2024 Crypto Market Review: BTC Dominance Rises, ETH Layer2 Explodes, Solana Leads Innovation

1. Market Overview

In 2024, the total market capitalization of the cryptocurrency market grew from $2.31 trillion to $3.33 trillion, an increase of 44.2%. This growth was driven by several key events, including the approval of the spot Bitcoin ETF and Trump’s victory. Bitcoin's dominance rose to 56.8%, and the assets under management for ETFs doubled.

Despite the launch of Ethereum ETFs, performance has been lackluster. Solana has performed well, with SOL prices rising by 29.3% and a net inflow of $2 billion into its ecosystem. The DeFi market share has expanded, with the total locked value (TVL) doubling. The DEX/CEX trading volume ratio has increased to 11.05%, with an annual trading volume of $2.67 trillion. Solana and Base have both doubled their market shares in DeFi TVL, reaching 7.17% and 3%, respectively.

The market capitalization of stablecoins has grown by 26.8%, exceeding $205 billion. Looking ahead, the potential approval of ETFs for assets such as XRP and SOL will have a positive impact on the market.

Macroeconomic Environment and Politics

Politics

Trump has been elected president of the United States again, and the Republican Party has won a majority in Congress. Trump's policies may bring uncertainty to the international situation. He is friendly towards cryptocurrencies, but specific policies still need to be observed.

Europe is affected by the Russo-Ukrainian war, with right-wing parties gaining more discourse power. Europe is following the United States in terms of cryptocurrency regulation, implementing the MiCA legislation.

The situation in the Middle East is tense, with ongoing conflict between Israel and Hamas. Multiple countries in South America are advancing the legalization of cryptocurrency.

Economy

In 2024, the global GDP growth rate is 2.6% and the inflation rate is 2.5%. Inflation in the United States has been partially controlled, leading to a rate cut. The Eurozone's economic growth is sluggish due to the impact of geopolitical conflicts. China is facing challenges such as weak consumption and export obstacles. Emerging market countries are affected by the dollar's interest rate hike, with some currencies depreciating.

The three major U.S. stock indexes rose sharply, with technology stocks performing particularly well. The development of AI has led to increased productivity. The Nikkei index hit a 30-year high, benefiting from carry trades and export advantages.

2. Bitcoin

2.1 Product and Agreement Design

In the second half of 2024, Bitcoin will have several software upgrades, such as Bitcoin Core 28.0 introducing flexible transaction forwarding strategies and the Lightning Network BOLT12. Discussions about protocol layer design are ongoing, mainly focused on soft fork proposals.

Different developers have differing opinions on the soft fork proposals, including the addition of new opcodes and improvements to the Lightning Network. A consensus has not yet been reached, and progress is expected by 2025.

The implementation of BitVM is still progressing, focusing on the design and implementation of cross-chain bridges. Some test versions of cross-chain bridges based on BitVM have already begun to operate.

2.2 Layer 2 - Lightning Network

The number of Lightning Network channels is basically stable, with a total of about 5000 BTC. The number of nodes is stable, but the number of channels has decreased, which may indicate that liquidity is concentrated in large nodes.

The agreements and application ecosystem continue to develop. BOLT12 has been adopted by multiple clients, supporting static payment methods. Some Layer 1 networks are developing Layer 2 solutions compatible with the BOLT specification.

The feasibility of business models remains a key focus. Service-oriented projects, especially those utilizing the Lightning Network as a settlement layer for cross-border transactions, may receive more attention. Future development depends on the issuance of stablecoins on the Lightning Network.

2.3 Layer 2 - Side Chains

Different Layer 2 projects perform variably. BTCFi faces challenges from relying on unsustainable TVL surges and airdrop incentives. The main motivation for depositing Bitcoin into L2 is to gain low-risk return opportunities.

BTCFi can achieve better liquidity abstraction and protocol layer stacking by leveraging existing infrastructure. If the focus is on enhancing the practicality of BTCFi rather than replicating EVM chains, there is still significant growth potential.

The key to the success of Bitcoin L2 lies in ensuring asset security and pursuing a vertical integration strategy.

On-chain assets 2.4

The overall performance of on-chain Bitcoin assets is mediocre and has not appreciated with the rise in Bitcoin prices. BRC20, Runes, and other meta-protocol assets are underperforming and are being replaced by new narratives around Meme and AI agents.

RGB, as an early CSV protocol, is still being promoted, and there is existing technical implementation support for integration with the Lightning Network. Its narrative mainly revolves around the issuance of Tether stablecoins, but the specific plan is still unclear.

Taproot Assets, launched by Lightning Labs, enables low-cost minting of stablecoins and instant settlement on Bitcoin. Tether has announced that it will issue stablecoins based on this.

The on-chain asset sector faces challenges of insufficient DEX experience and liquidity, while CEX also struggles with the integration of new asset types.

2.5 BTCFi

BTCFi provides additional returns for Bitcoin holders, and as the infrastructure improves, the total locked value is expected to grow. The types of returns pursued by BTC assets have shifted from L2 to staking, liquid staking, and liquid re-staking.

Babylon, as a cornerstone of the BTCFi ecosystem, has attracted a large amount of TVL denominated in Bitcoin. Various LST projects have emerged, drawing on mature DeFi design concepts. However, the recent Solv controversy has cast a shadow over the development of BTCFi in 2025.

Protocols that can flexibly mobilize Bitcoin liquidity and support a richer variety of asset classes will have a better chance of success.

