HTX Ventures 2024 Crypto Market Review and 2025 Outlook: 5 Prominent 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 impetus from the U.S. elections, cryptocurrencies like Bitcoin have reached record valuations, increasingly influencing social and political dynamics.

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 has increased from 45.27% to 56.81%. This means that most of the current liquidity in the crypto market is primarily concentrated in the Bitcoin ecosystem and is continuing to grow.

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. Over the course of 12 months, the ETF's holding percentage rose from 3.15% to 6.25%.

A new market centered around Bitcoin as the core asset, with ETFs and U.S. stocks as the channels for capital inflow, has officially opened through publicly listed companies serving as vehicles to infinitely absorb U.S. dollar liquidity. Therefore, the necessity for Bitcoin to further develop its ecosystem and improve capital efficiency is becoming increasingly prominent, which will also be achieved by increasing BTC demand and raising 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 previous rounds of Bitcoin Layer 2 projects have surged significantly. These old 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 are launched 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 downturn in the second quarter, BTC Layer 1 activity continued to grow steadily. However, while the Bitcoin market saw a recovery in the third quarter, this growth momentum did not manage to sustain.

Other Bitcoin Infrastructure

As the utilization of Bitcoin increases, other infrastructures including interoperability solutions and security layers are also beginning to emerge.

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.

However, these interoperability solutions may pose a threat to the security of underlying assets, as hacking incidents occur from time to time. As a result, 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 unleashed. 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 enables 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 like ARC-20 and SRC-20, and the rise 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 will turn 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 in Bitcoin scripts that rely on external events, ensuring the permissionless nature of stablecoins and lending projects during settlement, 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, namely 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 like sCrypt on the Bitcoin mainnet to achieve fully decentralized and transparent smart contract development. sCrypt is a TypeScript framework for writing smart contracts on Bitcoin, allowing developers to write smart contracts directly using 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 increase significantly.

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, along with improvements in Layer 2 fees and performance; the rapid development of other high-performance Layer 1s led by Solana; the continued deepening of the multi-chain landscape; projects represented by EigenLayer that enhance 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 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: EIP-4844 launched, reducing fees on Layer 2 networks.
• Solana and TRON: Thanks to the development of Meme Coins and 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 developing.

• zkSync and StarkNet: Continuous iterations and upgrades significantly enhance the user experience of ZK Rollups.
• 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: Connects 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 and has become 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 this year's primary market, 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 gained good development and market attention, with projects such as EigenLayer and Satori receiving tens of millions in investment from leading capital.

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 been favored by capital. Currently, Layer 1 represents the most concentrated technological development and exploration in the encryption field, and this track will still be a field 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 activity and vitality of its ecosystem by vigorously promoting the innovation and development of Meme projects. From the early Bome and Slerf to the mid-year Pump.fun, these projects, with their Bonding Curve pricing model and low market cap opening strategy, demonstrate strong "lottery attributes," attracting widespread attention. Moreover, the decentralized feature of Pump.fun, allowing "anyone to deploy Memes," has driven greater ecological prosperity, with over half of Solana's Meme projects originating from Pump.fun, among which dozens have a market cap exceeding $1 billion. Public chains like SUI and TRON have also quickly followed the Meme strategy, further invigorating their respective ecosystems.

Meme projects have become an important tool for attracting new users in the crypto market due to their simplicity and low entry barriers. A certain trading platform has launched a feature that allows users to purchase Meme assets using fiat currency, while the post-election wave of politically related Memes has provided 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, 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 on a certain trading platform after the launch of Meme coins fully illustrate 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 a high level of market attention and participation in the Meme fair launch track. Infrastructure projects such as Pump.fun and SunPump have become the 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. By providing simple and intuitive creation tools along with strong community support, it adopts a fair distribution model and has designed a mechanism for automatically adding liquidity to DEX. Coupled with Solana's successful market operation, community operation, and low transaction costs, Pump.fun was recognized by the market as soon as it was launched, successfully incubating multiple well-known meme projects. As of November 2024, more than 40,000 projects have been successfully issued to a certain DEX, with total project revenue exceeding 1.17 million SOL, approximately 200 million dollars.

At the same time, the success of Pump.fun has attracted many others.