Market View
This is our annual review of the predictions we made in the previous year, which we undertake both to maintain transparency on the veracity of our arguments as well as to improve upon our results. Below we review the accuracy of the predictions we made in our 2024 Crypto Market Outlook and grade ourselves both by our intents and outcomes. Note that our forecasts are not based on price predictions (which as an exchange, we do not give) but on the perspectives we provide on the market trends, trading risks, and critical developments that our institutional clients rely on for their investment strategies and decision-making.
Here were the key themes we enumerated for 2024:
Bitcoin hegemony
- What we said: Institutional flows will remain firmly anchored on bitcoin, with pent-up demand from traditional investors seeking to enter this market, making it harder to supplant bitcoin hegemony.
- Grade: A+
- What we got right: Investors anchored on bitcoin last year, with bitcoin dominance starting the year at 51% and reaching a high of 62% by mid-November. BTC outperformed ETH and most altcoins including notable performers like SOL.
- What we got wrong: In the post US election rally, altcoins caught a significant bid in anticipation of an improved regulatory regime, which drove BTC dominance down from 62% to a low of 55%.
A new trading regime
- What we said: As infrastructure matured throughout the previous bear cycle, we expect more market players to focus on finding the potential web3 apps that can help crypto bridge the gap between early adoption and mainstream use.
- Grade: A
- What we got right: A number of breakout crypto apps saw large mainstream use across multiple sectors. Polymarket stood out as a widely used application for prediction markets. Meanwhile, games like Off the Grid, memecoin trading tools like Moonshot, and rewards apps like Blackbird all saw growth as well.
- What we got wrong: Many apps launched without tokens, making it challenging for liquid market participants to capitalize on the success of these projects outside of private investment rounds.
The layer-1 equilibrium
- What we said: Chains would show increasing specialization – both by sector and function – throughout 2024. In particular, we expect more alt L1s to design their networks in a way that better aligned with specific narratives to become more targeted platforms.
- Grade: A-
- What we got right: Some of the most successful network launches in 2024 championed improvements beyond simple scalability. Hyperliquid, for example, was tailored to trading. Other top L1 performers also had targeted designs – Bittensor for artificial intelligence and Sui for MoveVM optimizations, for example.
- What we got wrong: General purpose blockchains have still continued to launch with some success.
The evolution of layer-2s
- What we said: L2s would continue to expand in scope and usage as more rollups pushed the boundaries of modular architecture. Meanwhile, the Dencun upgrade would lower fees for Ethereum L2s across the board.
- Grade: A+
- What we got right: L2s saw explosive growth in all metrics – active addresses, transaction counts, total value locked, etc. This was driven in part by drastic fee reductions following Dencun, as well as improved security guarantees by leading L2s. At the same time, L2 architecture has become more differentiated across performance, security, and execution environments.
- What we got wrong: More modular developments leveraging the strengths of different ecosystems to resolve issues of interoperability and fragmentation are still in progress.
The long road to de-dollarization
- What we said: Dedollarization would likely remain a center topic of conversation, though the USD would not be under any threat of losing its global supremacy. That said, there could be accelerated interest in developing new cross border payment solutions as more countries strike bilateral agreements to reduce their dependence on the USD.
- Grade: B+
- What we got right: The USD remained strong with the multilateral dollar index (DXY) increasing from 101 to 109 throughout 2024. The prospect of global tariffs could further entrench USD strength in 2025, although we’re waiting to see the official policies to be implemented by the new US administration.
- What we got wrong: Alongside geopolitical factors like sanctions imposed by the US on other nations, growing US debt and deficit issues have accelerated demand for alternatives to the USD, making a multipolar currency system a more plausible scenario in the longer-term.
The economic outlook for 2024
- What we said: The US would likely avoid a recession, though the economy would remain softer with the tapering of government stimulus. Meanwhile, inflation would continue its disinflationary trend, which would pave the way for rate cuts in 2H24.
- Grade: A+
- What we got right: The US avoided a recession, though concerns over the economy – particularly employment – remained. Inflation also tapered and rate cuts began in the latter half of 2024.
- What we got wrong: The US economy demonstrated a stronger performance than even we expected, as consumer spending contributed positively to growth.
Reading the regulatory tea leaves
- What we said: The foundations for crypto regulation will continue to be built in 2024, leading to more incremental regulatory clarity and greater institutional participation in this space in the future. The potential approval of spot bitcoin ETFs in the US could widen crypto access to new classes of investors and reshape the market in unprecedented ways.
- Grade: A
- What we got right: Spot BTC and ETH ETFs were approved, with the former setting record levels of inflows in the year following its launch. Meanwhile, the FIT 21 Act passed the US House, and the SAB 121 repeal passed both the US House and Senate.
- What we got wrong: Specific crypto regulations have still not been enacted into law despite strong legislative momentum.
Tokenization, redux
- What we said: Even more business and financial sectors will incorporate aspects of tokenization, though regulatory ambiguity and the complexities of managing different jurisdictions may continue to pose significant challenges for market participants.
- Grade: A
- What we got right: Tokenization continued displaying strong growth throughout 2024, rising from $8.4B to $15.2B in onchain assets. Major institutions such as BlackRock have also expanded their onchain tokenization efforts.
- What we got wrong: Tokenization efforts in sandboxes like those in Singapore, the EU, and the UK have lost the limelight to large tokenized treasury funds such as BUIDL that are released on public networks.
