A Comprehensive Review of the Crypto Market in the Second Half of 2024 from Macro Environment to Vertical Tracks

1. Market Overview

I.1 Crypto Market Fundamentals

The cryptocurrency market has experienced significant growth since the first half of 2024, with the total market capitalization increasing from $2.31 trillion to $3.33 trillion, a rise of 44.2%. This growth is primarily attributed to the approval of the spot Bitcoin ETF in the first half of 2024, as well as Donald Trump's victory in the U.S. elections in the second half of the year, which injected optimism into the industry with his deregulation and pro-encryption policies. Bitcoin's dominance rose to 56.8%, mainly due to the doubling of assets under management in Bitcoin ETFs, reflecting increased interest from institutional investors.

Despite the launch of the Ethereum ETF in the second half of 2024, its performance has been relatively lackluster. Solana has performed impressively, with the SOL price rising by 29.3% since the first half of 2024, and its ecosystem seeing a net inflow of $2 billion in 2024.

The share of the DeFi market continues to expand, with the total value locked (TVL) growing more than double since the beginning of the year. The ratio of DEX/CEX trading volume has increased from 9.37% at the beginning of the year to 11.05% by the end of the year, with an annual trading volume reaching $2.67 trillion. Solana and Base have more than doubled their DeFi TVL market shares in 2024, reaching 7.17% and 3%, respectively.

Stablecoins have seen significant acceleration, with a market capitalization growth of 26.8% from H1 2024, reaching a historical high of over $205 billion. New entrants like Ethena have further driven this trend with competitive yields. Looking ahead, the potential approval of ETFs for other institution-preferred assets like XRP and SOL will bring positive catalysts to the market.

I.2 Macroeconomic Environment and Politics

Politics

In the November 2024 U.S. election, Trump defeats Harris to be re-elected president, and the Republican Party wins a majority in both houses of Congress. Trump's America First and isolationist policies may trigger global trade protectionism. Trump had a friendly attitude towards the crypto market during his campaign, but the actual effects of his policies remain to be seen.

Europe is affected by the Russia-Ukraine war, with rising energy prices and increased military spending. The influence of right-wing parties has significantly strengthened in multiple countries. Europe is following the United States in cryptocurrency regulation, officially implementing the MiCA legislation by the end of 2024, which clarifies the regulatory framework for stablecoins and cryptocurrencies.

The situation in the Middle East is turbulent, with the conflict between Israel and Hamas entering its final stages, but relations with countries like Iran and Lebanon remain tense. Several countries in South America are advancing the legalization of crypto, while Argentina's new government is implementing large-scale reforms to reduce the inflation rate.

economy

In 2024, the global GDP growth rate is 2.6%, and the inflation rate is 2.5%. The US economy lands smoothly, with inflation partially controlled, and the Federal Reserve begins to cut interest rates three times in a row starting in September. The Eurozone experiences slow economic growth due to geopolitical conflicts. China faces challenges such as weak consumption and export obstacles, entering a state of deflation. Emerging market countries are affected by the US dollar interest rate hikes, with some countries experiencing severe depreciation of their local currencies.

The three major U.S. stock indices surged, with the Nasdaq rising over 28% and the S&P 500 increasing by 15.2%. The development of AI technology has become an important driving force, with AI tech companies represented by Nvidia performing impressively. The Nikkei index reached a new high in over 30 years, benefiting from carry trades by international investors and the export advantages brought about by the depreciation of the yen.

2. Bitcoin

2.1 Product and Protocol Design

In the second half of 2024, Bitcoin underwent some important software upgrades, such as Bitcoin Core 28.0 which introduced flexible transaction forwarding strategies and the BOLT12 for the Lightning Network. The community is discussing the soft fork proposals, mainly focusing on new opcodes (such as OP_CTV and OP_CAT), the LNHANCE scheme, and the "big script recovery movement". There has not yet been a consensus in the discussions, and progress is expected in 2025. The implementation of BitVM is still progressing steadily, with a focus on the design and implementation of cross-chain bridges.

2.2 Layer 2 - Lightning Network

The number of Lightning Network channels has not changed significantly, maintaining a total of about 5000 BTC. The number of nodes is basically stable, but the number of channels continues to decrease, which may indicate that liquidity is gradually concentrating in the hands of large node service providers. BOLT12 (offer) has been adopted by many clients, supporting static payment methods. Some Layer 1 networks (such as Nervos CKB) are developing Layer 2 solutions that comply with the BOLT specifications.

2.3 Layer 2 - Side Chains

The performance of various Layer 2 projects is uneven. The main challenges faced by Bitcoin L2 and BTCFi are reliance on unsustainable TVL surges and airdrop incentives. The key to success lies in ensuring asset security and pursuing a vertical integration strategy.

2.4 On-chain Assets

The overall performance of on-chain Bitcoin assets is mediocre. The performance of meta-protocol assets such as BRC20 and Runes is poor. The RGB protocol is still being promoted, focusing mainly on the issuance of Tether stablecoins. Taproot Assets, launched by Lightning Labs, enables low-cost minting of stablecoins and instant settlement on Bitcoin.

