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

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 influence of the U.S. elections, cryptocurrencies like Bitcoin have reached record valuations, increasingly affecting social and political landscapes.

Looking ahead, five major sectors showing exciting progress in 2024 are worth close attention in 2025. These sectors include the Bitcoin ecosystem, infrastructure (Infra), Meme, artificial intelligence (AI), and the TON ecosystem. This report provides an in-depth analysis of the current status, challenges, and future opportunities for each sector, along with a macroeconomic background and market outlook.

Bitcoin Ecosystem

market dominance

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

The Bitcoin spot ETF has accumulated 5.3% of the total existing Bitcoin supply, with the holdings increasing from 629,900 coins at the beginning of the year to 1,243,608 coins, an increase of 613,708 coins. Within 12 months, the ETF's holdings percentage rose from 3.15% to 6.25%. ( as of December 4, 2024 )

A new market centered around Bitcoin as the core asset, using ETFs and US stocks as channels for capital inflows, and leveraging publicly listed companies as vehicles to infinitely absorb US dollar liquidity has officially opened. Therefore, the necessity for Bitcoin to further develop its ecosystem and improve capital utilization efficiency has become increasingly prominent, which will also 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 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 advancements. 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 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 downturn in the second quarter, activity on the BTC Layer 1 continued to grow steadily. However, while the Bitcoin market saw a recovery in the third quarter, this growth momentum failed to sustain.

other Bitcoin infrastructure

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

interoperability

Bridging and WBTC are still 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. We expect that more interoperability solutions, including Xlink, Atomiq, and Auran, will 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 are not uncommon. In response, security solutions related to Bitcoin have started 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 released. 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 equipped the Bitcoin mainnet with the ability 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, as well as the emergence of infrastructure such as Bitcoin Layer 2, Bitcoin Restaking and LST, and Bitcoin cross-chain bridges, the entire ecosystem has rapidly evolved. Subsequently, after the Bitcoin conference in July 2024, the market shifted its focus towards decentralized, non-wrapped native BTCFi, such as stablecoins.

Currently, through the cryptographic techniques of Discreet Log Contracts (DLC) and Adaptor Signatures, developers can program financial contracts in Bitcoin scripts that rely on external events, ensuring permissionless liquidation for stablecoin and lending projects, 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, which prevents malicious actions by project parties by increasing the cost of wrongdoing, rather than achieving complete decentralization from the smart contract level. The stablecoin project that is about to launch its mainnet adopts this approach.

The real game changer is OP_CAT. As long as OP_CAT can pass, developers will be able to use advanced programming languages native to Bitcoin, such as sCrypt, to implement 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 in TypeScript, a popular high-level programming language. The current Bitcoin Layer 2 can also be converted to ZK Rollup, and the total scale of BTCFi is expected to significantly increase.

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, as well as the improvements in Layer 2 fees and performance; the rapid development of high-performance Layer 1; the continuous deepening of the multi-chain pattern; the enhancement of network security and capital efficiency through representative projects via the Restaking mechanism; and multiple Bitcoin Layer 2 projects attempting to combine Bitcoin's security with high-performance scaling solutions have all contributed to the vigorous development of 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 on Layer 2 networks.
• Some public chains: Benefiting from the development of Meme Coins and infrastructure projects, on-chain transactions are very active.
• Some emerging public chains: Applications in the GameFi and DeFi sectors 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 development.

• Some ZK Rollup projects: continuous iteration and upgrades have significantly improved the user experience of ZK Rollup.
• Some Optimistic Rollup projects: DeFi and NFT projects are thriving on these platforms, with a significant increase in TVL.

Layer 0 and cross-chain middleware

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

• Some cross-chain projects: connecting over 40 chains, significantly increasing cross-chain transaction volume.
• Some Layer 0 projects: IBC upgrade, cross-chain performance increased by 50%.

modular public chain

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

• Some modular public chain projects: support multiple modular execution layers and become benchmark projects for modular public chains.
• Other modular public chain projects: attracting a large number of developers and DApp deployments with extremely 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, primarily bringing smart contract and scalability features to the Bitcoin network.

• Some Lightning Network projects: Expanding Bitcoin's payment and contract capabilities through the Lightning Network.
• Some Bitcoin Layer 2 projects: driving the growth of Bitcoin smart contract applications.

Restaking

Restaking has improved capital utilization efficiency, and this year it has also gained good development and market attention, with some projects receiving tens of millions in investment from leading capital this year.

Infrastructure remains a key focus in investment and financing this year. Layer 1, modular public chains, and infrastructure related to the Bitcoin ecosystem have all attracted capital. Layer 1 currently represents the most concentrated technical development and exploration in the encryption field, and this track will continue to be a domain where development resources and capital are concentrated in the future.

Meme

Important retail capital entry after the implementation of the encryption easing policy.

In 2024, the Meme track once again became a hot topic in the crypto market. As an ecological stronghold, it not only promoted community consensus but also integrated with fields such as DeFi and GameFi, creating new use cases. For example, some public chains have successfully stimulated the activity and vitality of their ecosystems by vigorously promoting the innovation and development of Meme projects. From some projects at the beginning of the year to others in the middle of the year, these projects, with Bonding Curve pricing models and low market cap opening modes, demonstrated a strong "lottery attribute," attracting widespread attention. In addition, the decentralized feature of "anyone can deploy Meme" in some projects has driven greater ecological prosperity, with over half of the related Meme projects originating from these platforms, among which dozens of projects have a market cap exceeding $1 billion. Multiple public chains have also quickly followed the Meme strategy, further activating 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 certain platforms has allowed users to purchase Meme assets using fiat currency, while the Meme craze related to politics after the elections has provided a strong sense of participation for new players. Looking ahead, the new government's crypto policies and related governance trends will bring potential news impacts to the market or give rise to new Meme hotspots.

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 each time exchanges list Meme tokens fully illustrate this trend, which may continue to drive the development of this sector in the future.

Meme Infrastructure

With the increasing demand for fair issuance from market users, this year has seen a high level of market attention and participation in the Meme fair launch track. Infrastructure projects like certain platforms have become top cash flow projects this year, injecting new momentum into the development of Meme.

A Meme Issuance Platform

The platform is a Meme project issuance platform built on a certain public chain. By providing simple and intuitive creation tools along with strong community support, it adopts a fair issuance model.