jakiro
Source: Grayscale; Compiled by Deng Tong, Bitchain Vision
summary
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Cryptocurrency valuations fell in December after rising at the beginning of the year.The callback may reflect a more hawkish signal from the Fed.The last two Bitcoin bull markets have seen a similar decline.
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Spot Bitcoin and Ethereum Exchange Trading Products (ETPs) were launched in the U.S. market in 2024.The cumulative inflows have now reached US$38 billion.[1] Bitcoin and Ethereum fell 3% and 10% respectively in the month.[2]
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The financial cryptocurrency sector performed well in December.Grayscale Research believes that this segment may benefit from regulatory changes and/or new legislation in the incoming U.S. government and lists several types of decentralized finance (DeFi) in its updated Top 20 listRelated assets.Top 20 also lists assets related to decentralized AI technology, which remains the focus of market attention.
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In early January, the Senate will consider the Treasury Secretary, Commerce Secretary, SEC Chairman and CFTC Chairman nominated by President-elect.
In December 2024, the cryptocurrency market took a breath, with major stock indexes falling and bond yields rising.Grayscale Research believes many market changes are attributed to more hawkish signals sent by the Fed at its mid-December meeting.Despite setbacks last month, Bitcoin still rose 121% at the end of 2024.[3]
Traditional markets performed mixed at the end of the year (Figure 1).The dollar rose in December, with interest rates on the yield curve rising.Guidance that the Fed will slow down its rate cut in 2025 may have fueled the movement of the currency and bond markets.Large-cap stock indexes fell, led by cyclical market sectors.Large tech stocks (represented by Bloomberg’s seven indexes) were the exception, with gains in December and strong full-year returns.Bitcoin has fallen slightly, with risk-adjusted (i.e. taking into account the volatility of each asset) at a moderate rate of return.FTSE/Grayscale Crypto Industry Market Index (CSMI) fell 6% in December, giving up about 15% gains since November 2024.
Figure 1: Cryptocurrency returns at medium levels after risk adjustment
Short-term declines are a common feature of a bull market in cryptocurrencies.For example, during the latest appreciation phase of the cryptocurrency market cycle (from December 2018 to November 2021), the price of Bitcoin has risen by about 21 times.However, in total, Bitcoin’s price fell by at least 10% during this period, totaling 11 times, including two sharp drops of about 50%.During the previous appreciation phase of the cryptocurrency market cycle (from January 2015 to December 2017), the price of Bitcoin fell by at least 20% in total, a total of 11 times.[4] We still think,We are in the mid-term of the current Bitcoin bull market. As long as the market is still supported by fundamentals, there is still potential for further growth in 2025 and beyond(Figure 2).
Figure 2: Bitcoin price trend before two bull markets
In December, spot Bitcoin exchange-traded products (ETPs) listed in the United States once again became an important source of new demand, with total net inflows reaching $4.7 billion that month.Including the spot Ethereum ETP launched in July, the total cumulative net inflow of spot cryptocurrency ETP listed in the United States has now reached US$38 billion.[5] Although cryptocurrency ETP in other jurisdictions also showed an increase in investor demand, cumulative inflows were lower and more stable month by month (Figure 3).
Figure 3: US-listed spot cryptocurrencies ETP demand surge
Another important source of demand for Bitcoin in the US market is MicroStrategy, This is a listed company that holds Bitcoin on its balance sheet and operates mainly as a Bitcoin investment vehicle.[6] Micro-strategy was included in the Nasdaq 100 index in December.[7] In the fourth quarter of 2024, MicroStrategies purchased 194,180 Bitcoins with a market value of US$18.2 billion at the end of the year.[8] Therefore, the Bitcoin purchased by MicroStrategies in the fourth quarter is comparable to the net inflow of spot Bitcoin ETP in the fourth quarter.[9] Micro-strategy issues stock and debt instruments to fund its purchase of Bitcoin and has announced plans to continue purchasing Bitcoin over the next 3 years.[10] Given the quantitative importance of this source of Bitcoin demand, cryptocurrency investors should consider monitoring the financial performance indicators of micro-strategy, including the difference between the company’s market value and the value of its Bitcoin holdings.Generally speaking, if a company’s stock is trading above the value of its Bitcoin, it may incentivize it to issue shares and buy more Bitcoins.
In December, Ethereum (ETH) was underperforming Bitcoin (BTC), and the ETH/BTC price ratio was consolidated sideways in the past two months(Figure 4).Ethereum is the leading smart contract platform blockchain by market capitalization, but it faces increasingly fierce competition from other projects.[11]Ethereum’s performance is not as good as the second largest asset by market capitalization in 2024 Solana[12], investors are increasingly focusing on alternative Layer 1 networks such as Sui and The Open Network (TON).When creating infrastructure for application developers, architects of smart contract blockchains face various design choices that may affect technical features such as block time, transaction throughput, and average transaction fees.Regardless of the specific design choice, all smart contract platforms are competing for network expense revenue, which Grayscale Research believes is an important determinant of value accumulation.
