author | Binance Research
summary:
Following a strong performance in 2023, the total cryptocurrency market capitalization continued to climb in the first half of 2024, ultimately reaching approximately $2.27 trillion, a year-to-date increase of 37.3%. The first quarter of this year saw an astonishing increase of 60.2%. The second quarter was a relatively mixed situation, with the cryptocurrency market losing some of its gains and the market capitalization falling by 14.3%.
Layer-1 (“L1”) started the year strong, with Bitcoin still dominating the market after the fourth Bitcoin halving, the launch of the Runes protocol, and the approval of US spot ETFs (which have attracted more than $14 billion in inflows to date). Restaking activity in Ethereum has exploded, with EIP-4844 being updated, while BNB Chain continues to drive development of opBNB and Greenfield. Meanwhile, Solana performed well in the memecoin space and launched blockchain links (“Blinks”).
The first half of 2024 is the airdrop season in the Layer-2 ("L2") space, especially for zero-knowledge ("zk") projects. Its incentive commitments have brought a lot of funds to L2 chains, bringing the total locked value of L2 chains to $43 billion. This means that in just 6 months in the first half of the year, its total locked value ("TVL") has risen by 90%.
In 2024, a large amount of capital has poured into decentralized finance (" DeFi "), driving its total locked value ("TVL") from $54.4 billion to $94.1 billion, a 72.8% increase since the beginning of the year ("YTD"). This growth has benefited almost all areas in DeFi, including mainstream and niche markets, promoting the emergence of various protocols and providing on-chain access channels for previously inaccessible financial primitives.
The stablecoin market has shifted significantly, and is now only 14.5% away from the peak before TerraUSD (UST) crashed in April 2022. As of June 30, 2024, the stablecoin market capitalization reached $161 billion, a two-year high. While Tether's USDT still dominates, Circle 's USDC and Ethena's USDDe have both increased their market share.
The NFT market was volatile in the first half of the year, with sales falling and major project reserve prices falling by more than 50%. Blur continued to dominate, spurred by the Blast token airdrop, while Pudgy Penguins' physical toys had some success. Bitcoin NFTs also continued to shine.
SocialFi continues to develop, and Lens Protocol announced the upcoming launch of its zero-knowledge chain Lens Network. Farcaster users continue to grow after the launch of Frames, while friend.tech released its own token and V2 version. In addition, Fantasy.top collectible card game is also a highlight worth paying attention to.
The Web3 gaming sector had a strong first quarter, but in the second quarter, the market capitalization of game project tokens and other altcoin markets fell sharply. However, in stark contrast to the price decline, user growth indicators are healthier than ever, and projects such as Pixels and Hamster Kombat have attracted a large number of players through token airdrop promises.
Other areas of interest include memecoins, artificial intelligence (AI), and decentralized physical infrastructure networks (DePINs), which continue to attract strong interest from investors and the wider community in the first half of 2024.
The six key themes for the second half of 2024 are exciting, and we expect to make significant progress in these areas this year. These themes cover multiple aspects and areas, such as the macro environment, the Bitcoin ecosystem, ownership economic applications, and real-world assets ("RWAs").
Outlook for the second half of the year:
Looking ahead, we are pleased with the market’s outperformance over the past year and are optimistic about the following themes for 2024:
◆ Institutional adoption continues to increase: The approval of the US spot BTC ETF was one of the defining events of the first half of this year. This move attracted more new institutional demand to the Bitcoin market, a factor that increased the diversity and depth of investment interest compared to previous cycles. This trend will continue with the final approval of the US spot ETH ETF. The above products and the participation of TradFi giants such as BlackRock and Fidelity have brought more recognition and affirmation to the cryptocurrency industry, which is significant and perhaps its most important impact. We hope to see further adoption of these ETFs and cryptocurrencies by more investors in the United States and around the world (investors who may not have participated before). We also hope that some of these investors decide to further explore other areas beyond Bitcoin and Ethereum, and delve into topics such as DeFi, NFTs, and SocialFi.
◆ US macroeconomic conditions are worth watching: One of the most important events in the second half of the year will be the US presidential election in November (prediction markets (151) currently expect former President Trump to be re-elected). The period before and after the election may see some volatility in the market. In addition, after nearly two years of record high interest rates, the macro environment seems to be easing. Traders currently expect the Federal Reserve to make its first rate cut in September this year, and some other central banks around the world have also begun to cut interest rates. Given that rate cuts usually boost trading markets, this could be a potential positive for the cryptocurrency industry in the second half of the year.
◆ Bitcoin Scalability and DeFi: The Bitcoin market continues to expand in all directions: From a TradFi perspective, the scale of Bitcoin ETFs continues to grow, and from a cryptocurrency native perspective, ordinals, BRC-20 tokens, and the latest rune tokens are also growing. Bitcoin's scalability is also becoming an increasingly important issue, and multiple teams are working on various solutions, including Lightning Network, Stacks, RGB, Citrea, and Merlin. The Bitcoin DeFi market is also growing, and BounceBit and Babylon are among the early participants.
◆ Further development of ownership economy applications: By leveraging blockchain technology, users are able to take back sovereignty over resources that have traditionally been dominated by large entities. This includes personal data, creative content, and computing resources. For example, centralized storage services require users to give up control of their data, exposing them to risks such as privacy breaches and single point of failure vulnerabilities. To this end, various projects are committed to exploring alternative solutions to help users better control their personal assets and information. In this regard, two areas that need our attention are decentralized physical network infrastructure (DePIN) and decentralized social media (DeSoc). Although the concepts of DePIN and DeSoc have been around for some time, they have achieved steady development, thanks to factors such as the maturity of infrastructure development, increased awareness, and the continuous expansion of the cryptocurrency user base. In the case of DeSoc, notable developments include the launch of the Farcaster framework and record high user activity. At the same time, DePIN also has great potential because it provides practical utility while having a very broad total potential market and can expand rapidly through a bottom-up growth strategy.
◆ Growth of Real World Assets (RWAs): The tokenization of RWAs provides a compelling use case for blockchain technology. By bringing off-chain assets to the blockchain, RWA tokenization can improve transparency and efficiency, and bring new opportunities for composability and potential use cases. Although interest rate cuts are imminent, we expect RWAs to benefit from relatively high interest rates. Specifically, tokenized treasuries are still expected to attract much attention, and they provide another attractive source of income for cryptocurrency investors. In addition, in addition to the accelerated adoption of RWAs by institutions, the development momentum of related infrastructure such as decentralized identity, oracles, and interoperability solutions is also expected to increase. These elements are critical to building a comprehensive RWA ecosystem. As more and more institutions gain a deeper understanding of RWA tokenization, the development of these supporting infrastructures is likely to keep up.
◆ Web3 game player numbers hit new highs: Web3 game player numbers hit new highs, flocking to hyper-casual games like Hamster Kombat and Notcoin. Additionally, projects like Pixels and Parallel TCG have successfully built large and strong communities around their products. However, robust in-game open economic mechanisms have yet to emerge. Web3 gaming is the equivalent of DeFi’s “Uniswap moment.” As the Web3 player base continues to expand, projects will be increasingly motivated to innovate in sustainable in-game economic solutions to retain players for the long term.
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