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2024 crypto market review: Bitcoin ETF approved, Solana ecosystem exploded, AI empowered Web3
1. Market Overview
1.1 Cryptocurrency Market Fundamentals
In 2024, the total market value of the cryptocurrency market increased from $2.31 trillion to $3.33 trillion, a rise of 44.2%. This growth is attributed to the approval of spot Bitcoin ETFs and the favorable policy environment following Trump's victory. Bitcoin's dominance rose from 53.4% to 56.8%, and the asset management scale of ETFs doubled. Ethereum ETFs performed modestly, with the ETH/BTC ratio declining. Solana showed impressive performance, with SOL prices rising by 29.3% and a net inflow of $2 billion into the ecosystem.
The total locked value in DeFi has doubled, the DEX/CEX trading volume ratio has increased from 9.37% to 11.05%, and the annual trading volume reached 2.67 trillion USD. Solana and Base's DeFi TVL market shares have reached 7.17% and 3%, respectively. The market capitalization of stablecoins has grown by 26.8%, surpassing 205 billion USD. The potential approval of ETFs for XRP and SOL is expected to have a positive impact.
1.2 Macroeconomic Environment and Politics
Politics
In November 2024, Trump is re-elected as President of the United States, and the Republican Party wins a majority in Congress. Trump's America First policy may trigger global trade protectionism. His crypto-friendly policies are expected to promote industry development, but the actual policies still need to be observed.
Europe is influenced by the Russia-Ukraine war, with the discourse power of right-wing parties strengthening. Limiting immigration and economic isolation have become major topics. Europe is in a follower state regarding cryptocurrency policies, and the MiCA legislation has clarified the regulatory framework.
The situation in the Middle East is tense, and the conflict between Israel and Hamas is coming to an end. Several countries in South America are advancing the legalization of cryptocurrencies.
Economy
The global GDP growth rate in 2024 is 2.6%, with an inflation rate of 2.5%. Inflation in the United States has been brought under control, with consecutive interest rate cuts starting in September. The Eurozone is experiencing slow economic growth due to geopolitical conflicts. China is facing challenges such as weak consumption and export obstacles. Emerging market countries are affected by the U.S. dollar interest rate hikes, with some countries experiencing severe currency depreciation.
The three major U.S. stock indexes surged significantly, with technology stocks performing exceptionally well. The development of AI is disrupting multiple sectors and enhancing productivity. The Nikkei index reached a 30-year high, benefiting from carry trades and the depreciation of the yen.
2. Bitcoin
2.1 Product and Agreement Design
In the second half of 2024, there will be important software upgrades for Bitcoin, such as Bitcoin Core 28.0 introducing a flexible transaction forwarding strategy and the Lightning Network launching BOLT12. V3 transactions will support zero-fee forwarding, which may impact the MEV-related business models of mining pools.
The discussion on the soft fork proposal continues, mainly divided into adding new operation codes ( such as OP_CTV, OP_CAT), improving the Lightning Network with LNHANCE, and the "Big Script Recovery Movement" among others. There has not yet been a consensus, and progress may be made in 2025.
BitVM is making steady progress, with a focus on the design and implementation of cross-chain bridges. Some test versions of cross-chain bridges based on BitVM have begun to operate.
2.2 Layer 2 - Lightning Network
The number of Lightning Network channels has not changed significantly, with a total of about 5000 BTC. The number of nodes is stable, but the number of channels has decreased, which may indicate liquidity concentration or early channel closures.
BOLT12( offer ) has been adopted by multiple clients, supporting static payment methods. Some Layer 1 networks are developing Layer 2 solutions compatible with the BOLT specification.
The feasibility of the business model remains a focus of attention. Projects utilizing the Lightning Network as a settlement layer for cross-border transactions may receive more attention. Future development depends on the issuance of stablecoins on the Lightning Network.
2.3 Layer 2 - Side Chains
Layer 2 sidechains exhibit uneven performance, with TVL showing an alternating trend. BTCFi faces the challenge of relying on unsustainable incentives and needs to build a robust ecosystem to ensure lasting liquidity. The main driver for depositing Bitcoin into L2 is to obtain low-risk returns.
The key to the success of L2 lies in ensuring asset security and pursuing a vertical integration strategy.
On-chain Assets 2.4
On-chain assets of Bitcoin have not significantly appreciated in value with the rise in Bitcoin prices and have low activity. Assets of meta-protocols like BRC20 and Runes are performing poorly and are being replaced by new Meme and AI agent narratives.
RGB is being promoted, with technical implementation integrated with the Lightning Network. Taproot Assets is launched by Lightning Labs, and Tether will issue stablecoins based on it.
The development of on-chain asset tracks is limited by the DEX experience and insufficient liquidity. CEX remains important but may pose challenges for the integration of new asset types.
2.5 BTCFi
BTCFi provides additional income for Bitcoin holders and is expected to grow with the improvement of infrastructure. The types of income are shifting from L2 to staking, liquid staking, and liquid restaking. Babylon attracts a large amount of TVL, and various LST projects are emerging.
BTCFi is facing issues such as the Solv controversy and TVL calculation methods. The focus in the future is to find efficient ways to utilize staked assets. Protocols that can flexibly mobilize Bitcoin liquidity and support a wider range of asset categories are more likely to succeed.
