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

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 are reaching record valuations, increasingly impacting the social and political landscape.

Looking ahead, we have identified five major tracks that are expected to show exciting progress in 2024 and will be closely monitored in 2025. These tracks 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 track, along with the macroeconomic context 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 the majority of the current crypto market's liquidity is primarily concentrated in the Bitcoin ecosystem and is continuing to grow.

Bitcoin spot ETFs have cumulatively held 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 share of holdings has risen from 3.15% to 6.25%.

A new market has officially opened, centered around Bitcoin as the core asset, using ETFs and U.S. stocks as channels for capital inflow, and leveraging publicly traded companies like MSTR 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 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 wave of 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 developments. 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 launch in the coming years, the total TVL is expected to grow at least 2 to 4 times more, 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 failed to sustain.

other Bitcoin infrastructure

With the increase in Bitcoin's utilization, other infrastructures, including interoperability solutions and security layers, have also begun to emerge.

Interoperability

Bridges 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 more interoperability solutions, including Xlink, Atomiq, and Auran, to be launched in the coming year.

Security Layer

However, these interoperability solutions may pose a threat to the security of underlying assets, as hacking incidents occur from time to time. In response, security solutions related to Bitcoin have begun 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 Data Availability Layers (DA layers), 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 OP_CAT is key.

The Taproot upgrade has enabled the Bitcoin mainnet to have the capability 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, and the emergence of infrastructures such as 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 shifted its attention to native BTCFi that can achieve decentralization and non-wrapped models, such as stablecoins.

Currently, through cryptographic techniques such as Discreet Log Contracts (DLC) and Adaptor Signatures, developers can program financial contracts that depend on external events within Bitcoin scripts, ensuring the permissionless nature of stablecoin 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 aims to deter malicious behavior 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 pass, developers will be able to use sCrypt and other Bitcoin native high-level programming languages to implement completely decentralized and transparent smart contract development on the Bitcoin mainnet. sCrypt is a TypeScript framework for writing smart contracts on Bitcoin, allowing developers to directly use TypeScript, a popular high-level programming language, 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, we believe 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 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 other high-performance Layer 1s led by Solana; the continuous deepening of the multi-chain landscape; projects represented by EigenLayer improving network security and capital efficiency through the Restaking mechanism; and multiple Bitcoin Layer 2 projects attempting to combine the security of Bitcoin with high-performance scaling solutions have all contributed to the flourishing development in the infrastructure field.

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 certain infrastructure projects, on-chain transactions are very active.
• Aptos and Sui: Applications in the GameFi and DeFi sectors drive active user growth.

Layer 2

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

• zkSync and StarkNet: Continuous iteration and upgrades have significantly improved 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 made 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: Attracts 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 contracts 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 also received good development and market attention, including projects like EigenLayer and Satori, which have both received tens of millions in investments from top capital this year.

Infrastructure still occupies an important position in this year's investment and financing. 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 crypto field, and this track will continue to be a domain where development resources and capital are concentrated in the future.

Meme

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

In 2024, the Meme track 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. For example, Solana has successfully stimulated the vitality and activity of its ecosystem by vigorously promoting the innovation and development of Meme projects. From the early Bome and Slerf to a certain project in the middle of the year, these projects showcase a strong "lottery attribute" with their Bonding Curve pricing model and low market cap opening pattern, attracting widespread attention. In addition, the decentralized feature of a certain project's "everyone can deploy Meme" has driven greater ecological prosperity, with more than half of the Solana Meme projects originating from this platform, among which dozens of projects have exceeded a market value of 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 threshold. The launch of a certain platform allows users to purchase Meme assets with fiat currency, while the post-election Meme craze related to politics provides a strong sense of participation for new players. Looking ahead, the U.S. government's encryption policy and related governance trends will bring potential news impacts to the market or spawn new Meme hotspots. For example, if a certain government department gains attention, it may trigger another surge in a certain cryptocurrency.

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 every time a Meme coin is launched on a certain exchange fully illustrates this trend, which may continue to drive the development of this sector in the future.

Meme infrastructure

As the market users' demand for fair issuance has further strengthened, this year has seen high market attention and participation in the Meme fair launch track. Infrastructure projects such as a certain platform have become leading cash flow projects this year, injecting new momentum into the development of Meme.

A certain platform is a Meme project issuance platform built on Solana. By providing simple and intuitive creation tools and strong community support, it adopts a fair distribution model and has designed a mechanism for automatically adding liquidity to the DEX, along with Solana itself.