2024 Crypto Market Review and 2025 Outlook: 5 Prominent Tracks of Development

The year 2024 is set to be a milestone year for the encryption industry. From the approval of Bitcoin and Ethereum ETFs at the beginning of the year, to the booming bull market, and the influence of the U.S. elections, cryptocurrencies like Bitcoin are reaching record valuations and increasingly impacting social and political landscapes.

Looking ahead, there are five major sectors that are expected to show exciting progress in 2024 and are worth close attention in 2025. These sectors include the Bitcoin ecosystem, infrastructure (Infra), Meme, artificial intelligence (AI), and the TON ecosystem.

Bitcoin Ecosystem

market dominance

In the past year, Bitcoin's market dominance increased from 45.27% to 56.81%. This means that most of the liquidity in the current crypto market is primarily concentrated in the Bitcoin ecosystem, and it continues to grow.

The Bitcoin spot ETF has accumulated 5.3% of the total existing Bitcoin supply, with holdings increasing from 629,900 coins at the beginning of the year to 1,243,608 coins, an increase of 613,708 coins. Over the course of 12 months, the ETF's share of holdings rose from 3.15% to 6.25%.

A new market centered around Bitcoin as the core asset, using ETFs and U.S. stocks as channels for capital inflow, has officially opened. This market, represented by U.S. publicly listed companies like MSTR, is designed to infinitely absorb dollar liquidity. Therefore, the necessity for Bitcoin to further develop its ecosystem and improve capital efficiency has become increasingly prominent, which will also be achieved by increasing BTC demand and raising its price.

Layer 2

In the past three years, a total of 77 Bitcoin Layer 2 projects have been launched or completed financing. In the first half of 2024, driven by the hype surrounding Bitcoin ETF concepts, the trading volume and token prices of earlier Bitcoin Layer 2 projects (such as the Lightning Network, Stacks, and Liquid Network) have surged significantly. These older Layer 2 projects have also witnessed further technological developments. Various Layer 2 solutions have emerged on Bitcoin, including Spiderchain (Botanix), ZKRollup (Nexio and Critea), EVM-compatible chains (BOB and B Squared), and sidechains (Merlin), among others. As of now, the total locked value (TVL) of Bitcoin Layer 2 has reached $3 billion, contributed by 19 projects. Assuming all Bitcoin Layer 2 projects are launched in the coming years, the total TVL is expected to grow by at least 2 to 4 times, reaching $6 billion to $12 billion.

Layer 1/execution layer

BRC-20, Ordinals, and Runes are the main new execution standards that emerged at the end of 2023. Despite an overall market decline in the second quarter, activity on BTC Layer 1 continued to grow steadily. However, while the Bitcoin market showed signs of recovery in the third quarter, this growth momentum could not be sustained.

other Bitcoin infrastructure

With the increasing adoption of Bitcoin, other infrastructures, including interoperability solutions and security layers, have also begun to emerge.

interoperability

Bridging and WBTC are currently the mainstream interoperability solutions on Bitcoin. Since the Bitcoin network does not directly provide composability for building applications, people have to rely on these bridges/WBTC to unlock DeFi yields on other blockchains. More interoperability solutions, including Xlink, Atomiq, and Auran, are expected to be launched in the coming years.

Security Layer

However, these interoperability solutions may pose a threat to the security of underlying assets, as hacking incidents occur from time to time. In response, security solutions related to Bitcoin have begun to emerge.

Babylon is a typical example. It has developed a secure sharing protocol for Bitcoin, including:

Bitcoin timestamp: allows for the recording of data timestamps on the Bitcoin network, enhancing the credibility and immutability of the data.

Bitcoin Staking: Allows Bitcoin to provide security for other networks through economic incentives.

In addition, with the emergence of new technologies, such as the Data Availability Layer (DA Layer), the potential use value of Bitcoin is further unleashed. Nubit is a key player in the Bitcoin DA space. It expands data capacity through Bitcoin, supporting the development of applications, Layer 2, and oracles.

Whether the upgrade in 2025 passes through OP_CAT is key.

The Taproot upgrade has enabled the Bitcoin mainnet to issue assets. From the emergence of BRC-20 inscriptions and the Ordinals NFT market in 2023, to the subsequent introduction of asset issuance protocols like ARC-20 and SRC-20, followed by the emergence of infrastructure such as Bitcoin Layer 2, Bitcoin Restaking and LST, and Bitcoin cross-chain bridges, the entire ecosystem has rapidly developed. Subsequently, after the Bitcoin conference in July 2024, the market shifted its focus to decentralized, non-wrapped native BTCFi, such as stablecoins.

Currently, through cryptographic techniques such as Discreet Log Contracts (DLC) and Adaptor Signatures, developers can program financial contracts in Bitcoin scripts that rely on external events, ensuring the permissionless nature of stablecoin and lending projects during liquidation, and guaranteeing the permissionless nature of multi-party transaction operations through Partially Signed Bitcoin Transactions (PSBT). However, this still involves game theory logic to some extent, meaning that it aims to prevent malicious behavior from project parties by increasing the cost of wrongdoing, rather than achieving complete decentralization from the smart contract level. The stablecoin project Shell Finance, which is about to launch its mainnet, adopts this solution.

The real game changer is OP_CAT. As long as OP_CAT passes, developers will be able to use sCrypt and other Bitcoin-native advanced programming languages to achieve fully decentralized and transparent smart contract development on the Bitcoin mainnet. sCrypt is a TypeScript framework for writing smart contracts on Bitcoin, allowing developers to write smart contracts directly using the popular high-level programming language TypeScript. The current Bitcoin Layer 2 can also be converted to ZK Rollup, and the total scale of BTCFi is expected to increase significantly.

