Messari Deep Tide TechFlow December 23, 2024 22:08 Henan
Compilation & Translation: Deep Tide TechFlow
Introduction
It's year-end again, a time for summary and outlook.
As a top research institution in the field, Messari has released its annual report (The Crypto Theses 2025) as scheduled last week, providing a comprehensive description and forecast of the development history of the crypto industry in 2024 and trends for 2025.
The report highlights several points, such as the expectation that BTC will mature as a global asset next year, and the attribute of meme coins as a speculative outlet will continue to attract users.
The report has two main parts. The first starts with 'The current state of cryptocurrencies', which includes a short article on the status of the crypto market in 2024; the second is 'Segment research', reviewing the narratives and forward-looking theories of major segments.
However, considering the original report spans 190 pages, reading it in full is time-consuming; Deep Tide TechFlow has refined and summarized the key content from the original report, presenting the most important points, particularly the predictions and outlook sections of each subsection.
Macroeconomic environment: Breaking pessimistic expectations, providing strong support for crypto
Key developments
The economic trend in 2024 broke most pessimistic expectations, showcasing unexpected resilience in the U.S. economy. The Federal Reserve was able to implement rate cuts of 50 and 25 basis points in September and November, respectively, achieving a relatively smooth policy shift.
The S&P 500 index rose about 27% for the year, ranking among the top 20 for historical performance, fully reflecting market confidence in a soft landing for the economy. Notably, the market remained robustly upward overall, aside from brief volatility caused by the unwinding of yen arbitrage trades and geopolitical events.
Unique landscape of the crypto market
The crypto market faces dual challenges in 2024. On one hand, it needs to cope with various risk factors from traditional markets, while on the other hand, it must overcome industry-specific challenges, including the German government's selling pressure, token distribution from Mt Gox, and investigations into Tether. The market experienced a long consolidation period of up to 8 months until the elections became a breakthrough catalyst.
Predictions for 2025
The macro environment is expected to provide strong support for crypto assets.
Specifically:
The Federal Reserve has begun to ease the tightening policies since 2022 but has not yet entered a substantive easing phase. This gradual policy adjustment is expected to provide stable support to the market;
Volatility of various assets significantly decreases after elections. Historically, lower volatility often fosters even lower volatility, and this environment is particularly favorable for the development of cryptocurrencies like Bitcoin and Ethereum;
Most importantly, there is a fundamental improvement in the regulatory environment. Even a relatively neutral regulatory stance will bring significant improvements compared to the stringent controls of the past four years. This change is expected to alleviate major concerns for institutional investors entering the market, bringing in more incremental funds;
The stablecoin sector may become a breakthrough point. The bipartisan openness to stablecoin regulation creates favorable conditions for advancing related legislation in 2025;
Institutional funds: Fully entering the market
Market landscape undergoes significant changes
In 2024, the entry of institutional funds is no longer just talk. The approval of Bitcoin and Ethereum ETFs marks the formal recognition of the crypto asset class, providing more convenient access channels for both institutional and retail investors;
Blackrock’s IBIT sets a record: the first ETF to reach $3 billion in AUM within 30 days of issuance and surpassed $40 billion in about 200 days. This demonstrates strong institutional demand for crypto derivatives;
Diversification of institutional participation
Institutional participation goes beyond ETF investments. Traditional financial institutions are making significant progress in multiple areas: asset issuance, tokenization, stablecoins, and research;
Institutions like Sky (formerly MakerDAO) and BlackRock have launched on-chain money market funds. Ondo Finance's USDY (tokenized government bond fund) has reached approximately $440 million in assets;
Integration of financial technology
