2024 Crypto Market Review and 2025 Outlook: 5 Promising Tracks

The year 2024 is 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 impact of the U.S. elections, cryptocurrencies like Bitcoin have reached record valuations, increasingly influencing social and political landscapes.

Looking ahead, five major tracks showing exciting progress in 2024 are worth close attention in 2025. These tracks include the Bitcoin ecosystem, infrastructure (Infra), Meme, artificial intelligence (AI), and the TON ecosystem.

Bitcoin Ecosystem

market dominance

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

The Bitcoin spot ETF has accumulated 5.3% of the total existing Bitcoin supply, increasing its holdings from 629,900 coins at the beginning of the year to 1,243,608 coins, a growth of 613,708 coins. Over 12 months, the ETF's holding ratio increased from 3.15% to 6.25%.

A new market has officially opened that centers around Bitcoin as the core asset, with ETFs and US stocks as the channels for capital inflow, utilizing US-listed companies represented by MSTR as carriers to infinitely absorb US dollar liquidity. Therefore, the necessity for Bitcoin to further develop its ecosystem and improve the efficiency of capital utilization has become increasingly prominent, which will be achieved by increasing BTC demand and enhancing 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 around Bitcoin ETF concepts, the trading volume and token prices of earlier Bitcoin Layer 2 projects have surged significantly. These older Layer 2 projects have also witnessed further technological development. Various Layer 2 solutions have emerged on Bitcoin, including Spiderchain, ZKRollup, EVM-compatible chains, sidechains, and more. As of now, the total locked value of Bitcoin Layer 2 is (TVL), which has reached 3 billion dollars, contributed by 19 projects. Assuming all Bitcoin Layer 2 projects are launched in the coming years, the total TVL is expected to increase by at least 2 to 4 times, reaching between 6 billion to 12 billion dollars.

Layer 1/Execution Layer

BRC-20, Ordinals, and Runes are the main new execution standards that emerged at the end of 2023. Although the overall market declined 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 momentum was not sustained.

other Bitcoin infrastructure

As the utilization of Bitcoin increases, other infrastructures, including interoperability solutions and security layers, have also begun to emerge.

interoperability

Bridges and WBTC are still the mainstream interoperability solutions on Bitcoin. Since the Bitcoin network does not directly provide composability to build applications, people have to rely on these bridges/WBTC to unlock DeFi yields on other blockchains. We expect more interoperability solutions, including Xlink, Atomiq, and Auran, to be launched in the coming year.

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 shared protocol for Bitcoin, including:

Bitcoin timestamp: Allows 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 data availability layer (DA layer ), the potential use value of Bitcoin is further being unlocked. 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 launch of asset issuance protocols like ARC-20 and SRC-20, and 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 has shifted its attention to native BTCFi that can achieve decentralization and non-wrapping models, such as stablecoins.

Currently, through the cryptographic techniques of the cautious log contract (DLC) and the adapter signature (Adaptor Signature), developers can program financial contracts in Bitcoin scripts that rely on external events, ensuring permissionless liquidation of stablecoin and lending projects, and guaranteeing permissionless multi-party transaction operations through partially signed Bitcoin transactions (PSBT). However, this still involves game theory logic to some extent, which aims to deter malicious behavior from project parties by increasing the cost of wrongdoing, rather than achieving complete decentralization at the smart contract level. The stablecoin project Shell Finance, which will soon launch its mainnet, adopts this solution.

The one that can truly change the situation is OP_CAT. As long as OP_CAT can pass, developers will be able to use sCrypt and other Bitcoin native high-level 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 directly use TypeScript, a popular high-level programming language, to write smart contracts. The current Bitcoin Layer 2 can also be converted to ZK Rollup, and the total scale of BTCFi is expected to be significantly enhanced.

With the dual support of the macro market and infrastructure, we believe that Bitcoin will see 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 upgrades and construction of the Ethereum ecosystem, along with 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 multiple Bitcoin Layer 2 projects attempting to combine the security of Bitcoin with high-performance scaling solutions have all contributed to the flourishing development 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: Thanks to the development of Meme Coins and infrastructure projects, on-chain transactions are very active.
• Aptos and Sui: Applications in GameFi and DeFi are driving user growth.

Layer 2

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

• zkSync and StarkNet: Continuous iterative 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 serves as 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 multiple related projects completing financing this year, mainly bringing smart contract and scalability features to the Bitcoin network.

• Taro: Expanding 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 efficiency, and this year it has also gained good development and market attention, with projects such as EigenLayer and Satori receiving tens of millions in investment from top-tier capital.

Investment and Financing Events

Infrastructure continues to play an important role in this year's investment and financing. Layer 1, modular public chains, and infrastructure related to the Bitcoin ecosystem have all attracted capital's favor. Layer 1 currently represents the most concentrated technological development and exploration in the encryption field, and this sector will remain a focus of resource and capital development in the future.

Meme

Important retail funding entrance after the implementation of the encryption easing policy

In 2024, the Meme track once again becomes 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 scenarios. 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 Bome and Slerf at the beginning of the year to Pump.fun in the middle of the year, these projects demonstrate strong "lottery attributes" with Bonding Curve price curves and low market cap opening models, attracting widespread attention. In addition, the decentralized feature of Pump.fun allowing "anyone to deploy Meme" has driven greater ecological prosperity. Currently, more than half of the Solana Meme projects originate from Pump.fun, with dozens of projects having a market value 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 using fiat currency, and the post-election political-related Meme craze provides a strong sense of participation for new players. Looking ahead, the encryption policies of the Trump administration and related governance trends may bring potential news impacts to the market or give rise to new Meme hotspots. For example, if the "Department of Government Efficiency" 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 significant price increases observed every time an exchange lists a Meme coin fully illustrate 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 continues to grow, this year has seen a high level of 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 and strong community support, it adopts a fair distribution model and has designed a mechanism for automatically adding liquidity to DEX. Coupled with Solana’s successful market operation, community operation, and low transaction costs, Pump.fun was quickly recognized by the market upon its launch, successfully incubating multiple well-known meme projects. As of November 2024, more than projects have been successfully issued to DEX.