2024 Crypto Market Review and Outlook: Bitcoin ETF Approved, Solana Rises, DeFi Continues to Rise

1. Market Overview

I.1 Cryptocurrency Market Fundamentals

In 2024, the total market value of the cryptocurrency market grew from $2.31 trillion to $3.33 trillion, an increase of 44.2%. This growth was driven by key events such as the approval of spot Bitcoin ETFs and Trump's election victory. Bitcoin's dominance rose to 56.8%, primarily due to the doubling of ETF assets under management, reflecting increased interest from institutional investors.

The performance of the Ethereum ETF is relatively subdued, with a clear preference for Bitcoin among institutions. 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 is expanding, with the total locked value ( TVL ) increasing more than double. The ratio of DEX/CEX trading volume has risen from 9.37% to 11.05%, with an annual trading volume reaching $2.67 trillion. Solana and Base have both more than doubled their market share in DeFi TVL, reaching 7.17% and 3% respectively.

The market capitalization of stablecoins has grown by 26.8%, exceeding $205 billion, with new entrants like Ethena further driving growth. The potential approval of ETFs for assets like XRP and SOL in the future will have a positive impact.

I.2 Macroeconomic Environment and Politics

Politics

Trump wins the U.S. election, and the Republican Party gains a majority in both houses. Trump's policies may bring uncertainty to the international situation. Whether his crypto-friendly policies can be implemented remains to be seen.

Europe is affected by the Russia-Ukraine war, leading to a rise in right-wing party influence. Europe's crypto policies are in a following state, and the MiCA legislation clarifies the regulatory framework.

The Middle East is engulfed in continuous warfare, with multiple conflicts between Israel and Hamas and others. Argentina's Milei is implementing reforms, and many South American countries are advancing the legalization of crypto.

Economy

Global GDP growth rate is 2.6%, and the inflation rate is 2.5%. The United States has started to cut interest rates, and the economy is moving towards a stable landing. The Eurozone is experiencing slow economic growth due to geopolitical conflicts. China faces challenges such as sluggish consumption and export obstacles. Emerging market countries are affected by the U.S. dollar interest rate hikes, with some countries experiencing severe depreciation of their local currencies.

The US stock market performed strongly, with the Nasdaq rising over 28%. The development of AI is disrupting multiple fields and enhancing productivity. The Nikkei index has reached a 30-year high, benefiting from carry trade and export advantages.

2. Bitcoin

2.1 Product and Protocol Design

In the second half of 2024, Bitcoin will have important software upgrades, such as Bitcoin Core 28.0 introducing flexible transaction forwarding strategies, Lightning Network BOLT12, etc. These upgrades will impact applications related to mining pool MEV business models.

The discussion on protocol layer design focuses on soft fork proposals, mainly including the addition of new opcodes, improvements to the Lightning Network with LNHANCE, and the "Big Script Recovery Movement" among other directions. The discussion has not yet reached a consensus, involving considerations of functionality emphasis, flexibility, security, and other aspects.

The process of activating future soft forks may encounter disputes, and some consensus and development are expected to be seen in 2025. The implementation of BitVM is still underway, 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 much, with a total of about 5000 BTC. The number of nodes is basically stable, and the decrease in channel numbers may indicate liquidity concentration or early channel closures.

The protocol and application ecosystem continue to develop, with BOLT12 being widely adopted. Some Layer 1 networks are developing Layer 2 solutions compatible with the Lightning Network.

The focus remains on assessing the feasibility of business models. Service-oriented projects, especially those using 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 show varying performance. TVL exhibits an alternating trend. Challenges include reliance on unsustainable TVL spikes and airdrop incentives.

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

On-chain Assets

The overall performance of on-chain Bitcoin assets is poor, with low activity. BRC20, Runes, and other meta-protocol assets perform worse than popular meme assets.

RGB is still being promoted, and there is a technical implementation for integration with the Lightning Network. Taproot Assets enables low-cost minting of stablecoins, and Tether has announced that it will issue stablecoins based on it.

On-chain asset tracks face challenges such as insufficient DEX experience and liquidity, while CEX remains important.

2.5 BTCFi

BTCFi can provide additional returns for Bitcoin holders, and the overall locked value is expected to grow. The yield path shifts from L2 to staking, liquid staking, and liquid restaking.

Babylon attracts a large amount of TVL as a cornerstone. Various LST projects have emerged, drawing on mature DeFi concepts. The combinatorial development is becoming more mature, but recent controversies have cast a shadow over the BTCFi starting in 2025.

Protocols that can more flexibly mobilize Bitcoin liquidity and support a richer variety of asset classes are more likely to achieve success.

3. Ethereum

Despite the launch of the ETH ETF, its performance is inferior to that of the Bitcoin ETF. The ETH/BTC ratio has dropped to 0.037, highlighting institutions' preference for Bitcoin. Layer 2 gas fees are lower than those of Ethereum, leading to capital inflow into projects like Base.

EVM remains the most dominant virtual machine, encouraging developers to continuously build EVM-compatible networks and applications. It is expected that Ethereum and the EVM ecosystem will maintain their dominant position in 2025.