In May, PayPal issued its stablecoin PYUSD on Solana, and Agora, supported by Nick Van Eck, also launched the stablecoin AUSD on multiple chains, backed by Van Eck (asset management company) and custodied by State Street;
Predictions for 2025
The depth and breadth of institutional participation are expected to further expand. As BlackRock continues to position digital assets as a non-correlated asset class worth a small allocation, stable inflows into ETFs may persist. More importantly, institutions are seeking innovative opportunities across multiple verticals to reduce costs, increase transparency, or accelerate payment efficiency;
Particularly noteworthy is that traditional financial giants such as JPMorgan and Goldman Sachs are accelerating their layout. They are not only expanding their own blockchain platforms but also exploring a broader range of product offerings;
This trend indicates that institutions no longer view crypto merely as an investment asset but are beginning to take seriously its potential as financial infrastructure;
Meme: The heat will continue
2024 Market Landscape
Although meme coins account for only 3% of the market capitalization of the top 300 cryptocurrencies (excluding stablecoins), their trading volume consistently occupies 6-7% of the share, recently even climbing to 11%;
After the rise driven by politically themed meme coins like Jeo Boden in the first quarter, TikTok meme coins (such as Moodeng and Chill Guy) and AI agent concepts (like Truth Terminal's GOAT) continue to drive this momentum;
Market drivers
The prosperity of meme coins stems not only from trends or user-friendly interfaces but also from two key conditions:
Excess capital: As the overall crypto market appreciates, many traders have accumulated substantial funds but lack quality investment opportunities;
Ample block space: High-throughput networks like Solana and Base provide a low-cost, efficient trading environment;
This environment is particularly evident on Solana. The strong market performance at the end of 2023 and the beginning of 2024 allowed Solana users to accumulate substantial capital.
Evolution of trading infrastructure
User-friendly trading platforms have significantly promoted the popularity of meme coins. Applications like Pump.fun, Moonshot, and Telegram bots have simplified the operational processes for retail traders;
Especially Moonshot, which bypassed traditional cryptocurrency deposit channels by supporting payments via ApplePay, PayPal, or USDC on Solana, attracts a large number of new retail investors with its intuitive interface and simple registration process;
Predictions for 2025
Forecast for 2025: Meme coins are expected to continue growing, mainly due to several key factors:
Infrastructure support: High-throughput chains like Solana, Base, Injective, Sei, and TON provide ample block space, allowing meme coin transactions without bearing high costs;
User experience optimization: Applications like Moonshot and Pump.fun continuously lower the barriers to entry, simplify trading processes, and are expected to attract more retail participants;
Macroeconomic environment alignment: The speculative nature of meme coins, akin to gambling, may continue to attract users seeking entertainment and profits in the current macro environment;
Financing landscape: AI leads emerging investment themes
Market Overview
Crypto project financing shows an upward trend compared to 2023. Although the total financing amount for startup projects and protocols decreased by about 20% year-on-year (mainly affected by an anomaly in the first quarter of 2023), the market still saw multiple large financing deals;
Significant financing cases
Monad Labs: Raised $225 million in April, indicating that infrastructure and L1 projects remain key investment areas for VCs;
Story Protocol: Completed $80 million in Series B financing, led by a16z, focused on transforming intellectual property into programmable assets;
Sentient: Secured $85 million in financing, led by Thiel's Founders Fund, focusing on an open AGI development platform;
Farcaster and Freechat: Raised $150 million and $80 million, respectively, indicating sustained capital interest in the social domain;
The rise of AI and DePIN
Total financing for AI projects increased by about 100% year-on-year, with rounds of financing growing by 138%;
Total financing for DePIN projects increased by about 300% year-on-year, with rounds of financing growing by 197%;
AI rounds are particularly popular in accelerator projects like CSX and Beacon. Investors show strong interest in the intersection of crypto and AI.
