"ETF approval", "halving", and "US election" - these three keywords drove the market changes of Bitcoin throughout the year. Behind this overall picture, what specific changes in the trading market, on-chain fundamentals, and application layer of Bitcoin are worth noting? What potential impact will these changes have on the development in 2025?

Author: Carol, PANews

Source: PANews

In 2024, Bitcoin broke through the $100,000 mark in an upward trend, establishing a new milestone for the development of digital assets. The three keywords - "ETF approval", "halving", and "US election" - drove the market changes of Bitcoin throughout the year. Behind this overall picture, what specific changes in the trading market, on-chain fundamentals, and application layer of Bitcoin are worth noting? What potential impact will these changes have on the development in 2025?

This article uses multi-dimensional data to analyze the changes in Bitcoin in 2024. In summary:

· Bitcoin's annual increase reached 131.83%, less than the 158.06% of the previous year.

· The main driver of Bitcoin's price increase this year was the gradual improvement and relaxation of the regulatory environment, rather than simply the scarcity of supply (halving).

· The profitability level of long-term holders is better this year, and long-term holders tend to reduce their risk exposure earlier when the market is approaching overheating.

· This year's trading market saw a simultaneous increase in both volume and price. The annual average daily trading volume was about $38.354 billion, an increase of 102.72% over the previous year. The year-end open interest was about $30.948 billion, an increase of 195.79% over the end of the previous year.

· The total holdings of Bitcoin ETFs reached 11.2006 million BTC, a strong annual growth of 80.87%.

· The monthly average number of active addresses on the Bitcoin blockchain this year was about 780,300, a decrease of 17.75% compared to the previous year. This may indicate that in the context of a clear upward trend, long-term holding strategies are dominant, and the market may be transitioning to a low-liquidity growth phase led by institutional investors.

· The annual cumulative on-chain transaction volume was about 49.6658 million BTC, equivalent to $3.28 trillion. The total transaction volume in BTC terms increased slightly by 4.67% compared to the previous year.

· The number of addresses holding between 100 and 1,000 BTC increased by 11.21%, indicating that the trend of address balances becoming smaller in recent years has changed, and a trend of larger balances has emerged this year.

· The TVL of Bitcoin at the end of the year was about $6.755 billion, with an annual increase of as high as 2117.11%, of which Babylon's TVL accounted for 82.37%.

· Staking has replaced payment (Lightning Network) as the mainstream application of Bitcoin.

· The tightening of both short-term and long-term liquidity under the QT background constitutes the main pressure for Bitcoin to continue its upward trend next year.

· This year's rise is related to the expected friendly regulatory environment after the election. If the regulatory environment can be further relaxed next year, it will be conducive to the continued rise of Bitcoin.

· BTCFi may further develop, but for its application to become the main logic for Bitcoin pricing, it still needs to achieve sustained expansion of application scale, which may still be difficult next year.

Trading Market: Annual Price Increase Exceeds 131%, ETF Holdings Exceed 1.12 Million BTC

In 2024, Bitcoin's price rose from $42,208 at the beginning of the year to $97,851 at the end of the year (as of December 20), with an annual increase of 131.83%. On December 17, it even strongly broke through the $100,000 mark, reaching a historical high of $106,074, with a maximum annual increase of about 151.31%. Although it began to correct slightly at the end of the year, the price is still running at historical highs.

In terms of the overall trend, this year, Bitcoin experienced three stages: "rise - sideways - rise", which basically corresponded to the three major events of "ETF approval", "4th halving", and "US presidential election". Overall, the logic behind Bitcoin's rise this year was not solely attributable to the scarcity of supply brought about by the halving, or at least not entirely the traditional logic of supply scarcity. The approval of ETFs and the results of the US election indicated that the main driver of the rise in Bitcoin's price was the gradual improvement and relaxation of the regulatory environment, which attracted a large amount of institutional capital to the market, injecting liquidity and further pushing up the price.

According to data from glassnode, the profitability chips at the end of the year have reached 90.16% (as of December 20), a historical high. From the perspective of profitability strategy, the LTH-SOPR/STH-SOPR (the output profitability ratio of long-term holders/the output profitability ratio of short-term holders) has risen from 1.55 at the beginning of the year to 2.11 at the end of the year, with an annual average of 2.16. Especially since late November, this ratio has been greater than 3 multiple times, and at its highest, greater than 4. A ratio greater than 1 indicates that the profitability level of long-term holders is higher than that of short-term holders, and the larger the value, the higher the profitability level of long-term holders.

Overall, the profitability level of long-term holders is better this year, and this advantage becomes more obvious towards the end of the year. In addition, combining with the Bitcoin price, it can be found that the profitability peak of long-term holders appears earlier than the price peak, indicating that long-term holders tend to reduce their risk exposure earlier when the market is approaching overheating.

This year, the Bitcoin trading market saw a simultaneous increase in both volume and price, with the steadily rising price accompanied by an increase in trading volume.

According to statistics, Bitcoin's average daily trading volume for the full year was about $38.354 billion, with a single-day high of over $190.4 billion. The trading peaks occurred after November, with average daily trading volumes of $74.897 billion and $96.543 billion in November and December respectively, significantly higher than the previous monthly average of $30.8 billion.

The futures market was also active. The total open interest increased from $10.915 billion at the beginning of the year to $30.948 billion at the end of the year, an annual increase of 183.53%, with a significant increase.

