2024 will be a landmark year for the crypto industry. From the approval of the Bitcoin and Ethereum ETF at the beginning of the year, to the booming bull market, to the boost from the US election, cryptocurrencies such as Bitcoin have reached record valuations and are increasingly influencing the social and political landscape.
It has also been a fruitful year for HTX Ventures. Benefiting from the wave of innovation, we have backed 28 leading projects and funds exploring the new frontiers of crypto. These projects cover DeFi, BTCFi, ZK-rollups, modular infrastructure, Layer 1 and Layer 2 solutions, artificial intelligence, SocialFi, GameFi, and more.
Looking ahead, HTX Ventures has identified five major tracks that are showing exciting progress in 2024, which we'll be watching closely in 2025. These tracks include Bitcoin Ecology, Infrastructure (Infra), Meme, Artificial intelligence (AI), and TON Ecology. The report provides an in-depth analysis of the current situation, challenges and future opportunities of each circuit, as well as providing macroeconomic context and market outlook.
Bitcoin ecology
Market dominance
Over 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 concentrated in the Bitcoin ecosystem, and it continues to increase.
Source: CoinStats
The Bitcoin Spot ETF has accumulated 5.3% of the total number of bitcoins in existence, increasing its holdings from 629,900 at the beginning of the year to 1,243,608, an increase of 613,708. In 12 months, ETF holdings increased from 3.15% to 6.25%. (as of December 4, 2024)
A new market with Bitcoin as the core asset, ETF and US stocks as the fund inflow channel, and unlimited dollar liquidity through the US listed companies represented by MSTR as the carrier has been officially opened. Therefore, the need for Bitcoin to further develop the ecology and improve the efficiency of capital utilization has become increasingly prominent, which will also be achieved by increasing the demand for BTC and increasing the price.
Layer 2
Over the past three years, 77 Bitcoin Layer 2 projects have started or completed funding. In the first half of 2024, driven by the craze for the Bitcoin ETF concept, Bitcoin Layer 2 projects in previous cycles, such as the Lightning Network, Stacks, and Liquid Network, saw significant increases in both trading volumes and token prices. These old Layer 2 projects have also seen the technology evolve further. Various Layer 2 solutions have appeared on Bitcoin, including Spiderchain (Botanix), ZKRollup (Nexio and Critea), EVM compatible chains (BOB and B Squared), side chains (Merlin) and others. As of now, the total lock-in value (TVL) of Bitcoin Layer 2 has reached $3 billion, contributed by 19 projects. Assuming all Bitcoin Layer 2 projects launch in the next few years, the total TVL is expected to grow at least two to four times, to $6 billion to $12 billion.
Layer 1/ Execution layer
BRC-20, Ordinals, and Runes are the main new implementation standards to emerge by the end of 2023. Despite the overall market decline in the second quarter, BTC Layer 1 activity continued to grow steadily. However, while the Bitcoin market recovered in the third quarter, this growth momentum has not been sustained.
News of BTC L1s, Source:Cryptokoryo_research
Other Bitcoin infrastructure
As Bitcoin utilization increases, other infrastructure, including interoperability solutions and security layers, begin to emerge.
interoperability
Bridging and WBTC are still the mainstream interoperability solutions on Bitcoin. Since the Bitcoin network does not directly provide composability to build applications, one has to rely on these bridging /WBTC to unlock DeFi benefits 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 can pose a threat to the security of the underlying assets, as hacking incidents occur from time to time. To this end, Bitcoin-related security solutions are beginning to emerge.
Babylon is a prime example. It has developed a set of secure sharing protocols for Bitcoin, including:
Bitcoin timestamp: A timestamp that allows data to be recorded on the Bitcoin network, enhancing the trust and immutability of the data.
Bitcoin Pledge: Allows Bitcoin to provide security to 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 unlocked. Nubit is a key player in the Bitcoin DA space. It expands data capacity with Bitcoin, supporting the development of applications, Layer 2 and prophecy machines.