Emerging investment themes
In addition to AI and DePIN, several financing trends worth noting emerged in 2024:
Decentralized science fields are starting to gain attention, with projects like BIO Protocol and AMINOChain receiving financing;
VCs in the Asia-Pacific region are more inclined to invest in gaming protocols, especially projects launched on the TON blockchain;
The share of financing for NFT and metaverse projects has significantly declined compared to 2021 and 2022;
The social field continues to experiment, with projects like Farcaster, DeSo, and BlueSky receiving financing support, although past success cases have been limited;
Crypto users, new evidence of growth
Market size breakthrough
According to a16z's report, the number of monthly active addresses in cryptocurrency has reached a historical high of 220 million, with a growth trend similar to early internet adoption. Although this number may contain duplicates (as many users utilize multiple wallets), it is estimated that there are still 30-60 million real monthly active users after filtering;
Key cases of user growth in 2024
The breakthrough of the Phantom wallet, becoming the most popular wallet in the Solana ecosystem, once ranked in the top ten in the iOS app store, surpassing WhatsApp and Instagram;
The application of stablecoins in emerging markets: regions like Sub-Saharan Africa, Latin America, and Eastern Europe are beginning to bypass traditional banking systems and directly adopt stablecoins; platforms like Yellow Card, Bitso, and Kuna are driving adoption by providing stablecoin exchange and payment APIs;
The explosion of Telegram Mini-Apps: Notcoin has over 2.5 million holders, Hamster Kombat attracted 200 million users, and 35 million YouTube subscribers;
Polymarket's practical application: Rapid growth during the election period, adding nearly one million accounts, once becoming the second most downloaded news app on iOS;
Base and Hyperliquid drive CEX users on-chain: Base L2 offers a free transfer channel from Coinbase to Base, while Hyperliquid provides a CEX-like high-performance trading experience for perpetual contract traders;
Predictions for 2025
The crypto ecosystem is no longer just preparing for mass adoption but has already begun to realize it;
User growth is shifting from sporadic, noise-driven entry patterns to more natural discovery and sustained growth through various applications. Meme coins, consumer applications (like Phantom and Telegram), prediction market platforms, and the growing on-chain utility will continue to drive compound growth;
The next key step is to make blockchain navigation more retail-friendly, which will be greatly improved through innovations like chain abstraction and aggregated frontends.
Bitcoin: This year is beautiful, and next year will be more mature
Key developments in 2024
Prices and institutional adoption
Starting from $40,000, the ETF approval set a new high of $75,000 in Q1 and broke the important threshold of $100,000 after Trump's victory;
Bitcoin's market capitalization dominance rises to approximately 55%;
ETF issuers hold over 1.1 million bitcoins, with Blackrock and Grayscale accounting for 45% and 19% respectively;
There was only one instance of net outflow in April after ETF approvals; Blackrock's IBIT continues to be the largest net buyer, with approximately $8 billion inflow in November alone;
MicroStrategy continues to buy on a large scale, with the latest purchase of $2.1 billion in Bitcoin between December 2 and 8, previously holding about 420,000 Bitcoins, second only to Binance, Satoshi, and ETF issuers;
Michael Saylor and MicroStrategy (MSTR) continue to dollar-cost average, with a BTC-centric strategy encouraging other public companies such as Marathon Digital Holdings (MARA), Riot Platforms, and Semler Scientific to start accumulating BTC reserves;
2024 is also the year of Bitcoin halving, and the number of natural sellers of Bitcoin will decrease over time;
Network innovation
The rise of Ordinals and Runes
Ordinals bring NFT functionality to Bitcoin, and Runes launch as a new token standard similar to Ethereum's ERC-20;
Some Runes projects have valuations reaching nine figures, indicating market recognition of Bitcoin ecosystem expansion;
Breakthrough in Bitcoin's programmability and staking innovations
The emergence of BitVM brings the possibility of arbitrary computation to Bitcoin, with over 40 Layer-2 projects launched on testnets or mainnets;
CORE, Bitlayer, Rootstock, and Merlin Chain lead in TVL;
Babylon launched as the first staking protocol for Bitcoin in Q3, hitting the cap of 1,000 BTC in the first round within 6 blocks;
Liquid staking tokens like LBTC from Lombard are starting to emerge;
