HTX Ventures 2024 Crypto Market Review and 2025 Outlook: 5 Bright 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 robust development of the bull market, and then the impetus from the U.S. elections, cryptocurrencies such as Bitcoin have reached record valuations, increasingly impacting social and political landscapes.

Looking ahead, five major tracks that are expected to show exciting progress in 2024 are worth closely monitoring 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 increased from 45.27% to 56.81%. This means that a significant portion of the current crypto market liquidity is primarily concentrated in the Bitcoin ecosystem, and it is continuing to grow.

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

A new market has officially opened that uses Bitcoin as its core asset and ETFs and US stocks as channels for capital inflow, utilizing US-listed companies represented by MSTR as vehicles to infinitely absorb US 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 raising prices.

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 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 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 decline in the second quarter, activity on BTC Layer 1 has continued to grow steadily. However, while the Bitcoin market saw a recovery in the third quarter, this growth momentum was not sustained.

Other Bitcoin Infrastructure

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

Interoperability

Bridging and WBTC are currently the mainstream interoperability solutions on Bitcoin. Since the Bitcoin network does not directly offer composability for building 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 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. To address this, security solutions related to Bitcoin have begun to emerge.

Babylon is a typical example. It has developed a set of secure sharing protocols for Bitcoin, including:

• Bitcoin Timestamp: Allows 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 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 through OP_CAT is key.

The Taproot upgrade has enabled the Bitcoin mainnet 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 such as ARC-20 and SRC-20, along with the emergence of infrastructures 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 shifted its attention to native BTCFi that can achieve decentralization and non-wrapped models, such as stablecoins.

Currently, through the cryptographic techniques of Discreet Log Contracts (DLC) and Adaptor Signature, developers can program financial contracts in Bitcoin scripts that rely on external events, ensuring the permissionless nature of stablecoins and lending projects during liquidation, and guaranteeing the permissionless nature of multi-party trading operations through Partially Signed Bitcoin Transactions (PSBT). However, this still involves game theory logic to some extent, that is, 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.

What can truly change the status quo is OP_CAT. As long as OP_CAT can pass, developers will be able to use native advanced programming languages such as sCrypt to achieve 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. 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, it is believed 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 ongoing upgrades and construction of the Ethereum ecosystem, as well as 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 several Bitcoin Layer 2 projects attempting to combine the security of Bitcoin with high-performance scaling solutions, all contribute to the vigorous development 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 Coin and some 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 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 made new breakthroughs in interoperability.

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

modular public chain

Modular public chains provide 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 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, with projects such as EigenLayer and Satori receiving investments of tens of millions from top-tier capital.

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 attracted capital. Layer 1 currently represents the most concentrated technological development and exploration in the encryption field, and this track will still be a field of concentrated development resources and capital in the future.

Meme

Important retail capital entry after the implementation of encryption loose monetary policy

In 2024, the Meme track once again became 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 Bome and Slerf at the beginning of the year to Pump.fun in the middle of the year, these projects, with their Bonding Curve pricing model and low market cap opening strategy, exhibit strong "lottery attributes" and have attracted widespread attention. In addition, the decentralized feature of Pump.fun, which allows "anyone to deploy memes," has fostered greater ecological prosperity, with more than half of Solana's Meme projects originating from Pump.fun, and dozens of these projects having a market cap exceeding $1 billion. Public chains like SUI and TRON have also quickly followed Meme strategies, further invigorating their respective ecosystems.

Meme projects have become an important tool for attracting new users to the crypto market due to their simplicity and low barrier to entry. The launch of some platforms allows users to purchase Meme assets with fiat currency, while the post-election political-related Meme craze provides a strong sense of participation for new players. Looking ahead, the Trump administration's encryption policies and related governance trends will bring potential news impacts to the market and may 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 surges observed after some exchanges list Meme tokens fully demonstrate 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 grow, this year has seen high market attention and participation in the Meme fair launch track. Infrastructure projects such as Pump.fun have become top 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. It provides simple and intuitive creation tools and powerful community support.