3.1 L2s

After the Dencun upgrade, rollups transaction fees decreased by over 90%. Daily transaction volume on Layer 2 increased by 325%, and daily active addresses grew by 120%. The significant influx of funds into Base is attributed to a smooth user experience, collaboration with Coinbase, and the launch of popular applications.

Arbitrum has launched Stylus, which supports writing smart contracts in multiple languages. The future roadmap includes multi-client support, adaptive pricing, and more.

OP Superchain continues to grow, with the total number of chains based on OP-Stack reaching 56. The number of developers has increased from 900 to 3446.

The L2 network is expected to further integrate and enhance user engagement, becoming an important competitor to alt-L1 networks.

3.2 Re-staking

The amount of staked Ethereum has generally increased, while the yield has dropped to 3%. Users are seeking alternative yields through liquidity provision or lending. The TVL of the re-staking protocol has decreased from 5.11 million ETH to 4.44 million ETH.

Symbiotic's TVL has seen a significant increase, rising from $307 million to $2.12 billion.

The future catalytic factors depend on the introduction of reduction mechanisms and the flexibility provided to AVS, stakers, and node operators.

3.3 Ethereum Future Roadmap and EIP Proposals

The 2025 Pectra upgrade plan is scheduled to be completed in the first quarter, including several key EIP proposals:

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

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

Ethereum needs to adjust the staking reward issuance curve in the future to attract high-throughput applications and create greater value for holders.

4. Solana

In 2024, Solana performed exceptionally well, with a price increase of 75%. The SOL/ETH ratio rose to 0.06. Its unique SVM architecture offers low fees and high throughput, attracting multiple innovative applications.

The development of DeFi includes the launch of cbBTC, PYUSD incentive activities, and more. The market value of stablecoins has grown more than three times, reaching $5.1 billion. Developer adoption has significantly increased, with the number of new developers surpassing that of other blockchains. Institutional adoption has also risen, in collaboration with Shopify and Visa.

In 2024, the focus of the Solana ecosystem will mainly be on DePIN, meme, PayFi, and other areas:

DePIN

Helium and Render Network migrate to Solana, leveraging low fees and high TPS advantages to drive development. Emerging DePIN projects such as Hivemapper and Cudis are emerging.

Meme

The Memecoin era has arrived, with platforms like Pump.fun achieving tremendous success. The weekly DEX trading volume for Solana/Ethereum has increased from 48.85% to 137.47%. Data analysis platforms such as GMGN.ai offer more features.

PayFi

Integrate the advantages of crypto payment's high efficiency and programmability, as well as DeFi's low friction. Solana Pay is used as an integrated plugin on Shopify and collaborates with VISA to open offline payment channels.

Looking to the future

Firedancer activation will further enhance network performance. The Solana plugin offers greater flexibility. The approval potential of ETFs, growth of stablecoins, and institutional adoption will bring positive catalysts.

5. Alt-L1s

Berachain

Introducing the Proof of Liquidity ( PoL ) mechanism, the BeaconKit modular consensus client is compatible with EVM. Before launch, the TVL exceeded $1.5 billion, and after launch, it became the eighth largest network by TVL.

TON

With a base of 900 million monthly active users on Telegram. Daily active users increased from 27,725 to 293,539, and DeFi TVL grew more than 10 times. Future growth depends on closer collaboration with Telegram.

Kaia

Merged from Klaytn and Finschia, integrating LINE and KakaoTalk. Provides optimizations such as account abstraction and gas fee proxy payments. TVL increased from $37 million to $60 million. Launched the Kaia Wave plan to promote ecological prosperity.

Move

The number of monthly active developers has increased to over 1,500. Sui outperforms Aptos on several metrics, with a net inflow of $1.2 billion in 2024. The market capitalization of stablecoins has grown significantly, and DEX trading volume has risen. Aptos' TVL has increased 8 times, and the market capitalization of stablecoins has grown 12 times.

Movement launched the Move-based Ethereum scaling solution M2, providing a modular toolkit.

MegaETH

EVM compatible, with a throughput of 100,000 TPS. Introduces a specialized node architecture to optimize performance. Focuses on real-time transaction processing and state synchronization.

Monad

Achieve high performance through optimistic parallel transaction execution. The MonadBFT consensus mechanism reduces latency, and MonadDB optimizes data storage. Supports asynchronous I/O to improve throughput.

Competitive Landscape

The narrative in 2024 is no longer limited to the competition between Ethereum and Solana. More alternative L1 projects are expected to gain a larger market share in 2025.

6. Other Tracks

6.1 Meme

The overall increase in the Meme sector is 218%. Ethereum, Base, and Solana are the most active. Pump.fun launched as a milestone, greatly releasing retail demand. The Base ecosystem's Meme trends towards AI themes. New tools such as Kaito and Photon are emerging.

6.2 AI

From infrastructure to the explosion of agents, covering the upstream and downstream industries of AI. The Virtuals Protocol successfully transformed to catalyze the explosion of agents. Agent functionalities cover multiple areas such as social media bots, on-chain execution, and more.

![From macro environment to