Predictions for 2025
The inflow of Bitcoin ETFs far exceeded expectations, and over time, institutions are likely to gradually become the main driving force behind daily BTC price movements;
ETFs can purchase spot Bitcoin without using leverage. The inflow of spot funds from institutions is smoother and more consistent, which should reduce reflexive, leverage-driven volatility, helping Bitcoin mature as an asset;
The approval of Bitcoin ETFs may place BTC in the early mid-stage of becoming the world's leading store of value. In November, Bitcoin surpassed silver to become the eighth most valuable asset globally, partly due to ETF fund inflows throughout the year. Year-end trends indicate that ETF inflows will continue to increase in 2025, especially as Grayscale's GBTC shifts to a positive net flow;
In terms of regulation, the new Trump administration has shown a positive attitude towards cryptocurrencies and Bitcoin, making promises related to Bitcoin during the campaign. Although Bitcoin quickly repriced after Trump's victory, ultimately, the government needs to fulfill some of their claims;
Although we predict the likelihood of this happening is low, a federal strategic Bitcoin reserve would be particularly impactful. The market seems to approach the Trump administration with cautious optimism; if the president can achieve some high-probability action items, it may establish enough goodwill to sustain bullish sentiment for Bitcoin moving forward;
After the 2024 elections, the impact of clear and positive cryptocurrency reforms will become a significant issue across all government departments, and we believe that cryptocurrencies are on the verge of gaining bipartisan support. The impact is substantial and will help eliminate regulatory uncertainties surrounding Bitcoin in the foreseeable future;
On Runes and Ordinals, we believe the dust has settled, and the opportunities by 2025 are quite enticing;
Magic Eden is a driving force in improving Bitcoin UI/UX; if the Bitcoin ecosystem takes off, we expect them to become obvious winners;
Bitcoin's programmability and BTC staking are still in their infancy, and the early growth of TVL is insufficient to indicate real demand; consumers largely favor the performance capabilities of networks like Solana and Base, and if this trend continues, Bitcoin builders will face a tough battle;
Ethereum: Identity crisis and future opportunities
Overview of 2024 performance
Ethereum had an extraordinary year. As the 'younger brother' of the crypto market, it competes with Bitcoin's narrative of hard currency while also facing challenges from new public chains like Solana.
Major performances:
Significantly underperforming compared to other major crypto assets, especially against Bitcoin and Solana;
Layer-2 ecosystems continue to grow, but mainnet activity has significantly declined; ETH has experienced continuous inflation for the first time instead of the expected deflation;
Initial fund inflows were limited after ETF approvals, only beginning to accelerate recently;
L2 scalability has improved 15 times, with cumulative throughput reaching about 200 TPS;
The rapid growth of Base has sparked discussions that ‘the future of Ethereum is Coinbase,’ but the decentralization of the L2 ecosystem has led to compromised user experience and developer experience;
Key outlooks for 2025
L2 is better than L1
Layer-2 design allows for a more flexible execution environment, superior to native Layer-1; high-throughput L2s (like MegaETH) theoretically far exceed fast L1s;
Application chains can achieve better trade-offs, such as customized trading priorities;
Two viable models for increasing value capture
Ethereum faces two paths for value capture:
The route of fee irrelevance
Current fees mainly stem from speculative activities, with sustainability in question;
Token valuations should be based on 'security demand' rather than fees; maximum applications create the highest security demand, driving the value of native assets;
Enhancing fee capture routes
Native Rollup can enhance mainnet value capture and improve data availability fees;
Expand the base layer to compete with conventional EVM Layer-2s;
New opportunities for the overall ecosystem
A super Rollup, interconnected Based-Rollup networks, or high-fee burning could all potentially become successful paths;
Regaining market share in native crypto speculation will drive institutional interest;
The decentralized nature of the ecosystem means that any participant could facilitate this transition;
Solana: from follower to mainstream ecosystem
Key performances in 2024
Solana has transitioned from 'recovery after the FTX collapse' to a determined breakthrough.
