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

1. Market Overview

I.1 Crypto Market Fundamentals

In 2024, the total market capitalization of the crypto market grew from $2.31 trillion to $3.33 trillion, an increase of 44.2%. This growth is attributed to several key milestones, including the approval of the spot Bitcoin ETF in the first half of 2024, as well as new government regulatory relaxations and pro-crypto policies in the second half of the year. Bitcoin's dominance rose to 56.8%, largely thanks to the doubling of assets under management for the Bitcoin ETF, 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 remarkably, with the SOL price rising by 29.3% since the first half of 2024, and its ecosystem seeing a net inflow of 2 billion dollars in 2024.

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

Stablecoins have experienced significant acceleration, with a market capitalization growth of 26.8%, surpassing $205 billion. New entrants like Ethena have further fueled this trend with competitive yields. The potential approval of ETFs for other institutionally preferred assets like XRP and SOL will provide a positive catalyst for the market.

I.2 Macroeconomic Environment and Politics

politics

In the 2024 U.S. elections in November, Trump is re-elected as president, and the Republican Party wins a majority in both houses of Congress. The Trump administration will gain greater discourse power and executive strength, and its America First and isolationist policies may bring uncertainty to the international situation. Trump has a friendly attitude towards the crypto market during his campaign, but the actual policy effects still need to be observed.

Europe is affected by the Russia-Ukraine war, energy prices are rising, and military expenditures are increasing. The discourse power of right-wing parties has clearly strengthened. Europe is more in a following state regarding encryption policies, and the MiCA, which will be implemented by the end of 2024, clarifies the regulatory framework for stablecoins and cryptocurrencies.

Geopolitics in Other Regions

The situation in the Middle East is tense, and the conflict between Israel and Hamas is entering its final stages. Several countries in South America are advancing the legalization of Bitcoin.

Economy

In 2024, global GDP growth is expected to be 2.6%, with an inflation rate of 2.5%. Inflation in the United States has been partially controlled, leading to three consecutive interest rate cuts starting in September 2024. The Eurozone is experiencing slow economic growth due to the impact of geopolitical conflicts. China is facing issues such as sluggish consumption and hindered exports. Emerging market countries are severely impacted by the dollar's interest rate hikes, with some countries experiencing significant depreciation of their local currencies.

The three major U.S. stock indexes surged, with the Nasdaq rising over 28%. The AI industry performed remarkably well, with large models like ChatGPT having disruptive applications in multiple fields. The Nikkei index reached a new high in over 30 years, benefiting from carry trades and the depreciation of the yen.

2. Bitcoin

2.1 Product and Protocol Design

In the second half of 2024, Bitcoin will have some important software upgrades, such as Bitcoin Core 28.0 introducing flexible transaction forwarding strategies and the Lightning Network launching BOLT12. Discussions about protocol layer design are ongoing, primarily focusing on soft fork proposals including OP_CTV, OP_CAT, LNHANCE, etc. There has yet to be a consensus in the discussions, and progress is expected in 2025.

The implementation of BitVM is progressing steadily, with the current focus on the design and implementation of cross-chain bridges. Some test versions of cross-chain bridges based on BitVM have already started running.

2.2 Layer 2 - Lightning Network

The total number of open channels in the Lightning Network remains around 5000 BTC. The number of nodes is basically stable, but the number of channels continues to decrease. BOLT12(offer) has been adopted by many clients. Some Layer 1 networks are developing Layer 2 solutions that comply with BOLT specifications.

The main focus is on assessing the feasibility of business models. Service-oriented projects, particularly 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 exhibit uneven performance. The challenges faced by Bitcoin L2 include reliance on unsustainable spikes in TVL and airdrop incentives. Building a robust ecosystem to ensure lasting liquidity is key. Protocols that can more flexibly mobilize Bitcoin liquidity and support a wider range of asset classes will have a better chance of success.

2.4 On-chain Assets

On-chain assets of Bitcoin have not shown significant appreciation along with the rise in Bitcoin prices. Assets under meta-protocols like BRC20 and Runes have performed poorly. RGB is still being promoted recently, with some technical implementations supporting integration with the Lightning Network. Taproot Assets was launched by Lightning Labs, and Tether has announced that it will issue stablecoins based on it.

For the on-chain asset track, CEX may face certain difficulties in integrating new asset types.

2.5 BTCFi

BTCFi can provide additional returns for Bitcoin holders, with the overall locked value expected to grow. Staking, liquid staking, and liquid re-staking have driven the growth of various BTCFi projects. Babylon has attracted a large amount of TVL denominated in Bitcoin. Various LST projects have emerged, drawing on mature DeFi design concepts.

