Original authors: Tanay Ved, Coin Metrics.
Original translation by: Shan Ouba, Golden Finance.
As 2024 comes to a close, this year stands in stark contrast to the cryptocurrency winter of 2022, prompting us to pause and reflect on a remarkable year for the cryptocurrency industry.
2024 is arguably the most influential year in cryptocurrency history in many ways, starting with the launch of Bitcoin ETFs and culminating with Bitcoin surpassing $100,000 after the elections.
In this article, we revisit the significant developments shaping the digital asset industry in 2024 from a data-driven perspective.
Driven by the explosive success of Bitcoin ETFs in January, the cryptocurrency market experienced a strong growth phase in Q1, with Bitcoin soaring to an all-time high of $73,000. This was followed by a relatively calm consolidation period characterized by a reduced catalyst environment and a significant reallocation of supplies among major market participants. Now, as 2024 approaches its end, optimism has returned, propelled by the U.S. government's support for cryptocurrencies and the onset of the interest rate cut cycle.
Bitcoin (BTC) has undoubtedly been the focus this year, up 125% year-to-date, outperforming traditional asset classes and crypto assets. Solana (SOL) led the market multiple times during this cycle, ending the year up 78%, while Ethereum (ETH) continued to underperform, up 44% for the year.
The chart above shows the top 30 cryptocurrencies in the Datonomy TM space, each with a market capitalization exceeding $1 billion. Driven by retail enthusiasm, memecoins like DOGE and PEPE garnered widespread attention, while 'dinosaur coins' like Ripple (XRP) and Stellar (XLM) made surprising comebacks. Alternative Layer-1s like Sui (SUI) and established blue-chip DeFi protocols like Aave also gained attention, reflecting the shifting investor sentiment and themes shaping the market in 2024.
Q1: The ETF floodgates opened, Memecoin frenzy, Ethereum expanded with Blob.
The emergence of spot Bitcoin ETFs has triggered a wave of mass adoption, opening the floodgates for Wall Street. The assets under management (AUM) of 11 issuers now exceed $105 billion, holding over 1.2 million Bitcoins. This accounts for 5.6% of Bitcoin's current supply, with demand from corporate balance sheets further accelerating the pace at which supply is absorbed. In less than a year since their launch, spot Bitcoin ETFs have experienced strong liquidity, solidifying their status as the most successful debut in the history of any ETF category.
Weekly traffic shows sustained accumulation, with net increases exceeding $2 billion during peak weeks, despite occasional outflows during the summer market consolidation.
As Bitcoin drove institutional adoption and elevated the overall market, memecoins began to attract significant attention, leading to a surge driven by extreme risk. By early March, spot trading volume for memecoins reached $13 billion, and the market capitalization of major memecoins hit $60 billion.
While mature large memecoins saw some growth, most activity stemmed from a plethora of newly launched meme coins on Solana. A platform called pump.fun became the center of the explosive growth of memecoins in Q1, facilitating the creation of over 75,000 tokens and pushing the number of active wallets on Solana to a record 2.06 million at that time. Although these high levels of activity did not sustain, meme coins made a comeback with trading volumes exceeding $23 billion in November. New AI agent platforms like Virtuals on Base injected new energy into this phenomenon.
March also marked an important milestone for Ethereum, which deployed EIP-4844 in the Dencun upgrade. Shortly thereafter, Ethereum's Layer 2 Rollup adopted a new blob transaction fee market in parallel with the mainnet. This laid the foundation for Ethereum to expand its execution scope with the help of Layer 2 solutions like Base, Optimism, and Arbitrum, while reducing settlement costs on Layer 1, making transactions on the network more affordable. Demand for blobs remained strong, with Ethereum consistently reaching a target capacity of 3 blobs per block just seven months after launch.
While this made the Ethereum ecosystem more accessible, it can be argued that the reduction in Layer 1 fees hindered the value accumulation of ETH, also leading to a more fragmented user experience. However, there are no signs of exhaustion in the field, as well-known exchanges like Kraken and Uniswap, as well as multinational corporations like Deutsche Bank and Sony, are driving the development of Layer 2, with increases in blob capacity on the horizon.
Q2: Summer rally: The supply season begins.
The second quarter was characterized by a consolidation phase, with the market experiencing range-bound fluctuations due to a lack of catalysts. In April, Bitcoin underwent its four-year halving event, reducing daily issuance from 900 coins to 450 coins. Like previous halving events, this marked a turning point for the mining industry, forcing miners to adjust to the reduced block subsidies. This event stimulated upgrades to more efficient ASIC hardware, triggered further consolidation in the mining industry, and prompted some miners to repurpose their infrastructure for AI data centers to diversify revenue sources.