Major achievements:
Transitioning from a 'duopoly competition' between Bitcoin and Ethereum to a 'tripartite' landscape;
Network stability significantly improved, with only one instance of a 5-hour interruption throughout the year; total locked value (TVL) in DeFi grew from $1.5 billion to over $9 billion; stablecoin issuance increased from $1.8 billion to nearly $5 billion;
Positioning itself as a venue for speculation, particularly through memecoin trading. The seamless user experience of ecosystem wallets, along with platforms like Pump.fun and Moonshot, has made the issuance and trading of tokens easier than ever;
This series of on-chain activities has even occasionally pushed Solana's on-chain fees to surpass Ethereum's, highlighting the network's accelerating momentum and retail appeal;
Key outlooks for 2025
Ecosystem expansion
Expect applications that go beyond speculation: We are particularly excited about the prediction market of MetaDAO, and the emerging Solana L2 ecosystem is worth following to see if they can effectively compete with their Ethereum counterparts;
AI Trend Pioneering: a16z has become one of the most trend-value repositories in all areas of Github. The Solana ecosystem not only embraces AI x Crypto but also leads this trend;
Interest from traditional finance
Under the ETF trend, investors may seek to invest in 'tech stocks' in this field, with Solana emerging as the fastest horse;
A spot Solana ETF seems inevitable in the next one or two years, creating a perfect storm for the explosive second phase of the Solana story;
Intensifying competition
Next year is expected to see a batch of brand new Layer 1 blockchains (such as Monad, Berachain, and Sonic);
A revival of DeFi, AI agents, and consumer applications led by platforms like Base and numerous new L2s;
Other L1 + Infrastructure 2025 Outlook
Deep Tide Note: Due to limited space, this chapter focuses on interpreting the predictions for 2025; the summary for 2024 can be found in the original report, along with more integrated information from publicly available objective data.
Next year we will see Monad and Sonic launch as two general-purpose, high-throughput, 'holistic' L1s;
Both projects have accumulated significant funding (Monad at $225 million and Sonic at approximately $250 million in FTM tokens) to attract developers and teams;
Berachain is one of the most interesting experiments in L1, and after raising $142 million in Series A and B funding, over 270 projects are committed to supporting this network, showing great interest from developers and application teams;
Celestia's Lazybridging proposal and Avail's Nexus ZK proof verification layer have the potential to build meaningful network effects for modular L1 in the second half of 2025;
If Unichain succeeds, it could spark a wave of protocols that avoid L1 and build application-specific or domain-specific L2s to increase value accumulation and generate more income for token holders;
Alternative virtual machines (mainly Solana and Move VM) will continue to receive attention;
Avalanche9000, coupled with Avalanche's BD strength in institutional and gaming sectors, is set to be another strong year;
The outlook for Cosmos in 2025 remains uncertain;
Initia will launch as L1, supporting 5 to 10 application-specific, interoperable L2 solutions. This strategic setup positions Initia to potentially lead the next wave of application chain advancements;
In the interoperability track, focus on Across, Espresso, Omni Network;
In the ZK track, pay attention to Polygon's Agglayer. It is expected that almost all infrastructure protocols will adopt ZK technology in 2025;
The boundaries between applications and infrastructure are becoming increasingly blurred, and modular projects like Celestia, EigenDA, and Avail may benefit from this;
DeFi 2025 Outlook
Base and Solana - valuable real estate: We continue to see the growing prospects of Solana and Base DEX relative to other DEXs on different chains;
Vertical integration and composability: Protocols like Hyperliquid and Uniswap have shifted towards owning their own infrastructure to configure network characteristics to benefit their applications;
Prediction markets: We predict that trading volume may decline compared to previous election-driven trading months. To win, other protocols must be able to provide relevant markets for bettors to continuously speculate on while incentivizing market makers;
RWA: As interest rates decline, tokenized government bonds are expected to face resistance; idle on-chain capital may gain more favor, with the focus potentially shifting from purely importing traditional financial assets to exporting on-chain opportunities. Even with changes in macroeconomic conditions, RWA has the potential to maintain growth and diversify on-chain assets;
