Source: Kaiko Research
Compiled by: Tong Deng, Jinse Finance
I. The Road to $100,000 for BTC
2024 was a successful year for Bitcoin. With the launch of spot BTC ETFs in January, the market has gradually matured, and the fourth halving has also been smoothly carried out.
Even a few billion-dollar liquidations and sell-offs could not stop BTC's success this year. The BTC price in US dollars has risen nearly 140% so far this year, with a larger increase compared to other fiat currencies (some of which experienced significant devaluation in 2019).
II. US Election Fuels Bullish Bets
The 2024 US presidential election was of great significance for cryptocurrencies. Bitcoin or digital assets have never received so much attention on the world stage - at least not in such a positive way.
President Trump expressed support for gradual regulation and open dialogue with the industry in the summer. Shortly after someone attempted to assassinate him, he even appeared at the Bitcoin Nashville conference. Most of the crypto community rallied around the Republican candidate and the eventual Democratic nominee, Kamala Harris, and began to take some positive steps around cryptocurrencies.
Before the November 5th election, there was a "Trump trade" among market participants. A special election contract on Deribit attracted billions of dollars in trading volume and open interest before the election, and traders betting on a historic high soon after the election showed a significant bullish bias. They were right, as by November, BTC had exceeded $75,000.
The overall Senate vote and the final vote outcome were widely seen as favorable for cryptocurrencies. As a result, BTC led the post-election rally in crypto assets, breaking through $80,000 by November 11th.
As shown above, the increasingly bullish sentiment continued from November through the rest of the year, with Bitcoin's current all-time high exceeding $107,000.
III. Fees Soar Before Bitcoin's Fourth Halving
Bitcoin's fourth halving occurred on April 19th this year. On Saturday, the average Bitcoin transaction fee spiked to a record high of $146, significantly higher than Ethereum's $3 average fee that day.
The historic surge in Bitcoin network fees may have been the most significant development in the fourth quarter. While there were warning signs, it still caught many market participants by surprise.
Ordinals founder Casey Rodarmor announced plans to launch Runes, a protocol that would make it easier to issue fungible tokens on Bitcoin. However, given the impact of Ordinals on transaction fees, users may have already anticipated the fee increase, but the historic surge still surprised many.
Ordinals allow node operators to inscribe data and images onto newly created Bitcoin blocks. These so-called "inscriptions" are similar to NFTs, increasing the demand for Bitcoin block space and raising the fees earned by BTC miners.
The launch of Runes is expected to have a similar effect, with the protocol's introduction increasing the demand for block space and impacting fees.
IV. BlackRock Surpasses Grayscale
BTC ETFs broke various records this year, with 11 funds managing a total of over $100 billion in assets.
BlackRock was the big winner, demonstrating major institutions' interest in Bitcoin and digital assets. Its spot BTC ETF has over $55 billion in assets under management, surpassing Grayscale's GBTC within a few months. GBTC, launched by digital asset manager Grayscale in 2013, was largely a crypto-first product, and its significant NAV premium/discount meant limited institutional buy-in. So after the ETF launches this year, it was quickly overtaken by BlackRock.
With the company deciding to maintain fees at 1.5%, GBTC has been bleeding assets for most of the year. In the US ETF space, companies are accustomed to low fees, so Wall Street has largely preferred BlackRock and Fidelity over GBTC.
V. The ETH/BTC Ratio Declines
The ETH/BTC ratio has continued to decline since the Merge and showed no signs of slowing in 2024. The ratio compares the performance of the two assets, and it declines when Ethereum underperforms Bitcoin.
Other factors contributing to the decline include the rise of Solana, as users migrated to the cheaper network during speculative activity spikes in March and the fourth quarter. Meme tokens (which we'll discuss later) were also behind much of the speculation and drove Solana DEX volumes to sometimes exceed Ethereum's at times this year.
It fell to 0.033 in November, the lowest level since March 2021. What's behind the underperformance? Since the Merge, ETH has faced significant regulatory pressure, with staking in the US closely scrutinized and angering the SEC.
VI. A Slow Start: The Launch of ETH ETFs
ETH ETFs have had a slow start since launching in July. Similar to the BTC ETF launch, Grayscale's fund once again put pressure on the market, as the digital asset manager maintained fees at 2%.
However, after Grayscale's ETHE outflows decreased, the new funds started seeing inflows in late 2024. Inflows have significantly increased since the US election in November, and traders have also flocked to CME's ETH futures. This reflects similar activity seen when traders executed arbitrage trades on BTC futures in May and June.