2.5 BTCFi

BTCFi can provide additional returns for Bitcoin holders, and the overall locked asset value is expected to grow. After testing, Babylon has attracted a large amount of TVL. Various LST projects have emerged, drawing on mature DeFi design concepts. The key to BTCFi's future development lies in finding efficient ways to utilize and circulate staked assets.

3. Ethereum

Despite the launch of the ETH ETF in the United States on July 23, 2024, its performance has not been able to replicate the success of the Bitcoin ETF. The ETH/BTC ratio has decreased from 0.054 in January to 0.037 in December. Since the Dencun upgrade, gas fees on Layer 2 have been significantly lower than on Ethereum, leading to more funds flowing into Layer 2 projects.

3.1 L2s

Since the Dencun upgrade, the transaction fees for rollups have decreased by more than 90%. Base, OP Mainnet, and Arbitrum have achieved net inflows of $3.5 billion, $2.1 billion, and $1.7 billion respectively. The daily transaction volume of Layer 2 has grown from 5.18 million transactions to 16.86 million transactions, and the number of daily active addresses has increased from 989,000 to 2.18 million.

The significant inflow of funds into Base can be attributed to a smooth consumer experience, strategic partnerships with Coinbase, and the launch of popular consumer applications. Arbitrum has launched Stylus, allowing developers to write smart contracts in multiple languages. The OP Superchain continues to grow, with the total number of chains based on OP-Stack reaching 56 by the end of the year.

3.2 Re-staking

In 2024, the overall amount of staked Ethereum showed an upward trend, with the yield dropping to 3%. Re-staking protocols (such as Eigenlayer) attracted a large amount of TVL, but the growth momentum weakened in the second half of 2024. Symbiotic's TVL saw significant growth, increasing from $307 million to $2.12 billion.

3.3 Ethereum Future Roadmap and EIP Proposals

The year 2025 will be one of the most important years in the development of Ethereum, with plans for the Pectra upgrade. Key EIP proposals include EIP-7691 (expanding Blobs capacity), EIP-7702 (EOA account smart contract functionality), and EIP-7251 (optimizing validator management). The long-term development roadmap aims for a major upgrade in 2029, introducing core technologies such as zero-knowledge proofs and post-quantum cryptography.

4. Solana

In 2024, Solana performed exceptionally well, with a price increase of approximately 75%, and the SOL/ETH ratio rising from 0.04 to 0.06. Solana offers lower transaction fees and higher throughput, attracting many high-performance decentralized applications. The market capitalization of stablecoins grew more than threefold, reaching $5.1 billion. Solana achieved significant growth in developer adoption, and its partnerships with Shopify and Visa further strengthened network growth.

In 2024, the focus of the Solana ecosystem will mainly be on DePIN, memes, and PayFi. Looking ahead, the activation of Firedancer will further enhance network performance and security. The release of Solana plugins provides greater flexibility and programmability for token issuance.

5. Alt-L1s

Berachain

Berachain introduces a Proof of Liquidity (PoL) mechanism to ensure incentive alignment among validators, dApps, and users. The BeaconKit modular consensus client is EVM-compatible and offers features such as single-slot finality and optimistic payload construction. After its launch, Berachain has risen to become the eighth largest network by TVL.

TON

TON has attracted a lot of attention in 2024 with over 900 million monthly active users on Telegram. The game Catizen has reached 4.7 million monthly active users. The daily active users of TON have grown from 27,725 to 293,539, and the DeFi TVL has increased more than tenfold since the beginning of 2024.

Kaia

Kaia is formed by the merger of the Klaytn and Finschia blockchains, integrating two major messaging applications, LINE and KakaoTalk. Kaia offers optimizations such as account abstraction support, gas fee proxy payments, and keyless MPC wallets. Since its independent launch online, the TVL has grown from 37 million USD to 60 million USD.

Move

The Move ecosystem gained wider adoption in 2024, with the number of monthly active developers increasing to over 1,500. Sui and Aptos are the main Move blockchains, with Sui outperforming Aptos in several key metrics. The Movement Network launched M2, an Ethereum scaling solution based on the Move language.

MegaETH

MegaETH is a high-performance blockchain compatible with EVM, addressing the limitations of transaction throughput and computational power through node specialization. Its innovative architecture optimizes overall performance while maintaining decentralization.

Monad

Monad achieves optimistic parallel transaction execution across multiple EVM instances while maintaining compatibility with Ethereum bytecode. Its custom consensus mechanism, MonadBFT, reduces latency and improves transaction confirmation speed. Monad also integrates a proprietary database, MonadDB, to optimize data storage.

6. Other tracks

6.1 Meme

In 2024, the overall increase in the Meme sector reached 218%. Ethereum, Base, and Solana are the three most active public chains in the Meme ecosystem. The launch of Pump.fun has become a milestone in the encryption industry, greatly releasing retail demand. The Meme in the Base ecosystem is more inclined towards AI themes, such as the success of Virtuals Protocol.

6.2 AI

The AI field is one of the hottest areas in 2024. Agents + applications have become the main development direction, and the successful transformation of the Virtuals Protocol has catalyzed this trend. AI agents cover multiple areas including social media bots, on-chain execution, and VC agents.

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