Whether the 2025 upgrade is OP_CAT is the key
The Taproot upgrade brings the ability to issue assets on the main Bitcoin network. From the rise of the BRC-20 inscription and Ordinals NFT markets in 2023, to the subsequent launch of asset issuance protocols such as ARC-20 and SRC-20, to the emergence of infrastructure such as Bitcoin Layer 2, Bitcoin Restaking, and LST, Bitcoin cross-chain Bridges, etc. The whole ecosystem developed rapidly. Then, after the Bitcoin conference in July 2024, the market turned its attention to native BTCFIs that enable a decentralized, unpackaged model, such as stablecoins.
Currently, through the cryptography of discreet log contracts (DLCS) and Adaptor signatures, developers can program financial contracts in Bitcoin scripts that depend on external events, ensuring that stablecoins and lending projects are permissionless when liquidating. The permission-free operation of multi-party transactions is guaranteed through partially signed Bitcoin Transactions (PSBTS). However, this still partly involves the game-theoretic logic of deterring malicious behavior by raising the cost of doing evil, rather than full decentralization at the smart contract level. Shell Finance, a stablecoin project that is about to launch on the mainnet, has adopted this approach.
The real game-changer is OP_CAT. As long as OP_CAT is able to pass, developers can use Bitcoin's native high-level 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. The current Bitcoin Layer 2 can also be converted to ZK Rollup, and the total size of BTCFi is expected to increase significantly.
With the support of both macro markets and infrastructure, we believe Bitcoin will see a further surge in market demand over the next two years.
Infrastructure (Infra)
In 2024, infrastructure remains one of the most attractive tracks for the crypto industry. The combination of capital and technology has driven the rapid development of projects such as Layer 1, Layer 2 and middleware. Continued upgrading and building of the Ethereum ecosystem, as well as Layer 2 cost and performance improvements; The rapid development of other high-performance Layer 1, led by Solana; The continuous deepening of multi-chain pattern; Projects represented by EigenLayer improve network security and capital efficiency through Restaking mechanism; Several Bitcoin Layer 2 projects attempt to combine the security of Bitcoin with high-performance scaling solutions, which have contributed to the booming infrastructure space.
Layer 1
The Layer 1 project continues to optimize its consensus mechanism and performance to provide a solid foundation for on-chain applications.
Ethereum: Launched EIP-4844, reducing the cost of the Layer 2 network.
Solana and TRON: On-chain transactions are very active thanks to the development of Meme Coin and infrastructure projects such as Pump.fun and SunPump.
Aptos and Sui: Apps in GameFi and DeFi drive active user growth.
Layer 2
Layer 2 continues to be a critical path for scalability, with ZK Rollup and Optimistic Rollup each developing.
zkSync and StarkNet: The user experience of ZK Rollup has been greatly improved through continuous iterations.
Base and Arbitrum: DeFi and NFT projects are thriving on these platforms, with TVL growing significantly.
Layer 0 and cross-chain middleware
Layer 0 and cross-chain middleware break new ground in interoperability.
LayerZero: Connected more than 40 chains and saw a significant increase in cross-chain transactions.
Cosmos: IBC upgrade, improved cross-chain performance by 50%.
Modular public chain
Modular public chains offer high performance and flexibility, attracting a diverse range of applications.
Celestia: Supports multiple modular implementation layers and becomes a benchmark project for modular public chains.
Monad: Attracting a large number of developers and DApp deployments with high TPS performance.
Bitcoin Layer 2
Bitcoin Layer 2 has become an emerging hot spot in the primary market this year, and a number of related projects such as Babylon, Taro, BounceBit and Corn have completed financing this year, mainly bringing smart contracts and expansion functions to the Bitcoin network.
Taro: Expand Bitcoin's payment and contract capabilities through the Lightning network.
Stacks and RSK: Driving the growth of Bitcoin smart contract applications.
Restaking
Restaking enhances capital use efficiency, and projects like EigenLayer and Satori are staking and gaining traction this year.
Investment and financing event
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. Layer 1 currently represents the most concentrated technology development and exploration in the crypto space, and this track will continue to be an area of concentrated development resources and capital in the future.