With the dual support of the macro market and infrastructure, it is expected that Bitcoin will experience a further surge in market demand in the next two years.

Infrastructure (Infra)

In 2024, infrastructure remains one of the most attractive tracks in the encryption industry. The combination of capital and technology has driven the rapid development of projects such as Layer 1, Layer 2, and middleware. The continuous upgrade and construction of the Ethereum ecosystem, as well as the improvements in Layer 2 fees and performance; the rapid development of other high-performance Layer 1s led by Solana; the ongoing deepening of the multi-chain landscape; projects represented by EigenLayer enhancing network security and capital efficiency through the Restaking mechanism; and several Bitcoin Layer 2 projects attempting to combine Bitcoin's security with high-performance scaling solutions, all contribute to the vigorous growth in the infrastructure sector.

Layer 1

Layer 1 projects continue to optimize their consensus mechanisms and performance, providing a solid foundation for on-chain applications.

• Ethereum: Launched EIP-4844, reducing costs for Layer 2 networks.
• Solana and TRON: Benefiting from the development of Meme Coins and infrastructure projects such as Pump.fun and SunPump, on-chain transactions are very active.
• Aptos and Sui: Applications in GameFi and DeFi are driving active user growth.

Layer 2

Layer 2 continues to be a key path for scalability, with ZK Rollup and Optimistic Rollup each having their own developments.

• zkSync and StarkNet: Continuous iteration and upgrades significantly enhance the user experience of ZK Rollup.
• Base and Arbitrum: DeFi and NFT projects are thriving on these platforms, with significant growth in TVL.

Layer 0 and cross-chain middleware

Layer 0 and cross-chain middleware have made new breakthroughs in interoperability.

• LayerZero: Connects over 40 chains, significantly increasing cross-chain transaction volume.
• Cosmos: IBC upgrade, cross-chain performance improved by 50%.

modular public chain

Modular public chains offer high performance and flexibility, attracting a diverse range of applications.

• Celestia: Supports multiple modular execution layers and becomes a benchmark project for modular public chains.
• Monad: Attracts a large number of developers and DApp deployments with ultra-high TPS performance.

Bitcoin Layer 2

Bitcoin Layer 2 has become an emerging hotspot in the primary market this year, with several related projects such as Babylon, Taro, BounceBit, and Corn completing financing this year, primarily bringing smart contract and scaling capabilities to the Bitcoin network.

• Taro: Expands Bitcoin's payment and contract capabilities through the Lightning Network.
• Stacks and RSK: Driving the growth of Bitcoin smart contract applications.

Restaking

Restaking has improved capital utilization efficiency and has received good development and market attention this year, with projects like EigenLayer and Satori attracting tens of millions in investment from leading capital.

Infrastructure still occupies an important position in investment and financing this year. Layer 1, modular public chains, and infrastructure related to the Bitcoin ecosystem have all received capital favor. Layer 1 currently represents the most concentrated technological development and exploration in the encryption field, and this track will continue to be a field concentrated with development resources and capital in the future.

Meme

Important retail investor funding entry after the implementation of the encryption easing policy

In 2024, the Meme track once again became a hotspot in the crypto market. As an ecological stronghold, it not only promotes community consensus but also integrates with fields such as DeFi and GameFi, creating new use cases. For example, Solana has successfully stimulated the activity and vitality of its ecosystem by vigorously promoting the innovation and development of Meme projects. From the beginning of the year with Bome and Slerf to the mid-year Pump.fun, these projects have demonstrated a strong "lottery attribute" with their Bonding Curve pricing model and low market cap opening mode, attracting widespread attention. Additionally, Pump.fun's decentralized feature of "anyone can deploy Meme" has driven greater ecological prosperity, with over half of the Solana Meme projects originating from Pump.fun, among which dozens of projects have a market cap exceeding $1 billion. Public chains like SUI and TRON have also quickly followed the Meme strategy, further invigorating their respective ecosystems.

Meme projects have become an important tool for attracting new users to the crypto market due to their simplicity and low entry barriers. The launch of Moonshot allows users to purchase Meme assets with fiat currency, while the post-election political-related Meme craze has provided a strong sense of participation for new players. Looking ahead, the crypto policies of the Trump administration and related governance trends will bring potential news impacts to the market, possibly spawning new Meme hotspots. For example, if the "Government Efficiency Department" led by Elon Musk gains attention, it may trigger another surge in Dogecoin.

As the crypto market environment becomes more relaxed, it is expected that more retail investors will enter the market, and Meme projects will become an important channel for capital inflow. The huge price increases seen on a trading platform after each launch of a Meme token fully demonstrate this trend, which may continue to drive the development of this sector in the future.

Meme Infrastructure

As the demand for fair issuance among market users further increases, this year has seen extremely high market attention and participation in the Meme fair launch track. Infrastructure projects such as Pump.fun and SunPump have become leading cash flow projects this year, injecting new momentum into the development of Meme.

Pump.fun

Pump.fun is a meme project issuance platform built on Solana. By providing simple and intuitive creation tools along with strong community support, it employs a fair distribution model and has designed a mechanism for automatically adding liquidity to a certain DEX. Coupled with Solana's successful market operations, community management, and low transaction costs, Pump.fun has gained market recognition since its launch and has successfully incubated multiple well-known meme projects. As of November 2024, over 40,000 projects have been successfully issued to a certain DEX, with total project revenue exceeding 1.17 million SOL, approximately 200 million dollars.