Original author: Tanay Ved, Coin Metrics.
Original text translated by: Shan Ouba, Jinse Finance.
As 2024 comes to a close, this year stands in stark contrast to the cryptocurrency winter of 2022, and we want to take a moment to reflect on the remarkable year for the cryptocurrency industry.
2024 is arguably the most influential year in cryptocurrency history in many aspects, starting with the launch of Bitcoin ETFs and culminating in Bitcoin surpassing $100,000 after the elections.
In this article, we revisit the major advancements shaping the digital asset industry in 2024 from a data-driven perspective.
Fueled by the explosive success of Bitcoin ETFs in January, the cryptocurrency market experienced a strong growth phase in Q1, with Bitcoin soaring to a historic high of $73,000. This was followed by a calmer consolidation period characterized by a weakening of catalysts and a significant redistribution of supply among major market participants. Now, as 2024 draws to a close, optimism has returned, driven by the US government's support for cryptocurrencies and the beginning of the interest rate cut cycle.
Bitcoin (BTC) is undoubtedly the focus this year, with a year-to-date increase of 125%, outperforming traditional asset classes and cryptocurrencies. Solana (SOL) has led the market multiple times during this cycle, ending the year up 78%, while Ethereum (ETH) continues to underperform, rising 44% for the year.
The above chart shows the top 30 cryptocurrencies in the datonomy TM space, each with a market capitalization exceeding $1 billion. Driven by retail enthusiasm, meme coins 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 thematic rotation shaping the market in 2024.
Q1: The ETF floodgates open, Memecoin frenzy, Ethereum expands 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 currently exceed $105 billion, holding over 1.2 million Bitcoin. This amounts to 5.6% of Bitcoin's current supply, with demand from corporate balance sheets further accelerating the absorption of supply. In less than a year since their launch, spot Bitcoin ETFs have experienced strong liquidity, solidifying their position as the most successful debut in any ETF category in history.
Weekly flows show 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 boosted the overall market, memecoins began to attract significant attention, leading to an upward trend driven by extreme risk. In early March, the spot trading volume of memecoins reached $13 billion, with the market capitalization of major memecoins hitting $60 billion.
While mature large memecoins saw growth, most activity stemmed from a surge of newly launched meme coins on Solana. A platform called pump.fun became the epicenter 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, memecoins made a comeback, with November trading volume exceeding $23 billion. New AI agent platforms like Virtuals on Base injected fresh vitality into this phenomenon.
March also marked an important milestone for Ethereum, as it deployed EIP-4844 in the Dencun upgrade. Soon after, Ethereum's second-layer Rollup adopted a new blob transaction fee market in parallel with the mainnet. This laid the groundwork for Ethereum to expand its execution scope with the help of second layers like Base, Optimism, and Arbitrum while reducing settlement costs on the first layer, making transactions on the network more affordable. Demand for blobs has remained strong, with Ethereum achieving its target capacity of 3 blobs per block just seven months after launch.
While this has made the Ethereum ecosystem more accessible, it can be argued that the reduction in first-layer fees has hindered ETH's value accumulation while also leading to a more fragmented user experience. However, there are no signs of exhaustion in this field, as well-known exchanges like Kraken and Uniswap, along with Deutsche Bank and multinational corporations (like Sony), are driving the development of second layers, and increases in blob capacity are imminent.
Q2: Summer Rally: 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 quadrennial halving event, reducing the daily issuance from 900 to 450 coins. Like the halving event, this marked a turning point for the mining industry, forcing miners to adapt to reduced block subsidies. This event stimulated upgrades to more efficient ASIC hardware, triggered further consolidation in the mining sector, 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. Nevertheless, overall hash price (daily dollar revenue per TH/s) remains under pressure, reflecting miners' increasing reliance on network activity to maintain sustainability.
Compounding 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, adding to the selling pressure and exacerbating supply-side dynamics. Despite these sell-offs, Bitcoin's liquidity remains resilient, absorbing 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: A spring for stablecoins and tokenization.
Stablecoins are recognized as the 'killer app of cryptocurrencies,' and their global significance is beginning to permeate beyond the cryptocurrency sector. Stablecoins continue to export dollars worldwide, with a total supply exceeding $210 billion. USDT ($138 billion) and USDC ($42 billion) still dominate, while most stablecoin supply tends to favor the Ethereum network, with a supply totaling $122 billion. Overall, in November, stablecoins facilitated a monthly (adjusted) transfer volume of $1.4 trillion.
Although the role of stablecoins as a medium of exchange and store of value in emerging economies has been widely explored, the practical utility of stablecoins in payment and financial services infrastructure has further accelerated with Stripe's acquisition of Bridge. In addition, 99% of stablecoins are pegged to the dollar, with Tether and Circle directly investing nearly $100 billion in US Treasuries, consolidating their position as key tools in maintaining the dollar's dominance globally.
Meanwhile, BlackRock entered the tokenization space by launching the BlackRock USD Institutional Digital Liquidity Fund (BUIDL), investing in cash and US Treasury bonds as dollar-equivalent assets. BUIDL's supply quickly reached $500 million, expanding the landscape for 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 cap growing from $91 million to $6 billion, making it the third-largest stablecoin, offering attractive yields to holders through 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 EU has implemented specific requirements for stablecoins under the Markets in Crypto-Assets (MiCA) regulation, which has begun to reshape the euro-pegged stablecoin industry.
Q4: Election Frenzy.
The 2024 US presidential election had a profound impact on the digital asset market, pushing BTC to surpass $100,000 for the first time. Dedicated tokens 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 election.
On the eve of the elections, we also witnessed the rise of prediction markets like Polymarket, which played a crucial role in gathering collective wisdom on election outcomes. At its peak, Polymarket's open contracts were valued at over $450 million. Although activity on the platform has since waned, it demonstrated the practicality and potential of information markets on public blockchains.
After the elections, market optimism surged, thanks to the government's supportive stance on cryptocurrencies, which was a stark contrast to the previous regulatory resistance from the SEC. The demand for ETFs and corporate bonds drove Bitcoin's rise, with MicroStrategy's holdings reaching 444,262 BTC, funded by its stock and convertible bond issuance. Institutional investors' interest in the derivatives market hit new highs, reflected in CME's Bitcoin futures open interest reaching a record $22.7 billion, while the total exceeded $52 billion, with option-based ETFs also being launched successively.
Despite strong momentum, the implementation and timeline of cryptocurrency-friendly policies remain uncertain. While there are clear signs that the regulatory environment will be more supportive of cryptocurrencies, including the appointment of cryptocurrency advocates to key positions like the SEC chair and crypto czar, the specific regulatory framework remains unclear. Market enthusiasm has also been tempered by expectations of interest rate cuts, leading participants to adopt a cautiously optimistic outlook for 2025.
Nevertheless, 2024 leaves us with a solid foundation: 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 as the interest rate cut cycle begins. As we enter the next year, please stay tuned for our 2025 cryptocurrency outlook report, where we will explore the key themes and trends that will influence the coming year.
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