Meme
An important entry point for retail funds after the implementation of crypto easing policies
In 2024, Meme Circuit is once again a hot spot in the crypto market. As an ecological bridgehead, it not only drives community consensus, but also combines with DeFi, GameFi and other fields to create new use cases. For example, Solana has successfully stimulated the activity and vitality of the ecosystem by promoting the innovation and development of the Meme project. From Bome and Slerf at the beginning of the year to Pump.fun in the middle of the year, these projects have shown strong "lottery properties" with the Bonding Curve price curve and low market value opening mode, attracting wide attention. In addition, the decentralized nature of Pump.fun's "Everyone Deployable Meme" has fueled a greater ecological boom, with more than half of Solana Meme projects now originating from Pump.fun, dozens of which have exceeded $1 billion in market capitalization. Public chains such as SUI and TRON also quickly followed the Meme strategy, further activating their respective ecosystems.
Pump.fun
Meme project has become an important tool to attract new crypto users because of its simplicity and low threshold to get started. The launch of Moonshot allowed users to purchase Meme assets using fiat currency, while the post-election politics-related Meme craze provided a strong sense of engagement for new players. Looking ahead, the Trump administration's crypto policy and related governing trends will bring potential news impact to the market, or create new Meme hot spots. For example, if the "Department of Government Efficiency" (" DOGE ") led by Elon Musk gets attention, it could trigger another spike in dogecoin.
As the crypto market environment becomes more relaxed and more retail investors are expected to enter, the Meme project will become an important channel for capital inflows. The huge increase in each listing of Meme coins on Robinhood's exchange illustrates this trend and will likely continue to drive this track in the future.
Meme infrastructure
With the further enhancement of market users' demand for fair distribution, Meme's fair launch track achieved a high level of market attention and participation this year. Infrastructure projects such as Pump.fun and SunPump were the top cash flow projects of the year, injecting new momentum into Meme's growth.
Pump.fun
Pump.fun is a Meme project distribution platform built on Solana. By providing simple and intuitive creation tools and strong community support, adopting a fair distribution model, designing a mechanism to automatically add liquidity to DEX, coupled with Solana's own successful market operation, community operation and low transaction costs, Pump.fun was recognized by the market and successfully incubated a number of well-known Meme projects. As of November 2024, more than 40,000 projects have been successfully issued to Raydium, with cumulative project revenue of more than 1.17 million SOL, or about $200 million.
At the same time, the success of Pump.Fun has attracted many other projects to imitate, and Pump's imitation disk has appeared on multiple chains, of which SunPump has received the most attention. Overall, the current round of market-driven Meme boom cannot be separated from the innovation and development of infrastructure tools. Pump and other tools took the lead in introducing automatic liquidity into the distribution platform, and at the same time pursued fairness, low cost and high efficiency in the distribution cost and method, which effectively reduced the distribution cost and threshold, enhanced the confidence and participation of the market and community, and made the Meme project continue to become popular this year.
The success of Pump.fun has not been perfectly replicated on other chains for the following reasons:
Solana, with its low transaction costs and high throughput, is one of the ideal distribution platforms for Meme projects.
The Solana community has shown great enthusiasm for the new project, driving the rapid growth of the start-up Meme project.
Other ecosystems such as Ethereum face the problem of high Gas costs, and other high-performance chains such as BSC and Avalanche Meme project performance is also relatively flat.
Publishing platforms like Pump.fun and SunPump have become important infrastructure for Meme projects to grow. In the future, the Meme project may show a more diversified and practical trend, and the infrastructure in the product function may be added to the combination of games, NFT, social and other application scenarios. With the gradual improvement of multi-chain ecology and the richness of actual use scenarios, Meme infrastructure will continue to inject more vitality into the entire track.
Artificial Intelligence (AI)
In 2024, the Crypto+AI circuit has been exploring feasible directions, and dozens of AI subdivisions have emerged, including ZK/OPML to help AI uplink, AI data crowdsourcing, decentralized computing power leasing, AI data trading, AI games, and AI agents.
Crypto project expands focus to capture AI narrative
This year, a large number of blockchain infrastructure and applications have expanded the focus on AI. The centralization of resources and ownership is one of the key challenges to the long-term expansion of AI infrastructure, and the decentralized nature of blockchain networks provides a viable solution to the centralization problem of AI. One of the prime examples of traditional crypto projects turning to AI is Near. Since this year, it has encouraged AI to run on open source protocols on the chain.