As one of the main factors driving the rise in Bitcoin's price, the asset holding situation of various ETFs has always been closely watched. According to statistics, the total holdings of Bitcoin ETFs increased from the initial 619,500 BTC to 11.2006 million BTC at the end of the year, a strong annual growth of 80.87%. The rapid growth period was basically consistent with the period of rapid price increase, both in 2-3 March and after November.

Currently, BlackRock's holdings have reached 524,500 BTC, the largest among all ETFs. In addition, Grayscale and Fidelity also have relatively large holdings, reaching 210,300 BTC and 209,900 BTC respectively. The holdings of other ETFs are relatively low, mostly below 50,000 BTC.

In addition to ETFs, more and more listed companies have also become buyers of Bitcoin, which may bring more possibilities to the market. According to statistics, the company with the largest holdings is currently MicroStrategy, with 439,000 BTC, exceeding the holdings of many ETFs. In addition, the leading companies in the North American Bitcoin mining industry, Marathon Digital Holdings and Riot Platforms, also have relatively large holdings, exceeding 40,000 BTC and 10,000 BTC respectively.

On-chain Fundamentals: Active Addresses Down, Large Addresses Up, Total Transactions Reach 49.66 Million BTC

The average monthly active BTC addresses this year was around 780,300, down 17.75% from last year's 948,700. Active addresses were above 800,000 in January-April and November-December, but below 720,000 in May-October.

Although this is generally consistent with the price trend, it is worth noting that the annual average active addresses declined even as BTC hit a new high, which may suggest that the market has shifted from the high-frequency trading stage of retail investors to the low-liquidity growth stage dominated by institutional investors as the uptrend becomes clearer.

The total on-chain transactions for the year exceeded 188 million, up about 29.66% from last year, continuing the two-year upward trend. The monthly average was 15.67 million, with October seeing the highest at 20.48 million. Interestingly, on-chain transactions were more frequent during the price consolidation period, likely due to factors like short-term arbitrage, address reorganization, and contract liquidations.

The total on-chain transaction volume for the year was around 49.67 million BTC, equivalent to $3.28 trillion. The BTC-denominated transaction volume increased slightly by 4.67% compared to last year. The monthly average was around 4.14 million BTC, or about $273.45 billion.

Overall, the relative trends in transaction count and volume have continued the divergence seen in 2022 and earlier, with BTC transaction count increasing but transaction volume declining, likely due to the expansion of applications like the Ordinals protocol in the high-price environment.

In terms of address balance distribution, addresses holding 0.001-0.01 BTC, 0.01-0.1 BTC, and 0.1-1 BTC are still the most numerous, accounting for 97.24% of the total. However, the number of addresses in these three ranges all declined by 3.94%, 2.74%, and 2.62% respectively during the year. The only balance ranges that saw increases were 100-1000 BTC and 1000-10000 BTC, up 11.21% and 1.68% respectively. This suggests a shift from the recent trend of address balances becoming smaller, with a trend towards larger balances potentially related to address reorganization and institutional capital inflows.

Applications: From Ordinals to BTCFi, TVL Surges 2117% YoY

BTC's application focus shifted from Ordinals to BTCFi this year, moving from asset issuance to asset utilization. According to DeFiLlama, the TVL of BTC DeFi surged from $305 million at the start of the year to $6.755 billion by year-end, a 2117.11% increase. The peak TVL exceeded $7.3 billion. BTC is now the 4th largest blockchain by TVL, after Ethereum, Solana, and TRON.

The largest BTC protocol has shifted from the payments-focused Lightning Network to the staking-focused Babylon. As of December 20, Babylon's TVL reached $5.564 billion, accounting for 82.37% of the total. According to Dune (@pyor_xyz), Babylon had over 140,000 unique staking addresses as of December 23, with a 7-day staking address growth rate of 100%.

Babylon's rapid growth has driven a series of staking and restaking protocols. In addition to Babylon, there are now 10 other BTC staking protocols, including Lombard, SolvBTC LSTs, exSat Credit Staking, Chakra, Lorenzo, uniBTC Restaked, alloBTC, pSTAKE BTC, b14g, and LISA BTC LST. These staking protocols could create network effects that further expand BTC's applications.

Outlook for Next Year

BTC has seen ample upside this year. Looking to 2025, BTC may enter a period of adjustment early in the year, and its subsequent performance will continue to be influenced by macroeconomic conditions, regulatory environment, and industry development, with both volatility and opportunities.

From a macroeconomic perspective, the Fed turned hawkish on rate cuts at the end of this year, and more importantly, the quantitative tightening (QT) policy backdrop remains unchanged, meaning long-term liquidity will likely remain tight, and short-term liquidity growth may also slow under the goal of controlling inflation. This could put pressure on BTC's ability to continue rallying next year.

However, BTC's price action this year suggests it is more sensitive to changes in the regulatory environment. The results of the U.S. presidential election directly triggered BTC's price to break above $100,000, so if there is further regulatory easing next year, it could provide impetus for BTC to continue its upward trend.

From an industry development perspective, the rapid rise of BTCFi has pushed BTC into a new stage of asset application, and staking protocols and other applications could foster network effects for these assets, further supporting BTC's price. However, if BTC's price becomes highly influenced by its applications, this would represent a new upward logic beyond just scarcity and digital gold, and would require significant scale of applications, which may be difficult to achieve in the short term.