Growing ETH futures open interest, along with a changing regulatory outlook, have reversed the trajectory of ETH ETFs, with net flows turning positive in late November and December. Net flows since launch have now exceeded $2 billion, including over $3 billion outflows from ETHE.
ETH will be one of the biggest winners from the power shift in Washington. While it lagged Bitcoin this year, the regulatory changes brought by the US government transition will greatly benefit the second-largest asset by market cap. Clarity on ETH's classification as a commodity or security, as well as staking, may be two key drivers for growth next year.
VII. MicroStrategy, the Trendsetter, Bought More BTC Than Ever
In terms of BTC purchases, MicroStrategy had its busiest year yet. The business software company has already transformed in many ways from its core business this year. Chairman and former CEO Michael Saylor even referred to his company as the world's "first Bitcoin treasury company" in the Q3 earnings report in November.
Since January, MicroStrategy has purchased over 249,850 bitcoins, with the pace of purchases accelerating since the US election, nearly doubling its holdings in the past month. The company has issued multiple convertible bonds to fund its acquisitions, raising concerns among some market participants that a price crash could adversely impact the company and potentially force it to sell.
However, this strategy is currently paying off. The rapid rise in BTC prices and the bullish market sentiment have caused MSTR's value to soar to an all-time high. MSTR has reached a new high for the first time since the 2000 dot-com bubble burst, in 24 years.
Although MicroStrategy is a pioneer in corporate Bitcoin purchases, some Republican lawmakers want the U.S. government to follow suit. Senator Cynthia Lummis has pledged to establish a strategic Bitcoin reserve after Donald Trump wins the U.S. presidential election.
8. The Alameda Gap has narrowed after the ETF listing
This year, the crypto market has finally made FTX's collapse a thing of the past. The liquidity gap (or Alameda Gap) left by the collapse of FTX and its sister company Alameda Research has narrowed this year.
Driven by price increases and growing market share, Bitcoin's 1% market depth this year has exceeded the pre-FTX level of about $120 million. The recovery of Kraken, Coinbase, and LMAX Digital has been the most prominent. Notably, the Bitcoin market depth of the institution-centric LMAX reached a record $27 million this week, briefly surpassing Bitstamp and becoming the third-largest Bitcoin liquidity market.
9. Meme Token Frenzy
As mentioned above, meme tokens experienced exponential surges at different times this year. In particular, due to the launch of Pump dot fun, tokens on Solana experienced significant growth, which is a protocol for launching meme tokens, allowing anyone to issue tokens and build liquidity from scratch through word-of-mouth and participation.
However, familiar assets have largely dominated the trading volume on centralized exchanges. Similar to the rally before 2021, Dogecoin has again gained favor with traders - also due to the post-election bullish sentiment. Dogecoin rose after the president-elect Donald Trump revealed plans to establish a "Department of Government Efficiency" (D.O.G.E.) led by Elon Musk and Vivek Ramaswamy.
One of the new tokens launched on Solana this year is PNUT, which has captured people's imagination, inspired by Peanut the Squirrel (a New York pet influencer), whose premature death has led to widespread online support (and token issuance).
One trader even turned a $16 PNUT investment into a realized profit of $3 million. PNUT is currently traded on several major centralized exchanges, including Binance, Crypto.com, and OKX.
10. Regulatory Changes Reshape the Stablecoin Market
Since June, European regulation has been reshaping the stablecoin market. The landmark European Union's Markets in Crypto-Assets (MiCA) regulation has triggered a wave of major exchange stablecoin delistings and product adjustments.
Throughout 2024, the trading volume of the Euro against cryptocurrencies remained above the previous year's average, indicating growing demand. Three months after the implementation of MiCA, the Euro-backed stablecoin market has undergone a significant transformation driven by the emergence of MiCA-compliant alternatives. By November 2024, MiCA-compliant Euro stablecoins (including Circle's EURC, Société Générale's EURCV, and Banking Circle's EURI) have captured a record 91% market share.
After listing EURI in late August, Binance has become a major player in the Euro stablecoin market, on par with Coinbase. Nevertheless, with the push of Circle's EURC, Coinbase remains the largest market, accounting for 47% of the share.
Conclusion
This year has been crucial for establishing digital assets as a viable asset for Wall Street investors. Time will tell if the industry can sustain growth in the coming months and years, but this rebound feels different.
The 2024 rebound is built on the arrival of established companies with risk frameworks (currently including BTC and ETH). With regulatory changes and market structure shifts, next year's rally is expected to go beyond Bitcoin and expand to other assets.