Data annotation/management
Currently, the limitation of data resources is one of the major challenges to scaling AI development. Most of the useful data for AI models is monopolized by big tech companies. Due to the limited jurisdiction of these companies, language and cultural coverage is inefficient. Existing centralized AI data tagging companies are unable to fully scale their datasets due to insufficient financial incentives and jurisdictional constraints on operations.
Blockchain technology can solve these problems well. Several projects are being launched, such as Kiva, Sapien, Bagel and others, aimed at improving data sourcing and incentivizing more efficient data annotation tasks across jurisdictions.
Decentralized reasoning and machine learning
At the moment, people mainly use centralized service providers like Hugging Face to run reasoning for open source models, which can raise privacy or censorship issues. Decentralized inference allows users to run machine learning models without relying on centralized services, while ensuring the reliability of the model's output. Three main areas of verifiable reasoning have emerged, each with different cost and security trade-offs.
ZKML
Use zk-SNARKs technology to provide privacy inference for AI models. Giza, Modulus Labs and EZKL are the major players in the space. These techniques enhance the security and accuracy of the reasoning process of open source models. However, due to the high cost of generating zk proofs, the cost of inference will increase significantly, resulting in at least a 100x increase in time costs and latency compared to centralized inference. Therefore, current products still need to be further improved on zk technology before they can be widely used in the future.
OPML
The inference result is assumed to be accurate unless the challenger in the network proves it wrong. The network Challenger acts as an observer of the inference on the chain, running its own model to ensure the accuracy of the output. The main example of OPML is ORA. Although the cost performance is better than ZKML, it is still much more expensive than centralized inference due to the cost required to pay the observer.
Chain to centralized inference network
Through a decentralized inference network, queries are run by a small number of nodes on the chain. If there is a discrepancy, the abnormal node will be punished. This is the lowest cost and fastest of all solutions, but security cannot be guaranteed because of the possibility of cheating on nodes. To ensure higher security, more nodes may need to be deployed, but this will increase the cost. Ritual is an example of running a decentralized inference network.
Due to its lower cost efficiency compared to local inference, decentralized AI inference is not currently the first choice for users. In the current state of AI development, output verification is not a major concern for AI developers and users. In addition, edge computing can also be used as another privacy and security solution for running AI models. Therefore, decentralized reasoning may face growth bottlenecks in the long run.
Decentralized GPU
Gpus are in high demand in AI development, and the current GPU providers are dominated by a few large companies in the market, which can bring price risk if extreme market conditions occur. The old decentralized GPU protocol Render has increased in price tenfold since 2023. This year, a large number of decentralized GPU networks have been launched on the market, such as IO.net, Grass, Akash, and others. These networks incentivize GPU contributions through tokens and target audiences include consumers and smaller GPU companies.
However, due to the lack of uniformity in GPU resources on these networks and the fact that most high-performance Gpus are not owned by individual consumers, it is expected that centralized GPU providers will remain the primary choice for AI developers.
On-chain AI agent
AI agents are deployed on the blockchain and use the token mechanism to incentivise and guide specific behaviors of the agent, including interacting with smart contracts, trading, and querying on behalf of users. Myshell is an example. In the future, AI agents will gradually become users' stewards and assistants, providing users with more comprehensive service execution capabilities - such as self-issuing assets, launching viral transmission, forming decentralized autonomous organizations (DAOs), and even taking charge of fund trading and investment decisions, forming their own unique cultures and beliefs. This deep integration of AI and encryption technology is impossible for Web2 to achieve, and it is also a new form that Web3 cannot complete independently by encryption technology.
None of this has been productized yet. Recently, to address the need for an AI agent to have an independent financial identity and thus be able to freely control the wallet, Coinbase launched an AI wallet based on the Coinbase MPC Wallet, allowing AI agents to easily use the wallet to process various transactions. To make the AI wallet easier to understand, Coinbase also provides a Based Agent template for direct zero-code deployment. It is expected that more production applications will appear in 2025.