3. Ethereum
The ETH ETF launched in July 2024 did not perform as expected, with the ETH/BTC ratio dropping from 0.054 to 0.037. Layer 2 gas fees are lower than Ethereum, leading to capital flowing into projects like Base. Ethereum saw a net outflow of nearly $8 billion.
At the end of the year, the ETH ETF showed improved performance driven by crypto-friendly policies. EVM remains the most dominant virtual machine, with developers continuously building EVM-compatible networks and applications. Ethereum and the EVM ecosystem are expected to maintain their dominant position in 2025.
3.1 L2s
After the Dencun upgrade, rollup transaction fees have decreased by over 90%. Base, OP Mainnet, and Arbitrum achieved net inflows of $3.5 billion, $2.1 billion, and $1.7 billion respectively. Daily transaction volume on Layer 2 increased by 325%, and the number of daily active addresses rose to 2.18 million.
The inflow of Base funds is attributed to consumer experience, collaboration with Coinbase, and the launch of popular applications. Daily active users reached 1.6 million, and the activity level in DeFi has significantly increased.
Arbitrum launched Stylus, supporting multiple programming languages for writing smart contracts. Future plans include multi-client support, adaptive pricing, and more.
OP Superchain continues to grow, with 56 chains based on the OP-Stack. The number of active developers has increased to 3,446.
Layer 2 networks are expected to see increased competition by 2025, each vying for network effects with unique value propositions.
3.2 Re-Staking
The amount of staked Ethereum reached 34.5 million coins, with the yield dropping to 3%. The re-staking protocol attracted a large TVL, but the growth momentum has weakened. Symbiotic's TVL increased more than fivefold, reaching 2.12 billion dollars.
The future development depends on the introduction of reduction mechanisms and the balance of flexibility.
3.3 Ethereum's Future Roadmap and EIP Proposals
The 2025 Pectra upgrade plan is scheduled for completion in the first quarter, including several key EIPs:
The long-term roadmap aims for a major upgrade in 2029, introducing zero-knowledge proofs and post-quantum cryptography.
Ethereum needs to adjust the staking reward issuance curve to attract high-throughput applications and create greater value for holders.
Other Infrastructure
Sorter: The decentralized shared sorting concept is attracting attention, with Metis leading the way. Multiple Rollup plans for decentralized sorters.
Data availability: Demand continues to grow, with Celestia, Avail, EigenDA, etc. occupying the market. Ethereum's long-term vision provides a low-cost DA solution.
Intent and Chain Abstraction: The Chain Abstraction Coalition was established to promote the adoption of chain abstraction solutions. The ERC-7683 proposal was launched to support shared liquidity layers.
AI Agents and Intent-Driven DeFi Trading: The combination of large language models and AI agent technology brings new breakthroughs to DeFi trading.
4. Solana
In 2024, Solana performed excellently, with a price increase of 75% and the SOL/ETH ratio rising to 0.06. Leveraging the advantages of the SVM architecture, it attracted multiple high-performance applications. The market cap of stablecoins grew more than threefold, reaching $5.1 billion. The number of new developers surpassed Ethereum.
The Solana ecosystem focuses on areas such as DePIN, Meme, and PayFi:
DePIN Projects like Helium and Render Network are migrating to Solana, bringing a strong user base. In 2024, several notable projects such as Hivemapper and Cudis are emerging.
Meme Memecoins are thriving on Solana, with Pump.fun becoming an important launch platform. Various tools and analysis platforms have emerged, such as GMGN.ai and Solana Early Birds.
PayFi Integrating the advantages of crypto payments and DeFi, Solana Pay serves as an important infrastructure. It expands payment channels in collaboration with Shopify, VISA, and others.
Looking to the Future Firedancer activation will further enhance network performance. The Solana plugin provides more flexible token issuance capabilities. Factors such as the potential approval of ETFs, growth of stablecoins, and institutional adoption will drive ecological development.
Stay tuned:
5. Alt-L1s
In 2024, Alt-L1 continues to receive attention, competing with Ethereum in terms of ecosystem activity, latency, throughput, and transaction fees. Emerging Alt L1s worth noting include:
Berachain Introducing the Proof of Liquidity ( PoL ) mechanism, the BeaconKit module is EVM compatible. Before launch, the TVL exceeded 1.5 billion USD, and after launch, it jumped to become the eighth largest network.
TON Relying on Telegram's 900 million monthly active users, it attracted significant attention in 2024. Daily active users increased to 293,539, and DeFi TVL grew over 10 times. However, after Q4, attention declined, and it is necessary to explore innovative channels to attract users.
Kaia Created by the merger of Klaytn and Finschia, integrating LINE and KakaoTalk. Provides account abstraction, gas fee proxy payment, and other optimization measures. Launched the Kaia Wave program to promote ecological prosperity.
Move The number of monthly active developers has increased to over 1,500. Sui outperforms Aptos in several metrics, focusing on crypto-native applications. Aptos focuses on institutional directions such as RWA tokenization, stablecoins, and BTCFi.
MegaETH EVM compatible, with 100,000 TPS and millisecond-level block time. Transaction throughput and computing power limitations are addressed through node specialization.
Monad Optimized performance through MonadBFT and MonadDB, supporting asynchronous I/O. Supports up to 10,000 transactions per second, 1-second block time, and finality.
In 2025, these Alt-L1s are expected to gain a larger market share, each competing with unique value propositions.
6. Its