Points-based incentives: We expect points to remain at the core of protocols aimed at guiding user adoption through token distribution, powering market and yield trading protocols. As we enter 2025, protocols may refine their points programs while nurturing early adopter communities;
Driven by new opportunities in yield farming and the speculative appeal of points-based incentives, yield trading protocols like Pendle are expected to grow further;
AI X Crypto 2025 Outlook
Bittensor and Dynamic TAO: new AI coin casinos
Each existing subnet (as well as future subnets) will have its own token, and they will essentially be associated with Bittensor's native TAO token;
The AI competition is essentially a talent competition; Bittensor has a unique angle to attract talent -- subnets show early signs of producing high-quality research;
If Bittensor unexpectedly becomes a center for cutting-edge AI research in the cryptocurrency field next year, don’t be surprised;
Bittensor is not just a speculative 'AI coin casino' but a platform capable of attracting serious AI developers;
Decentralized model training: a stumbling block and a pivot
Decentralized networks will not attempt to compete with giants like OpenAI and Google by training large-scale foundational models but may focus on fine-tuning smaller specialized models;
More experiments are expected next year in the realm of small and specialized models. These models may be designed to perform specific tasks;
AI agents and meme coins: ongoing experiments
Most AI agents may prefer to operate on-chain;
The increasing token valuation can provide funding for the sustainable development of AI agents and promote engagement in social media;
We believe that as more engineers pay attention, the density of talent will continue to increase;
With AI agent KOLs actively competing for attention on social media, this category will surpass 'static' meme coins;
As discussions around AI's openness and closure continue, we expect cryptocurrencies to occupy an increasingly larger portion of the dialogue;
DePIN 2025 Outlook
By 2025, we expect energy DePIN to build supplier infrastructure worth $500 million to $1.5 billion while generating up to $50 million in demand-side sales;
As Helium Mobile prepares for further growth and DAWN is set to launch its mainnet in 2025, the wireless sector will solidify its position as a breakthrough use case in DePIN;
Revenue forecast: The industry is expected to achieve revenue in the range of tens of millions to less than nine figures by 2025;
RTK networks like GEODNET are expected to expand supply, providing 90%-100% coverage for high-value areas in the EU and North America by the end of 2025. Additionally, annual revenue may grow to over $10 million;
The weather collection network in the vertical field for 2025 is expected to achieve significant progress;
Integration and partnerships between energy and mobility DePIN are expected to further enhance grid integration and energy collection data for electric vehicle batteries;
In 2025, document storage DePIN is expected to generate revenues of $1.5 million to $5 million across the entire sub-industry;
With the successful promotion of projects like Grass, data collection-related DePIN is expected to increase in 2025;
Consumer Application 2025 Outlook
Play-to-earn airdrops will continue to be the primary method for attracting players to games. The ‘Paid Airdrop 2’ strategy may become the new standard in 2025;
Mobile applications will become a decisive trend in 2025;
In 2025, we expect Solana to continue to hold the largest share of memecoin trading activity;
Ordinals are expected to become a category that continues to attract attention. Upcoming catalysts, such as potential CEX listings, airdrop-driven wealth effects, and the growing popularity in Asian markets, are likely to lead to sustained growth and wider appeal throughout the year;
CeFi 2025 Outlook
With the continuation of the bull market and persistent increases in financing rates, the supply of Ethena may continue to expand;
Yield-bearing stablecoins may not quickly seize a significant share from Tether;
Trump's chosen Secretary of Commerce Howard Lutnick managing Tether's assets may lead to a complete shift in the U.S. stance towards Tether;
True innovation is likely to happen behind the scenes of orchestration companies like Bridge. Stablecoin APIs (such as those provided by Yellow Card) will enhance small businesses' ability to accept stablecoins as payment on a global scale;
In terms of exchanges, we will continue to see the integration of on-chain and off-chain services. Coinbase and Kraken hope to onboard as many people as possible to their L2s in 2025 and may offer incentives for this;
The new government will allow exchanges to be more lenient in the assets they choose to list. As Binance, Bybit, and Coinbase compete to list the most popular cryptocurrencies, this trend could reach a fever pitch in 2025;
Appendix:
1.https://messari.io/report/the-crypto-theses-2025?signup=success#macro
2.https://x.com/impalementd/status/1835694077947642225
