developers in the industry—finding the right balance between security, privacy, and usability is no easy task. However, blockchain infrastructure can now handle hundreds of millions or even billions of on-chain users, making it 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 transaction volume
As infrastructure significantly reduces transaction costs, stablecoin activity rebounded in 2024. Notably, stablecoins are used not only 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 send remittances, 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 transaction volume using on-chain data, isolating true organic stablecoin usage may be challenging. Transactions can be manually initiated by end users or programmatically initiated by bots, and some of these on-chain transactions do not resemble traditional settlements.
Fortunately, Visa has created a clear and simple way to demonstrate how stablecoins are used while adjusting for inorganic activity from bots and other artificial 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 transaction volume here.
3. (Bitcoin and Ethereum) ETP net flow
The SEC approved exchange-traded products (ETP) for Bitcoin and Ethereum last year. This is an important milestone that makes it easier for individuals and institutional investors to gain access to 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 flow,' which represents the amount of BTC or ETH flowing into or out of ETPs. (Excluding existing products like Grayscale Bitcoin and Ethereum Trusts, which eventually convert to ETPs.) So far, there has been a net flow of 515,000 BTC (with an on-chain holding of $110 billion) and 611,000 ETH (with an on-chain holding of $13 billion).
As more institutional investors seek exposure to crypto assets, this should translate into increased ETP net flows. Tracking on-chain deposits and withdrawals from addresses identified as ETP custodians allows us to monitor this data in real time.
Tracking ETP net flow here.
4. Spot trading volume DEX vs CEX ratio
As more people join the blockchain, we expect the usage rate of decentralized exchanges (DEX) in cryptocurrency trading to surpass 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, as new users entered the space, trading volume on high-throughput chains like Coinbase's Base and Solana surged, pushing DEX trading volume to historic highs.
As more and more new consumer applications come online, the importance of decentralized exchanges may continue to grow, further driving the growth of DEX.
As we monitor the ever-changing balance between decentralized, crypto-native activity and centralized crypto trading, this will be an important indicator to watch.
Tracking the spot trading volume DEX vs CEX ratio here.
5. Total transaction fees (block space demand)
The total trading fees in dollars reflect the total demand for block space on specific chains, which is actual economic value.
However, since most projects explicitly attempt to reduce user fees, this metric has many nuances. That's 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 for the first time (see the chart below). Notably, this milestone was achieved while Solana's unit transaction costs were significantly lower; the cost of sending USDC on Ethereum is about $5, while on Solana it is less than 1 cent. This is an important milestone, and we will continue to monitor it.
Many ecosystems and their associated fee markets are maturing, making it a good time to start measuring the economic value brought by various blockchains. In the long run, the demand for block space (measured in the total dollar value of fees paid) may be the most important indicator of progress in the crypto industry. Why? Because it reflects participation in valuable economic activities and the willingness of users to pay for those activities.
Tracking block space demand through transaction fees here.
We track several indicators in the industry, including our annual cryptocurrency status report—but this year we will closely monitor these five indicators. As investor channels expand, the industry will have the conditions to attract more users and builders; as infrastructure matures, it paves the way for compelling new applications; and with the emergence of more popular products like stablecoins. Let's see what other products are developed this year to drive the development of these indicators.
