Thesis Overview of Key Crypto Industry Themes for 2024 from the Coinbase Report. Part 1.
1. Bitcoin Hegemony:
- Institutional capital flows are expected to remain tied to Bitcoin at least until the first half of 2024.
- The choice of digital assets is moving towards more stable brands, leading to a sustained increase in Bitcoin's dominance above 50% for the first time since April 2021. This has been largely provoked by several well-known and established financial giants submitting applications for spot Bitcoin ETFs in the U.S.
- The restrained demand from traditional investors, seeking to enter this market, will make it difficult to displace Bitcoin's hegemony in the near term.
2. New Trading Regime:
- The cryptocurrency trading mode may shift towards Web3 applications in 2024, as market participants show more interest in the diversity of transaction options.
- The market players are expected to focus on identifying potential Web3 applications that bridge the gap between early adoption and widespread use of cryptocurrencies.
3. Layer 1 Protocol Equilibrium:
- Debates regarding the advantages of modular and integrated (monolithic) types of blockchains will continue in the near future. Monolithic blockchains like Solana will continue to hold an important place in the crypto ecosystem. However, the value of these blockchains ultimately depends on what projects are built on them and how widely they are used.
4. Development of Layer 2 Protocols:
- The proliferation of Layer 2 has led to a minor shift in activity away from Ethereum, while almost eliminating activity in alternative Layer 1s. Rapid growth of scalable Layer 2 solutions has led to the emergence of new unifying stacks such as Opstack, Polygon CDK, and Arbitrum Orbit. The number of transactions in Ethereum remains relatively stable, averaging about 1 million per day.
- By comparison, the combined activity in Arbitrum, Base, Optimism, and zk Sync currently averages more than 2 million transactions per day.
