HTX Ventures 2024 Crypto Market Review and 2025 Outlook: 5 Major Tracks Show Promising 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 thriving bull market, and the influence of the U.S. elections, cryptocurrencies like Bitcoin have reached record valuations, increasingly impacting the social and political landscape.

Looking ahead, five major tracks that show exciting progress in 2024 will attract attention in 2025. These tracks include the Bitcoin ecosystem, infrastructure (Infra), Meme, artificial intelligence (AI), and the TON ecosystem.

Bitcoin Ecosystem

market dominance

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

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

A new market has officially opened, centered around Bitcoin as the core asset, with ETFs and U.S. stocks as the channels for capital inflow, using U.S. listed companies represented by MSTR as vehicles to infinitely absorb U.S. dollar liquidity. Therefore, the necessity for Bitcoin to further develop its ecosystem and improve capital utilization efficiency has become increasingly prominent, which will also be realized 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 Bitcoin ETF concept boom, the trading volume and token prices of earlier rounds of 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 development. Various Layer 2 solutions have emerged on Bitcoin, including Spiderchain, ZKRollup, EVM-compatible chains, sidechains, and more. As of now, the total value locked (TVL) in Bitcoin Layer 2 has reached $3 billion, contributed by 19 projects. Assuming all Bitcoin Layer 2 projects launch in the coming years, the total TVL is expected to grow at least 2 to 4 times, reaching between $6 billion and $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 decline in the second quarter, activity on BTC Layer 1 continued to grow steadily. However, while the Bitcoin market showed signs of recovery in the third quarter, this growth momentum was unable to be sustained.

Other Bitcoin infrastructure

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

interoperability

Bridging and WBTC are still the mainstream interoperability solutions on Bitcoin. Since the Bitcoin network does not directly provide composability to build applications, people have to rely on these bridges/WBTC to unlock DeFi yields on other blockchains. More interoperability solutions, including Xlink, Atomiq, and Auran, are expected to 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 occur from time to time. To this end, security solutions related to Bitcoin have begun to emerge.

Babylon is a typical example. It has developed a secure sharing protocol for Bitcoin, which includes:

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 data availability layers (DA layers), the potential use value of Bitcoin is further being unlocked. 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 via OP_CAT is key.

The Taproot upgrade has enabled the Bitcoin mainnet to issue assets. From the rise of BRC-20 inscriptions and the Ordinals NFT market in 2023, to the subsequent launch of asset issuance protocols such as ARC-20 and SRC-20, and the emergence of infrastructure like Bitcoin Layer 2, Bitcoin Restaking and LST, and Bitcoin cross-chain bridges, the entire ecosystem has rapidly developed. Subsequently, after the Bitcoin conference in July 2024, the market will shift its attention to native BTCFi that can achieve decentralization and non-wrapping models, such as stablecoins.

Currently, through cryptographic techniques such as Discreet Log Contracts (DLC) and Adaptor Signature, developers can program financial contracts in Bitcoin scripts that depend on external events, ensuring the permissionless nature of stablecoins and lending projects during liquidation, 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 means preventing malicious behavior from project parties by increasing the cost of wrongdoing, rather than achieving complete decentralization from the smart contract level. The stablecoin project Shell Finance, which is about to launch its mainnet, adopts this solution.

The one that can truly change the status quo is OP_CAT. As long as OP_CAT can be passed, developers will be able to use sCrypt and other Bitcoin-native high-level programming languages to achieve completely decentralized and transparent smart contract development on the Bitcoin mainnet. sCrypt is a TypeScript framework used for writing smart contracts on Bitcoin, allowing developers to directly use the popular high-level programming language TypeScript to write smart contracts. The current Bitcoin Layer 2 can also be converted to ZK Rollup, and the total scale of BTCFi is expected to increase significantly.