3. Ethereum

Despite the launch of the ETH ETF, its performance has not matched that of the Bitcoin ETF. The ETH/BTC ratio has decreased, highlighting institutional investors' preference for Bitcoin. Since the Dencun upgrade, Layer 2 gas fees have significantly decreased, leading to a flow of funds into Layer 2 projects.

3.1 L2s

After the Dencun upgrade, rollups transaction fees decreased by over 90%. Base, OP Mainnet, and Arbitrum achieved net inflows of $3.5 billion, $2.1 billion, and $1.7 billion respectively. Layer 2 daily transaction volume grew by 325%, and the number of daily active addresses doubled.

Base has shown outstanding performance, with daily active users surging to 1.6 million. Its DeFi activity has significantly increased, with the stablecoin market growing to $3.6 billion and daily DEX trading volume rising to $1.7 billion. Base has also established an important partnership with Stripe.

Arbitrum has launched Stylus, which supports the development of smart contracts in multiple programming languages. Its future roadmap includes multi-client support, adaptive pricing, and more.

The OP Superchain continues to develop, with the total number of chains based on the OP-Stack reaching 56. The number of active developers has surged to 3,446.

L2 networks with unique positioning and value propositions are expected to further integrate and enhance user stickiness.

3.2 Re-staking

The amount of staked Ethereum has increased overall, with the yield dropping to 3%. Re-staking protocols like Eigenlayer are attracting a large amount of TVL. The TVL of Symbiotic has grown more than fivefold, reaching 2.12 billion USD.

The future catalytic factors depend on the implementation of the reduction mechanism and the flexibility provided to AVS, stakers, and node operators.

3.3 Ethereum Future Roadmap and EIP Proposals

2025 will be an important year for Ethereum's development, with the Pectra upgrade expected to be completed in the first quarter. Key EIP proposals include:

• EIP-7691: Expand Blobs target capacity to further reduce L2 costs
• EIP-7702: Introduce smart contract functionality for EOA accounts
• EIP-7251: Optimizing Validator Management to Reduce Network Load

The Ethereum core research team has reorganized its long-term development roadmap, aiming for a major upgrade in 2029, introducing core technologies such as zero-knowledge proofs and post-quantum cryptography.

Other Infrastructure

Sorter

The concept of decentralized shared sorting is becoming increasingly important. Metis has become the first Ethereum Rollup to achieve decentralized sorting. Major players include Astria, Espresso, and Rome Protocol. The field is expected to see greater growth by 2025.

Data Availability and Modular Blockchain

The data availability track is still dominated by Ethereum Blobs, Celestia, Avail, and EigenDA. The demand for data availability solutions continues to grow. Ethereum's vision is to provide low-cost solutions, starting from the Pectra upgrade and eventually implementing PeerDAS.

Intention and Chain Abstraction

The Chain Abstraction Coalition has been established, with over 60 blockchain members. Particle Network and Xion have respectively launched Universal Accounts and Meta Accounts. The ERC-7683 proposal has been introduced to address interoperability challenges.

AI agents and intent-driven DeFi trading are rapidly innovating, such as Griffain can automatically execute trades through natural language requests.

4. Solana

In 2024, Solana performed exceptionally well, with a price increase of about 75%, and the SOL/ETH ratio rising to 0.06. Its unique SVM architecture offers low fees and high throughput. The market capitalization of stablecoins has grown more than threefold, reaching $5.1 billion. There has been significant growth in the number of developers adopting the platform, with the number of new developers surpassing that of other blockchains.

In 2024, the main focus of the Solana ecosystem will be on areas such as DePIN, meme, and PayFi.

DePIN

Helium and Render Network have shown strong performance after migrating to Solana. io.net has become one of the most influential computing power projects of 2024. New projects such as Hivemapper, Cudis, Grass, and XNET have emerged.

Meme

The year 2024 is regarded as the year of Memecoins. Pump.fun has successfully launched, driving a significant increase in Meme coin trading volume on Solana. Data analysis platforms like GMGN.ai provide support for early identification of Meme investment opportunities.

PayFi

PayFi aims to integrate the advantages of crypto payments and DeFi to establish a new financial market. Solana Pay, as an integrated plugin, can be used in Shopify storefronts. Solana has also partnered with VISA to expand offline payment channels.

Looking to the Future

Firedancer activation will further enhance network performance and security. The Solana plugin offers greater flexibility and programmability. The approval potential of Solana ETFs, the growth of the stablecoin market, increased institutional adoption, and rising DeFi activity will all bring positive impacts to the ecosystem.

5. Alt-L1s

In 2024, Alt-L1 continues to attract attention, competing with Ethereum in various aspects. Emerging Alt L1s worth noting include:

Berachain

Introducing the Proof of Liquidity ( PoL ) mechanism to reward liquidity providers with governance tokens. The BeaconKit modular consensus client is compatible with EVM. The TVL exceeded $1.5 billion before launch and soared to become the eighth largest network after launch.

TON

With Telegram's 900 million monthly active users, it attracted a lot of attention in 2024. Daily active users increased from 27,725 to 293,539, and DeFi TVL grew more than tenfold. However, attention declined after Q4, and TVL has receded. Future growth will rely on close collaboration with Telegram.

Kaia

Formed by the merger of Klaytn and Finschia, integrating the two major messaging applications LINE and KakaoTalk. It offers optimization measures such as account abstraction and gas fee proxy payments. TVL increased from $37 million to $60 million. Launched a $10 million Kaia Wave incentive program in partnership with LINE NEXT.

Move

The number of developers in the Move ecosystem has increased to over 1,500. Sui outperforms Aptos on multiple metrics, with a net inflow of $1.2 billion in 2024 and a nearly 500% increase in the price of its native token. Aptos TVL