Source: Kaiko Research; Translated by: Deng Tong, Golden Finance
1. The Road to BTC's $100,000 Milestone
2024 is set to be 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 also proceeding smoothly.
Even several billion dollars in liquidations and sell-offs could not prevent BTC's success this year. The price of BTC in U.S. dollars has risen nearly 140% so far this year, significantly more than against other fiat currencies (some of which experienced significant devaluation in 2019).
2. U.S. Elections Stimulate Bullish Bets
The 2024 U.S. elections hold significant importance for cryptocurrency. Bitcoin and digital assets have never received so much 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. Much of the cryptocurrency community rallied around Republican candidates and eventual Democratic candidate Kamala Harris, beginning to take some positive initiatives regarding cryptocurrency.
Before the election on November 5, Bitcoin experienced a 'Trump trade' among market participants. A special election contract on Deribit attracted billions of dollars in trading volume and open contracts before the election, and shortly after the election, traders betting on a historical high showed significant bullish tendencies. They were right; by November, BTC trading volume had surpassed $75,000.
The overall voting results in the Senate and the final tally are widely regarded as favorable for cryptocurrency. As a result, BTC led the post-election surge in crypto assets, breaking through $80,000 by November 11.
As we have shown above, the increasingly bullish sentiment has persisted from the remainder of November into December, with Bitcoin's current historical peak exceeding $107,000.
3. Bitcoin's Fees Skyrocket Before the Fourth Halving
Bitcoin's fourth halving took place on April 19 this year. On that Saturday, Bitcoin's average transaction fees skyrocketed, reaching a historic high of $146. This is significantly higher than the average fee of $3 for Ethereum 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 has taken many market participants by surprise.
Casey Rodamor, the founder of Ordinals, announced plans to launch Runes, a protocol that allows for easier issuance of fungible tokens on Bitcoin. However, based on Ordinals' impact on transaction fees, users may have anticipated an increase in fees, but the historic surge 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 launch of Runes is also proceeding in a similar manner. The protocol's launch has resulted in increased demand for block space, thereby impacting fees.
4. BlackRock Surpasses Grayscale
BTC ETFs have broken various records this year, with the total assets managed by 11 funds rising to over $100 billion.
BlackRock is the big winner, indicating that major institutions are interested in Bitcoin and digital assets. Its spot BTC ETF manages over $55 billion in assets, surpassing Grayscale's GBTC in just a few months. GBTC, launched by digital asset management company Grayscale in 2013, became largely a cryptocurrency-first product, and its significant premium/discount to net asset value meant limited institutional buying. Therefore, after the ETF launch this year, it was quickly overtaken by BlackRock.
After the company decided to keep fees at 1.5%, GBTC has been losing assets for most of this year. In the U.S. ETF space, companies are accustomed to low fees, leading most firms on Wall Street to prefer BlackRock and Fidelity over GBTC.
5. The ETH/BTC Ratio Declines
Since the merge, the ETH/BTC ratio has continued to decline and shows no signs of slowing down in 2024. This ratio compares the performance of the two assets, and it falls when Ethereum underperforms Bitcoin.
Other contributing factors to the decline include the rise of Solana, as users migrated to cheaper networks during the speculation surge in March and the fourth quarter of this year. Meme tokens (which we will discuss later) were the driving force behind much speculation and propelled Solana's DEX trading volume to sometimes exceed that of Ethereum this year.
Fell to 0.033 in November, the lowest level since March 2021. What is behind the poor performance? Since the merge, ETH has faced immense regulatory pressure, as staking in the U.S. has come under close scrutiny, provoking the SEC's ire.
6. Slow Start: ETH ETF Launch
ETH ETFs have had a slow start since their launch in July. Similar to the launch of BTC ETFs, Grayscale's fund again put pressure on the market as the digital asset management company kept fees at 2%.
However, after the outflow of Grayscale's ETHE decreased, newly launched funds began to see inflows starting at the end of 2024. Since the U.S. election in November, inflows have surged, with traders flocking to CME's ETH futures. This reflects similar activity observed when traders executed arbitrage trades on BTC futures in May and June.
ETH futures open interest has been steadily increasing, and changes in regulatory outlook have reversed the trend of ETH ETFs, with net inflows turning positive at the end of November and December. The net inflow since launch has now exceeded $2 billion. This includes over $3 billion in funds flowing out of ETHE.
ETH is set to be one of the biggest winners of the regime change in Washington, D.C. While it has lagged behind Bitcoin this year, the regulatory shifts brought by the change in the U.S. government will benefit the second-largest asset by market capitalization immensely. The classification of ETH as a commodity or security and the clarity around staking could be two major drivers of growth next year.
7. 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' during the third-quarter earnings report in November.
Since January, MicroStrategy has purchased over 249,850 Bitcoins, accelerating its pace of buying since the U.S. elections, with its holdings nearly doubling in the past month. The company has issued multiple convertible bonds to finance its acquisitions, raising concerns among some market participants that a price drop could adversely affect the company and even lead to forced selling.
Currently, this strategy is paying off. The rapid rise in BTC prices and the bullish sentiment in the market have led MSTR's value to soar to an all-time high. For the first time in 24 years since the burst of the internet bubble in March 2000, MSTR has reached a new high.
While MicroStrategy is a pioneer in corporate Bitcoin purchases, some Republican lawmakers hope the U.S. government will follow suit. Senator Cynthia Lummis has pledged to establish a strategic Bitcoin reserve after Donald Trump wins the U.S. presidential election.
8. The Alameda Gap Has Narrowed After ETF Listings
This year, the crypto market has finally put the collapse of FTX behind it. The liquidity gap left by the collapse of FTX and its sister company Alameda Research (also known as the Alameda Gap) has narrowed this year.
Driven by rising prices and increasing market share, Bitcoin's 1% market depth this year has surpassed the previous level of about $120 million before FTX. The recovery of Kraken, Coinbase, and LMAX Digital has been particularly prominent. Notably, LMAX's Bitcoin market depth, focused on institutions, reached a record $27 million this week, briefly surpassing Bitstamp to become the third-largest liquidity Bitcoin market.
9. The Meme Token Frenzy
As mentioned above, meme tokens experienced exponential surges at different times this year. In particular, due to the launch of Pump dot fun, tokens on Solana saw significant growth; this 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 volume on centralized exchanges. Similar to the rally before 2021, Dogecoin is once again favored by traders — also due to bullish sentiment after the election. Dogecoin surged after incoming President 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 the imagination, inspired by Peanut the Squirrel (a New York pet influencer), whose untimely passing led to significant online support (and a token issuance).
One trader even turned a $16 investment in PNUT into a realized profit of $3 million. PNUT is currently trading on several major centralized exchanges, including Binance, Crypto.com, and OKX.
10. Regulation Triggers Changes in the Stablecoin Market
Since June, regulation in Europe has been reshaping the stablecoin market. The landmark European Market Crypto Asset Regulation (MiCA) has triggered a wave of delistings of major exchange stablecoins and adjustments in product offerings.
Throughout 2024, the trading volume of the euro against cryptocurrencies remained above last year's average level, indicating a growing demand. Three months after the enactment of MiCA, the euro-backed stablecoin market underwent a significant transformation 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) accounted for 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, holding 47% of the share.
Conclusion
This year has been significant for establishing digital assets as viable assets 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 shifts in regulation and changes in market structure, next year's rally is expected to surpass Bitcoin and extend to other assets.
