HTX Ventures 2024 Crypto Market Review and 2025 Outlook: 5 Promising Tracks of 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 booming bull market, and then to the impact of the U.S. elections, cryptocurrencies like Bitcoin have reached record valuations, increasingly influencing social and political landscapes.

Looking ahead, five major tracks showing exciting progress in 2024 will be closely watched 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 liquidity in the current crypto market 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 share has risen from 3.15% to 6.25%.

A new market centered around Bitcoin as the core asset, utilizing ETFs and US stocks as capital inflow channels, and using listed companies as vehicles, has officially opened to infinitely absorb US dollar liquidity. Therefore, the necessity for Bitcoin to further develop its ecosystem and improve capital utilization 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 funding. In the first half of 2024, driven by the Bitcoin ETF concept craze, the trading volume and token prices of previous rounds of Bitcoin Layer 2 projects 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 locked value (TVL) of Bitcoin Layer 2 has reached 3 billion USD, 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 more, reaching 6 billion to 12 billion USD.

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 showed some recovery in the third quarter, this growth momentum did not manage to sustain.

Other Bitcoin Infrastructure

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

In terms of interoperability, bridging and WBTC are currently the mainstream interoperability solutions on Bitcoin. We expect more interoperability solutions, including Xlink, Atomiq, and Auran, to be launched in the coming year.

In terms of security layers, security solutions related to Bitcoin are beginning to emerge. Babylon is a typical example, as it has developed a secure sharing protocol for Bitcoin, including Bitcoin timestamps and Bitcoin staking.

In addition, with the emergence of new technologies such as data availability layers (DA layers), the potential use value of Bitcoin is further unlocked. Nubit is a key player in the Bitcoin DA space.

Whether the upgrade in 2025 passes through OP_CAT is key.

The Taproot upgrade has endowed the Bitcoin mainnet with the capability 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 developed rapidly. Subsequently, after the Bitcoin conference in July 2024, the market shifted its attention to decentralized, non-wrapped native BTCFi, 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 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 is to prevent malicious behavior from project parties by increasing the cost of wrongdoing, rather than achieving complete decentralization from the smart contract layer. The stablecoin project Shell Finance, which is about to launch its mainnet, employs 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 sCrypt and other Bitcoin native high-level programming languages to achieve fully decentralized and transparent smart contract development on the Bitcoin mainnet. The 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, 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 upgrade and construction of the Ethereum ecosystem, as well as the improvement 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 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—all of these have facilitated the vigorous growth of 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 costs on Layer 2 networks.
• Solana and TRON: Benefiting from the development of Meme Coins and related 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 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 achieved new breakthroughs in interoperability.

• LayerZero: Connecting over 40 chains, cross-chain transaction volume has significantly increased.
• Cosmos: IBC upgrade, cross-chain performance increased 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 a new 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 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 the efficiency of capital utilization, and this year it has gained good development and market attention, including projects like EigenLayer and Satori, which have received tens of millions in investments from leading capital this year.

investment and financing events

Infrastructure continues to hold an important position in this year's investment and financing. Layer 1, modular public chains, and infrastructure related to the Bitcoin ecosystem have all attracted capital. Layer 1 currently represents the most concentrated technical development and exploration in the encryption field, and this sector will remain a focus for development resources and capital in the future.

Meme

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

In 2024, the Meme sector once again becomes 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. From the Bome and Slerf projects 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 cap opening strategy, attracting widespread attention. Additionally, the decentralized feature of Pump.fun, which allows "anyone to deploy Memes", has fostered greater ecological prosperity, with over half of the Solana Meme projects originating from Pump.fun, among which dozens of projects have surpassed a market cap of 1 billion USD. Certain public chains have also quickly followed the Meme strategy, 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 entry barriers. The launch of Moonshot allows users to purchase Meme assets using fiat currency, while the post-election political-related Meme craze provides a strong sense of participation for new players. Looking ahead, certain political trends may bring potential news impact 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 increase seen each time a Meme token 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 demand for fair issuance among market users continues to grow, this year has seen extremely high market attention and participation in the Meme fair launch track. Infrastructure projects such as Pump.fun have become leading cash flow projects this year, injecting new momentum into the development of Meme.

Pump.fun 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 that automatically adds liquidity to DEX. Coupled with Solana's successful market operations, community management, 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, over 40,000 projects have been successfully issued to a certain DEX, with total project revenue exceeding 1.17 million SOL, approximately 200 million USD.

At the same time, the success of Pump.fun has attracted many other projects to imitate it, with Pump clones appearing on multiple chains. Overall, this round of market-driven Meme craze cannot be separated from the innovation and development of infrastructure tools. Tools like Pump have taken the lead in automatically adding liquidity to the issuance platform, while pursuing fairness, low cost, and efficiency in the issuance costs and methods, effectively reducing issuance costs and thresholds, enhancing market and community confidence and participation, which has led to the continued explosion of Meme projects this year.

The success of Pump.fun has not been perfectly replicated on other chains, mainly due to the following reasons:

• Solana has become one of the ideal launch platforms for Meme projects due to its low transaction costs and high throughput.