2024 Crypto Market Review and Outlook: BTC ETF Approved, Trump Victorious, Solana Rising

1. Market Overview

1.1 Cryptocurrency Market Fundamentals

In 2024, the total market capitalization 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 in the first half of 2024 and the optimism brought by Trump's overwhelming victory in the second half of the year. Bitcoin's dominance rose to 56.8%, largely thanks to the doubling of the assets under management of 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 flat. Solana has performed well, with the SOL price rising by 29.3% and a net inflow of $2 billion into its ecosystem.

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

The market capitalization of stablecoins has increased by 26.8%, exceeding 205 billion USD. Looking ahead, the potential approval of ETFs for institutionally preferred assets like XRP and SOL is expected to bring positive catalysts to the market.

1.2 Macroeconomic Environment and Politics

Politics

In the 2024 U.S. presidential election in November, Trump is elected president again, and the Republican Party wins a majority in both houses of Congress. Trump's America First and isolationist policies bring uncertainty to the international situation. Trump was friendly towards cryptocurrency market policies during his campaign, but it remains to be seen whether he can truly make an impact.

The impact of the Russia-Ukraine war has significantly strengthened the discourse power of right-wing parties in Europe. Europe is more in a following state regarding policies in the cryptocurrency market, with the MiCA legislation set to be officially implemented by the end of 2024, clarifying the regulatory framework for stablecoins and cryptocurrency entities.

Geopolitics in Other Regions

Conflict continues in the Middle East as the Israel-Hamas conflict enters its final stages. The Argentine Milei government is implementing reforms that have reduced the overall inflation rate. Several South American countries are advancing legislation to allow for the legal regulation and circulation of cryptocurrencies.

Economy

In 2024, the global GDP growth rate is 2.6%, and the inflation rate is 2.5%. The U.S. economy is developing towards a stable landing. The Eurozone is experiencing slow economic growth due to the impact of geopolitical conflicts. China is facing challenges such as weak consumption and obstacles to exports. Emerging market countries are affected by the U.S. dollar interest rate hikes, with some countries experiencing severe depreciation of their local currencies.

The three major U.S. stock indexes all rose significantly, with technology companies performing exceptionally well. The Nikkei Index reached a 30-year high, benefiting from carry trades and export advantages.

2. Bitcoin

2.1 Product and Agreement Design

In the second half of 2024, there are some important software upgrades for Bitcoin, such as Bitcoin Core 28.0 introducing flexible transaction forwarding strategies and the BOLT12 for the Lightning Network. These upgrades may impact various application scenarios.

Discussions about the design of the Bitcoin protocol layer are ongoing, mainly focusing on soft fork proposals. The discussions are roughly divided into several camps: adding new opcodes, the LNHANCE proposal, and the "big script recovery movement." No consensus has yet been reached in the discussions, primarily revolving around the limitations and potential risks of specific proposals.

The implementation of BitVM is still progressing steadily, focusing on the design and implementation of cross-chain bridges. Some test versions of cross-chain bridges based on BitVM have begun to run.

2.2 Layer 2 - Lightning Network

The number of publicly accessible Lightning Network channels has not changed much, remaining at about 5000 BTC. The number of nodes has basically remained stable, but the number of channels continues to decrease.

The Lightning Network protocol and application ecosystem continue to develop. BOLT12 has been adopted by numerous clients and supports static payment methods. Some Layer 1 networks are developing Layer 2 solutions that conform to the BOLT specifications.

The main focus remains on evaluating the feasibility of business models. Service-oriented projects, especially those 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 perform unevenly. Some projects have seen a decline since their peak, while others continue to grow. The TVL of various Layer 2 projects shows a clear alternating trend.

The challenges faced by Bitcoin's second layer and BTCFi are multifaceted, with the key being the construction of a robust ecosystem to ensure lasting liquidity. The main driver for Bitcoin deposits into L2 solutions is the opportunity to obtain low-risk returns priced in Bitcoin.

The key to the success of Bitcoin L2 lies in: 1) ensuring asset security; 2) pursuing a vertical integration strategy.

2.4 On-chain Assets

On-chain assets of Bitcoin are generally divided into two categories: meta-protocols and CSV( client validation). Overall, these assets have not shown significant appreciation with the rise in Bitcoin prices, and their liquidity is relatively low.

BRC20, Runes, and other meta-protocol assets have performed poorly recently. RGB is still being promoted and has technical implementations supporting integration with the Lightning Network. Taproot Assets, launched by Lightning Labs, allows for minting stablecoins at lower fees and achieving instant settlement on Bitcoin.

For the on-chain asset sector, due to the insufficient experience and liquidity support of Bitcoin on-chain DEX, CEX is still important for such assets.

2.5 BTCFi

BTCFi can provide additional Bitcoin-denominated returns for Bitcoin holders, with an overall expectation of increased locked value. The type of returns pursued by BTC assets has shifted from L2 to staking, liquid staking, and liquid re-staking.