As shown in the chart, transaction fees have become a key component of mining revenue, partially offsetting the decline in block subsidies. However, overall hash prices (daily dollar revenue per TH/s) remain under pressure, reflecting that miners are increasingly reliant on network activity for sustainability.
Adding to these challenges is the additional supply pressure. The most notable is the long-awaited distribution of Mt. Gox bankruptcy assets, with thousands of BTC re-entering the market. Similarly, the German government sold over 50,000 BTC seized during a criminal investigation, increasing the selling pressure and exacerbating supply-side dynamics. Despite these sell-offs, Bitcoin's liquidity remained resilient, absorbing the supply without causing significant disruption to market stability. Looking ahead, as FTX creditors are set to receive cash distributions in 2025 and may re-enter the market, selling pressure could ease.
Q3: The spring of stablecoins and tokenization.
Stablecoins are recognized as the 'killer application' of cryptocurrencies, with their global significance beginning to permeate beyond the cryptocurrency industry. Stablecoins continue to export dollars worldwide, with a total supply exceeding $210 billion. USDT ($138 billion) and USDC ($42 billion) remain dominant, while the majority of stablecoin supply tends to favor the Ethereum network, with a supply of $122 billion. Overall, in November, stablecoins facilitated $1.4 trillion in monthly (adjusted) transfer volume.
While the role of stablecoins as a medium of exchange and value storage in emerging economies has been widely explored, the momentum for their utility in payment and financial services infrastructure has accelerated further with Stripe's acquisition of Bridge. Additionally, 99% of stablecoins are pegged to the dollar, with Tether and Circle directly investing nearly $100 billion in U.S. Treasury bonds, solidifying their position as key instruments in maintaining the dollar's dominance globally.
Meanwhile, BlackRock entered the tokenization space with the launch of the BlackRock USD Institutional Digital Liquidity Fund (BUIDL), investing in cash and U.S. Treasury bills and other dollar-equivalent assets. BUIDL's supply quickly reached $500 million, expanding the landscape of tokenized securities on public blockchains. The ecosystem expanded in 2024, offering stablecoins with varying risk profiles, liquidity, collateral, and savings mechanisms. Ethena's USDe stood out, with its market capitalization growing from $91 million to $6 billion, becoming the third-largest stablecoin, providing attractive yields to holders by leveraging positive financing rates in a rising market. Meanwhile, First Digital USD (FDUSD) gained prominence as a liquidity source and widely used quote currency on exchanges.
Regulatory scrutiny on stablecoins has been increasing, reflecting the growing importance of stablecoins in the global financial system. The European Union implemented specific requirements for stablecoins under the Markets in Crypto-Assets (MiCA) regulation, which has begun reshaping the euro-pegged stablecoin industry.
Q4: Election frenzy.
The 2024 U.S. presidential election had a profound impact on the digital asset market, pushing BTC to surpass $100,000 for the first time. Dedicated coins in Coin Metrics' Datonomy TM space (including meme and privacy coins) and smart contract platforms were standout areas, with returns of 129% and 84%, respectively, since the elections.
On the eve of the elections, we also witnessed the rise of prediction markets like Polymarket, which played a crucial role in aggregating collective wisdom on election results. At its peak, Polymarket's open contracts were valued at over $450 million. Although activity on the platform has since subsided, it showcased the utility and potential of information markets on public blockchains.
Post-election, market optimism surged, thanks to the government's supportive stance on cryptocurrencies, which was in stark contrast to the previous regulatory hurdles posed by the SEC. The demand for ETFs and corporate bonds drove up Bitcoin, with MicroStrategy's holdings reaching 444,262 BTC, funded by its stock and convertible bond issuance. Institutional interest in the derivatives market hit new highs, reflected in CME's Bitcoin futures open interest reaching a record $22.7 billion, with a total exceeding $52 billion, while options-based ETFs were launched successively.
Despite the strong momentum, the implementation and timeline of cryptocurrency-friendly policies remain uncertain. While there are clear signs indicating a more supportive regulatory environment for cryptocurrencies, including the appointment of cryptocurrency advocates to key positions such as the SEC Chair and Cryptocurrency Czar, the specific regulatory framework remains unclear. Market enthusiasm has also been subdued due to expectations of interest rate cuts, with participants adopting a cautiously optimistic outlook for 2025.
Nonetheless, 2024 has laid a solid foundation for us: the launch of spot Bitcoin ETFs, accelerated adoption of stablecoins, significant advancements in on-chain infrastructure and applications, and a pro-cryptocurrency government taking office at the onset of the interest rate cut cycle. As we enter the next year, please stay tuned for our 2025 cryptocurrency outlook report, where we will explore the key themes and trends shaping the upcoming year.
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