-based Agent, Source: https://x.com/starzqeth/status/1853597036421259728
In addition, AI agent networks are beginning to emerge. Theoriq is a key example. It enables efficient multi-agent operations on the blockchain through a community-governed AI agent marketplace, provides an efficient distribution channel for AI agent creators, and simplifies the process for AI agent users to perform multiple tasks.
TON ecology
TON (The Open Network) ecosystem relies on Telegram's hundreds of millions of users and strong technical support, gradually establish a multi-level blockchain ecosystem, and achieve a full outbreak of ecology and market in 2024. From DeFi to Meme to NFT and gaming, TON has leveraged its broad user base to make significant achievements in multiple areas, pioneering the way Web2 social applications monetize traffic via encryption.
Ton overview, data Source: https://defillama.com/chain/TON
With the traditional business model struggling to generate significant revenue for Telegram, TON began exploring zero-threshold or lightly paid, point-and-click mini games, adding the expectation of token airdrops, and successfully attracting a large number of Web2 users to participate.
Notcoin's success
In May 2024, the first project, Notcoin, went live. Notcoin is a social point-and-click game accessible via Telegram. Players interact with Notcoin bots and invite friends to start the game. The mechanics are simple: a gold coin appears on the screen, and each click earns Notcoin, the game's virtual currency. The player's ability to click is limited by energy bars, which are depleted with clicks but replenished over time.
After Notcoin was launched, it was widely welcomed by the market. Relying on the simple game mechanism and Telegram's huge user base, it achieved one million monthly active users in a short time and launched major exchanges. The success of Notcoin marks the successful realization of TON's eco-game model and a new level of user diversion on the gaming track.
Optimization of Catizen
After Notcoin, Catizen encouraged users to start playing with small payments such as $0.99 and $4.99 by optimizing the game experience with features such as acceleration. Users can deposit through OTC fiat currency and purchase crypto assets directly with credit cards, greatly lowering the threshold for participation. This zero threshold or light payment model further expands the user base.
Other business models
In the TON ecosystem, Dogs is one of the most popular Meme projects. Through unique community governance and ecological construction, Dogs quickly took a place in the market. The project implements simple mining operations by verifying Telegram accounts and invitation mechanisms. After its launch, Dogs attracted a large number of communities and traffic, and several exchanges were also launched in a short period of time.
In addition to games and social projects, DeFi is also thriving in the TON ecosystem. Projects such as TonStaker and Ston.fi are making good progress. Through traffic star projects such as Notcoin, Dogs, and Catizen, TON not only consolidated its position in the social payment field, but also made breakthroughs in several tracks such as DeFi.
However, click-and-click minigame is still essentially a model of importing the expectation of a Web2 user to airdrop tokens and then selling them to an exchange. After the initial heat passed, there was a serious decline in traffic. At present, TON Ecology urgently needs to find a new business model in 2025 that can improve user retention and find the next growth curve. It could be DeFi, it could be Meme, but it's definitely not a pattern that's already implemented on Ethereum or Solana. TON's success has also inspired other Web2 social apps. For example, Line, which focuses on the South Korean and Southeast Asian markets, launched its Kaia chain, which began experimenting with the Mini DApp model to monetize existing Web2 traffic. This shows that TON's model is having a profound impact on the entire industry.
Line Web3 Platform Breakdown,
Source: https://govforum.kaia.io/t/gp-4-budget-request-for-kaia-wave/963
The attention of capital markets
In the capital market, compared with other high-performance public chains, TON ecology has attracted more capital attention. Several projects have received investment support from the primary market this year. TON Ecology will continue to make efforts in terms of user experience, ecological diversity and technological innovation, injecting new impetus into the continued development of the crypto market.
2024 is a year for TON ecology to take off, but facing the future, TON needs to innovate its business model, improve user retention, and find new growth curves. Only in this way can we stay ahead of the fierce blockchain competition and bring continuous value to users and investors.