After several phases of controlled testing, Babylon attracted a large amount of TVL denominated in Bitcoin. Various LST projects have also emerged one after another to unlock liquidity and promote DeFi activities. The combinatorial development of these protocols has become more mature.

Protocols that can flexibly mobilize Bitcoin liquidity and support a richer array of asset classes will have a greater chance of success.

3. Ethereum

On July 23, 2024, the U.S. launched the ETH ETF, but its performance did not replicate the success of the Bitcoin ETF. The ETH/BTC ratio has dropped 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.

In December 2025, under a crypto-friendly Trump administration, Ethereum ETFs will experience their best performance. EVM remains the most dominant and active virtual machine in the ecosystem.

3.1 L2s

Since the Dencun upgrade, the transaction fees for rollups have decreased by over 90%, resulting in net inflows of $3.5 billion, $2.1 billion, and $1.7 billion for leading Layer 2s such as Base, OP Mainnet, and Arbitrum, respectively. The daily transaction volume of Layer 2 has increased from 5.18 million to 16.86 million, and the number of daily active addresses has risen from 989,000 to 2.18 million.

The significant capital inflow into Base can be attributed to several factors, including a seamless consumer experience, a strategic partnership with Coinbase, and the launch of popular consumer applications. The daily active user count has surged from 68,324 to 1.6 million.

Arbitrum ranks the highest in TVL. The launch of Arbitrum Stylus enables developers to write smart contracts using a variety of developer-friendly languages.

The OP Superchain continues to gain momentum, with the total number of chains based on OP-Stack reaching 56 by the end of the year, accounting for 43% of all L2/3 chains, while the transaction volume of the Superchain accounts for over 56% of all L2 transaction volume.

3.2 Re-staking

In 2024, the amount of staked Ethereum showed an overall upward trend, reaching a peak of 34.5 million coins by November 10, 2024; meanwhile, the yield continued to decline, dropping to 3% by the end of the year.

The re-staking protocol attracted a large amount of TVL, although its growth momentum weakened in the second half of 2024, with TVL decreasing from 5.11 million ETH to 4.44 million ETH by the end of the year.

The total locked value of Symbiotic ( TVL ) has seen significant growth, surging from $307 million to $2.12 billion, an increase of more than 5 times.

3.3 Ethereum Future Roadmap and EIP Proposals

2025 will be one of the most important years in the development history of Ethereum, as it plans to undergo a major upgrade - Pectra. This upgrade is expected to be completed in the first quarter of 2025. Here are several key EIP proposals:

• EIP-7691: Expand Blobs target capacity, reduce L2 costs
• EIP-7702: Implementing smart contract functionality for EOA accounts
• EIP-7251: Optimize validator management, reduce network load

The long-term development roadmap for Ethereum aims for a major upgrade in 2029, introducing core technologies such as zero-knowledge proofs and post-quantum cryptography.

Ethereum is currently in a state of net inflation. In the future, adjustments need to be made to the issuance curve of staking rewards, while attracting high-throughput applications to run on its platform.

Other Infrastructure

• Sorter: The concept of decentralized shared sorting aims to enhance network resilience and redistribute value capture.

• Data Availability and Modular Blockchains: The data availability track is still dominated by Ethereum Blobs, Celestia, Avail, and EigenDA. The demand for data availability solutions continues to grow.

• Intent and Chain Abstraction: The Chain Abstraction Coalition was established last year, with members including over 60 blockchains. Particle Network and Xion respectively launched Universal Accounts and Meta Accounts.

• AI agents and intent-driven DeFi trading: As the reasoning capabilities of large language models improve, this field is rapidly innovating, bringing new breakthroughs to the DeFi trading experience.

4. Solana

In 2024, the price of Solana is expected to increase by about 75%, with the SOL/ETH ratio rising from 0.04 to 0.06. Leveraging its unique SVM architecture, Solana offers lower transaction fees and higher throughput. The market capitalization of stablecoins has grown more than three times, reaching $5.1 billion.

In 2024, the focus of the Solana ecosystem will mainly be on areas such as DePIN, meme, and PayFi.

DePIN

Projects like Helium and Render Network are migrating to the Solana network. io.net, as one of the most influential computing power projects of 2024, has a fully diluted valuation exceeding $4.8 billion.

Meme

Pump.fun has achieved great success, with various memecoins contributing significant trading volume on Solana. GMGN.ai offers more direct features such as Pump.fun line chart services, address tracking, and more.

PayFi

PayFi integrates the efficient programmability of crypto payments, low friction of transaction lending, and composability of DeFi with the unique advantages of Web3. Solana Pay can be used as an integration plugin option in stores supported by Shopify.

Looking Ahead

Firedancer activation will further enhance network performance and security. The Solana plugin offers higher granularity, greater flexibility, and stronger programmability. Future focus:

• Solana itself: SOL ETF may be launched, Firedancer client goes live.
• Solana