The key to future development lies in finding efficient methods for utilizing and circulating pledged assets. Protocols that can more flexibly mobilize Bitcoin liquidity and support a richer variety of asset classes will have a greater chance of success.

3. Ethereum

Despite the launch of the ETH ETF on July 23, 2024, its performance has not been able to replicate the success of the Bitcoin ETF. The ETH/BTC ratio fell 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, rollups transaction fees have decreased by over 90%. Base, OP Mainnet, and Arbitrum have achieved net inflows of $3.5 billion, $2.1 billion, and $1.7 billion, respectively. The number of daily transactions on Layer 2 has increased by 325%, 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 a smooth consumer experience, strategic partnerships with Coinbase, and the launch of popular consumer applications. Arbitrum has launched Stylus, allowing smart contracts to be written in multiple languages. The OP Superchain continues to gain strong momentum, 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 increased, while the yield dropped to 3%. The re-staking protocol attracted a large amount of TVL, but the growth momentum in the second half of 2024 weakened. Future catalysts will depend on the successful implementation of the reduction mechanism, as well as the flexibility offered to AVS, stakers, and node operators.

3.3 Ethereum Future Roadmap and EIP Proposals

The Pectra upgrade is expected to be completed in the first quarter of 2025. Key EIP proposals include:

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

The Ethereum team has reorganized its long-term development roadmap, aiming for a major upgrade in 2029 that will introduce core technologies such as zero-knowledge proofs and post-quantum cryptography.

Other Infrastructure

• Sorter: The decentralized shared sorting concept has gained attention to enhance network resilience and redistribute value capture.
• Data availability and modular blockchain: The demand for data availability solutions continues to grow.
• Intent and Chain Abstraction: The Chain Abstraction Coalition has been established to promote the adoption of chain abstraction solutions.
• AI agents and intent-driven DeFi trading: Research on executing intent-driven trades using large language models is ongoing.

4. Solana

In 2024, the price of Solana is expected to increase by approximately 75%, with the SOL/ETH ratio rising from 0.04 to 0.06. The market capitalization of stablecoins is projected to grow more than threefold, reaching $5.1 billion. According to the Electric Capital report, Solana is expected to attract more new developers in 2024 than any other blockchain.

In 2024, the main focus of the Solana ecosystem will be on DePIN, memes, PayFi, and other areas.

• DePIN: Projects like Helium and Render Network are migrating to the Solana network to promote ecosystem development.
• Meme: Platforms like Pump.fun have significantly increased the trading volume of Meme coins on Solana.
• PayFi: Solana Pay collaborates with Shopify, VISA, and others to expand payment channels.

Future Outlook:

• Firedancer activation will further enhance network performance and security.
• The Solana plugin offers greater flexibility and programmability, which is expected to drive institutional adoption.
• The potential approval of the Solana ETF, growth in the stablecoin market, institutional adoption, and increased DeFi activity will bring positive catalysts.

5. Alt-L1s

Berachain

Berachain introduces the liquidity proof mechanism ( PoL ), with the BeaconKit modular consensus client compatible with EVM. Before launch, the TVL exceeded $1.5 billion, and after launch, it surged to become the eighth-largest network by TVL.

TON

With over 900 million monthly active users on Telegram, TON is attracting significant attention in 2024. Daily active users grew from 27,725 to 293,539, and DeFi TVL increased more than tenfold. Future growth will depend on closer collaboration with Telegram and exploring innovative user acquisition channels.

Kaia

Kaia is formed by the merger of Klaytn and Finschia, integrating the two major messaging applications LINE and KakaoTalk. It offers optimizations such as account abstraction and Gas fee proxy payments. The Kaia Wave program is launched to promote ecological prosperity.

Move

The number of Move ecosystem developers has grown to over 1,500. Sui outperforms Aptos in several metrics, including FDV, TVL, net capital inflow, and DEX trading volume. Movement has launched an Ethereum scaling solution M2 based on the Move language.

MegaETH

MegaETH is a high-performance blockchain compatible with EVM, addressing transaction throughput and computing power limitations through node specialization.

Monad

Monad achieves optimistic parallel transaction execution across multiple EVM instances, integrating MonadDB to optimize data storage. It can achieve up to 10,000 transactions per second, with a 1-second block time and 1-second finality.

6. Other tracks

6.1 Meme

The Meme sector has an overall increase of 218% in 2024. 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 industry, greatly releasing retail demand. New tools such as Kaito, Photon, and GMGN.AI continue to emerge, helping users to seize market opportunities more efficiently.

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