Can we play a game?
- What we said: More game developers are trying to merge the network effects of a high-quality AAA game with sustainable financialization mechanics. With many projects reaching the 2-3 year mark in their game development process, we think the release of some web3 games in 2024 should be closely watched.
- Grade: B+
- What we got right: A number of crypto games launched in 2024, with leaders such as Off the Grid capturing mainstream attention by delivering a AAA game experience with distributions across multiple platforms.
- What we got wrong: Crypto-integrated games have not yet reached sustained levels of high market penetration, and a number of anticipated crypto games are still under development or closed beta.
How to hardwire a decentralized future
- What we said: The decentralization of real world resources would continue to be a major trend into 2024 (and beyond). We are specifically focused on decentralized physical infrastructure networks (DePIN) and the related concept of decentralized compute (DeComp).
- Grade: A-
- What we got right: DePIN grew massively as a sector with revenues for many DePIN projects growing by more than an order of magnitude. For example, io.net, a DeComp project, saw an 18x growth in revenue throughout 2024.
- What we got wrong: The adoption of DePIN networks has largely been localized to crypto-forward participants, though there are early signs of broader market penetration.
Decentralized identity
- What we said: Innovations like zero-knowledge (ZK) fraud proofs and fully homomorphic encryption (FHE) would enable computations on user data while still keeping that data encrypted. To make this a reality, we think that individuals would need to have control over their own identity data.
- Grade: C
- What we got right: ZK identities have gained early traction in a few locales. Buenos Aires, for example, introduced QuarkID to enable ZK secured digital identities. Meanwhile, the updated European Digital Identity (EUDI) regulation mandates that by 2026, all member states must offer an EU digital identity wallet to citizens and residents. This could be powered by ZK technologies (though not necessarily blockchain related). Coinbase also launched Verified by Coinbase for onchain attestations.
- What we got wrong: The scale of adoption of these technologies remains fairly nascent and in the exploratory phases. Roadblocks, both regulatory and technological, continue to persist, resulting in a fairly slow rollout of these technologies.
A better user experience
- What we said: More projects would continue to focus on how to make crypto technology more user friendly and accessible. In particular, improvements to private key management and fee abstraction would see significant improvements with the adoption of more account abstraction tooling.
- Grade: B+
- What we got right: Smart wallets and pay master architectures have seen increased adoption. More than 100K Coinbase Smart Wallets were created in 2024, with an uptick in embedded smart wallet usage in applications across the board.
- What we got wrong: Despite large improvements in technological capabilities, the adoption of smart wallets and account abstraction architecture has not meaningfully occurred in more legacy applications.
Validator middleware and customizability
- What we said: Validator middleware solutions would continue to grow in adoption. In particular, restaking (pioneered by EigenLayer) and distributed validator technology (DVT) would see substantial growth.
- Grade: A-
- What we got right: EigenLayer was one of the largest growth stores in 1H24 and is currently the third largest protocol by TVL at $14.4B. Meanwhile, DVT has also seen an uptick in usage with leaders like SSV network seeing tremendous growth from 2K validators to 61K validators in 2024 (now accounting for 5% of all staked ETH).
- What we got wrong: Validator middleware technologies took a backseat in market focus in the latter half of 2024 following the EigenLayer token genesis. Meanwhile, restaking services on EigenLayer continue to have security guardrails and are not yet live with full restaking payouts.
Outlook 1Q25
In the near term, crypto markets are primarily focused on two catalysts: President-elect Donald Trump’s inauguration on January 20th and the ongoing FTX claim distributions. However, the timeline for realizing both effects are uncertain, putting broader macro considerations in the driver’s seat for now, in our view. While some potential announcements, such as confirmation of a strategic bitcoin reserve, could provide upside, Polymarket assigns relatively low odds of that happening in the first 100 days. The FTX distributions, currently prioritizing small claims under $50,000 and totaling $1.2 billion, may have a limited impact on markets in the near term, with the larger $10 billion-plus claims delayed until smaller claims are processed.
Nevertheless, we are cautiously optimistic for 1Q25 per our comments in the 2025 Crypto Market Outlook. The stablecoin market cap is currently growing by more than $2 billion weekly, sustaining a heightened pace for the past two months and signaling continued inflows into crypto. In our view, these flows may be focused on altcoins as market participants increase onchain liquidity. At the same time, we think institutional interest, buoyed by the positive post-election sentiment, may continue its momentum, which could support the market over the coming months.
The broader macroeconomic backdrop remains a mixed bag. The reduced likelihood of Fed rate cuts on the back of stronger employment data and inflation risks may temper risk asset performance in the short to medium term, but we think the narrative could shift later in the year toward AI-driven growth stories as monetary policy uncertainty diminishes. Until then, however, markets may experience more choppiness driven by a wider dispersion of expectations around interest rates, in our view.
We think bitcoin’s supply side story may also temper some upside expectations in the near term. The active supply of BTC (moved onchain in the past three months) has spiked to 4.6M, up from 2.7M in October 2024. We believe this is a proxy for increased willingness among long-term holders to exit their positions around the $100K level. This 1.9M BTC delta, representing more than $90 billion in notional value, underscores the significance of current price levels as a distribution zone for long-term holders. These supply-side dynamics suggest there could be a period of grinding consolidation for bitcoin in the coming months similar to the onchain signals we observed when bitcoin breached all-time-highs in March 2024 (see Chart 1).