Macroscopic direction
The main theme of the crypto market in 2024 was kicked off by the passage of the Bitcoin ETF in January and will be further clarified after Trump's election victory in November. From a macro perspective, the crypto market is currently in a transition phase from quantitative tightening (QT) to quantitative easing (QE), which is expected to start in the second quarter of next year. Historical experience shows that the peak of a crypto bull market usually does not occur during a rate cut cycle, but is more likely to occur at the end of a rate cut cycle or near the end of a rate increase cycle, or even at the beginning. For example, the extremely loose policies triggered by the pandemic in 2020 kicked off the crypto bull market, with the market peaking at the end of 2021 as the Fed gradually signaled tightening, followed by interest rate hikes that officially began in 2022.
Therefore, the current market is far from the peak of the bull market. Overall, this bull market could have multiple paths to follow, especially with the prospect of a strong bull market on the back of Trump's fiscal expansionary policies and unprecedented crypto-friendly signals. In addition, with the relaxation of regulations and the entry of traditional financial institutions, Bitcoin will gain more solid support and gradually become the core dollar asset outside the dollar industry cycle (such as AI). The decoupling of Bitcoin from the traditional digital currency market (Altcoins) is expected to further strengthen.
On the other hand, the base rate is expected to fall to neutral by mid-2025. Whether it cuts rates further or signals tightening will depend on the level of inflation at that point and whether Trump succeeds in exerting influence on the Fed. If the Fed signals tightening in response to inflation, markets could enter a period of adjustment until May 2026, when Trump has a chance to take control of Fed policy.
The influx of traditional financial giants and crypto retail investors in 2025 will breed new racetracks
The repeal of SAB 121 clears the way for traditional financial institutions
Trump is expected to repeal SAB 121 when he takes office on January 20. The move will allow traditional financial institutions to hold cryptocurrencies on their balance sheets, further promoting the institutionalization of crypto assets. This not only provides more funding options for crypto assets, but also makes spot cryptocurrencies more accessible through existing institutional trading platforms and partnerships, increasing the maturity of the institutional crypto market overall.
SAB 121 (Staff Accounting Bulletin 121) is guidance issued by the United States Securities and Exchange Commission (SEC) in 2022. According to the regulation, banks, exchanges or other financial institutions that hold or hold crypto assets must treat those crypto assets as liabilities and disclose them on their balance sheets. Even if these institutions are merely custodians of their clients' crypto assets, they must bear potential liability.
This rule requires financial institutions to make adjustments in two areas:
Detailed disclosure of risks: They must disclose in detail the potential risks associated with crypto assets, including market volatility, hacking, technical failures, and more.
Accounting treatment adjustment: Crypto assets need to be treated as liabilities, rather than just held in custody as client assets. This could increase the total liabilities of banks and financial institutions and affect their capital adequacy ratios
Because of these restrictions, SAB 121 directly discourages traditional U.S. financial institutions, particularly national banks such as Citibank and jpmorgan Chase, from offering cryptocurrency custody services, and also limits crypto companies' access to banking services.
However, with the clarity of regulatory attitudes and the relaxation of policies, traditional financial services firms and investors will be able to operate on the blockchain for the first time, bringing new benefits and strategic opportunities.
Coingecko, dated Dec 4th
PayFi: Fiat direct link crypto activity will create endless possibilities
As traditional financial institutions are allowed to legally invest, hold, and custody crypto assets, tracks such as PayFi, compliant stablecoins, and compliant fiat money are expected to rise rapidly. Tether recently announced the launch of its new Real World Assets (RWA) platform, which focuses on tokenizing real-world financial assets (such as government bonds, real estate, and other fixed income assets) to provide a digital form of investment.
Moonshot creates a whole new usage scenario by connecting fiat coins and Meme transactions. In the future, more projects are likely to emerge by connecting fiat channels, linking real assets, and high-frequency crypto play (e.g. GameFi, DeFi).
Sum up
As the regulatory environment becomes more open and transparent in 2024, the crypto industry is entering a new era. As a long-term investor since 2018, HTX Ventures is committed to leveraging our expertise and insight to expand the industry's availability and customer base by identifying and supporting the best and most cutting-edge technology innovation projects.
We look forward to 2025 and to continuing this journey with our partners, investors and the entire crypto community." Let's work together to build a more innovative and accessible crypto ecosystem.