With the dual support of the macro market and infrastructure, it is expected that Bitcoin will experience 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 accelerated the rapid development of projects such as Layer 1, Layer 2, and middleware. The continuous upgrade and construction of the Ethereum ecosystem, along with improvements in Layer 2 fees and performance; the rapid development of other high-performance Layer 1s led by Solana; the ongoing deepening of the multi-chain landscape; projects represented by EigenLayer enhancing network security and capital efficiency through the Restaking mechanism; and multiple Bitcoin Layer 2 projects attempting to combine Bitcoin's security with high-performance scaling solutions, all contribute to the vigorous growth in 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 fees for Layer 2 networks.
• Solana and TRON: Benefiting from the development of Meme Coins and infrastructure projects, on-chain transactions are very active.
• Aptos and Sui: Applications in GameFi and DeFi drive user growth.

Layer 2

Layer 2 continues to be a key path for scalability, with ZK Rollup and Optimistic Rollup each having their own developments.

• zkSync and StarkNet: Continuous iterative upgrades significantly enhance the user experience of ZK Rollup.
• Base and Arbitrum: DeFi and NFT projects are thriving on these platforms, with significant growth in TVL.

Layer 0 and cross-chain middleware

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

• LayerZero: Connecting over 40 chains, significantly increasing cross-chain transaction volume.
• Cosmos: IBC upgrade, cross-chain performance improved by 50%.

modular public chain

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

• Celestia: Supports multiple modular execution layers, becoming a benchmark project for modular public chains.
• Monad: Attracting a large number of developers and DApp deployments with ultra-high TPS performance.

Bitcoin Layer 2

Bitcoin Layer 2 has become an emerging hotspot in the primary market this year, with several related projects such as Babylon, Taro, BounceBit, and Corn completing financing this year, mainly bringing smart contract and scalability features to the Bitcoin network.

• Taro: Expanding Bitcoin's payment and contract capabilities through the Lightning Network.
• Stacks and RSK: Driving the growth of Bitcoin smart contract applications.

Restaking

Restaking has improved capital utilization efficiency, and this year it has received good development and market attention, including projects like EigenLayer and Satori, which have both received tens of millions in investment from top capital this year.

investment and financing events

Infrastructure continues to play an important role in investment and financing this year. Layer 1, modular public chains, and infrastructure related to the Bitcoin ecosystem have all received capital favor. Layer 1 currently represents the most concentrated technological development and exploration in the encryption field, and this track will still be a field concentrated with development resources and capital in the future.

Meme

Important retail funding entry after the implementation of the encryption easing policy

In 2024, the Meme sector has once again become a hotspot in the crypto market. As an ecological stronghold, it not only promotes community consensus but also integrates with fields such as DeFi and GameFi, creating new use cases. Solana has successfully stimulated the activity and vitality of its ecosystem by vigorously promoting innovation and development in Meme projects. From the Bome and Slerf at the beginning of the year to Pump.fun in the middle of the year, these projects showcase a strong "lottery attribute" with their Bonding Curve pricing model and low market capitalization opening strategy, attracting widespread attention. In addition, the decentralized feature of Pump.fun that allows "anyone to deploy Memes" has driven greater ecological prosperity, with over half of Solana's Meme projects originating from Pump.fun, among which several projects have a market capitalization exceeding 1 billion USD. Public chains like SUI and TRON have also quickly followed suit with Meme strategies, further energizing 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 Moonshot allows users to purchase Meme assets using fiat currency, while the post-election wave of politically related Memes provides a strong sense of participation for new players. Looking ahead, the crypto policies of the Trump administration and related governance trends are likely to bring potential news impacts to the market, or give rise to new Meme hotspots. For instance, if the "Government Efficiency Department" led by Elon Musk gains attention, it could trigger another surge in Dogecoin.

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 increase observed after a certain exchange lists a Meme coin fully illustrates this trend, which may continue to drive the development of this sector in the future.

Meme Infrastructure

As the demand for fair issuance among market users continues to strengthen, this year has seen extremely high market attention and participation in the Meme fair launch track. Infrastructure projects such as Pump.fun and SunPump have become leading cash flow projects this year, injecting new momentum into the development of Meme.

Pump.fun

Pump.fun is a Meme project issuance platform built on Solana. By providing simple and intuitive creation tools along with strong community support, it adopts a fair distribution model and has designed a mechanism to automatically add liquidity to DEX. Coupled with Solana's successful market operation, community operation, and low transaction costs, Pump.fun has been recognized by the market and has succeeded since its launch.