Figure 4: Ethereum lags behind Bitcoin in December and 2024
Grayscale’s cryptocurrency industry framework shows that digital asset valuations generally fell in December (Figure 5).The worst-performing market segment is the consumer and cultural cryptocurrency industry, mainly due to the decline in the price of Dogecoin, the largest meme coin by market capitalization.[13] One exception to the market decline is the financial cryptocurrency industry, which is primarily supported by the rise of Binance Coin (BNB), which is related to Binance Exchange and Binance Smart Chain Smart Contract PlatformTokens.Grayscale Research believes thatRegulatory changes and new legislation in the new U.S. government may specifically support blockchain-based financial applications.Therefore, we introduce several assets related to decentralized finance (DeFi) in the latest Top 20 list.
Figure 5: Financial crypto industry performs well
New innovations related to decentralized artificial intelligence technology are the dominant themes in the crypto market in 2024 and may become the dominant theme again in the new year.Much of the attention remains focused on developments related to AI “agents”——This is a software that can act independently to pursue a complex set of goals.These AI agents are revolutionizing the way we interact with blockchain technology, as Luna demonstrates on the Virtuals protocol.Luna is a female anime-style chatbot with a specific goal of attracting 100,000 followers on X, and it is worth noting that she can perform financial transactions through her crypto wallet (“tip”) Luna tokens to users.This integration with blockchain technology is particularly important because it enables AI agents like Luna to directly access and allocate financial resources, which goes beyond previous task-based proxy AI use cases.
Since the emergence of AI proxy tokens in late October 2024, projects with leading market capitalization in the industry have made remarkable gains, with Virtual soaring 49,000% and Ai16z rising 8,700% [14].It is worth noting that ai16z, a project named after investment company a16z, built the No. 1 AI proxy framework on GitHub in December [15] and announced a partnership with Stanford University.[16]
final,2024 is a landmark year for the digital asset market: New spot Bitcoin and Ethereum ETP bring more investors to the crypto ecosystem, Bitcoin network undergoes the fourth halving event, researchers in the newThe blockchain application technology has made breakthroughs, and cryptocurrencies have occupied a prominent position in the US election.While some specific topics will change, we expect cryptocurrency investors to remain excited in 2025.
In early January, the U.S. Senate will begin considering candidates for President-elect Trump’s nomination for the Cabinet and leaders of various government agencies.For the cryptocurrency market, we believe the most important confirmation may be the Secretary of Finance (Scott Bessent), the Secretary of Commerce (Howard Lutnick), the Chairman of the Securities and Exchange Commission (SEC) (Paul Atkins) and the Chairman of the Commodity Futures Trading Commission (CFTC) (written by this articleNo candidate has been announced at the time).The new role of White House AI and cryptocurrency tsar (David Sacks) does not require Senate confirmation.Although Grayscale ResearchThe next Congress is expected to pass legislation related to cryptocurrencies, but this may not happen until lawmakers address taxes and certain other issues.Outside the United States, the EU’s MiCA regulations came into full effect on December 30, 2024, which imposes stricter regulations on stablecoins, resulting in Tether’s unlicensed USDT being removed from the exchange from 2025 in favor of supportCompliance alternatives, such as Circle’s USDC.[17]
In addition to political factors,The cryptocurrency market seems likely to be driven by its usual fundamentals: global adoption of Bitcoin as an alternative currency medium, demand for next-generation decentralized web applications, and macro-market factors,For example, changes in the central bank’s monetary policy that affects the valuation of all assets.Despite uncertain outlooks, we believe many industry trends look favorable at the beginning of the new year.
Index definition:
Bloomberg’s Seven Total Return Index (BM7T) is an equal dollar-weighted index that tracks seven of the most widely traded companies in the United States.The S&P 500 Industrial Index includes companies in the S&P 500 index that are classified as members of the GICS industrial sector.The Bloomberg-Barclays Treasury Over 25 Years Index measures the total return on nominal U.S. Treasury bonds with a remaining maturity of more than 25 years.The US dollar index (DXY) tracks the strength of the dollar against a basket of major currencies.The Russell 2000 index consists of the smallest 2000 companies in the Russell 3000 index, accounting for about 8% of the total market capitalization of the Russell 3000.The S&P Goldman Sachs Commodity Index (S&P/GSCI) is a comprehensive index of commodity sector returns, representing a leveraged, long investment in commodity futures, which is widely scattered across a variety of commodities.The FTSE/Grayscale Cryptocurrency Sector Index Series measures the price returns of digital assets listed on major exchanges around the world.The Nasdaq 100 Index is the stock index of the 100 largest companies traded on the Nasdaq Exchange, calculated by revised market capitalization.
References:
[1] Source: Bloomberg, Grayscale Investments.Data as of December 31, 2024.
[2] Source: Artemis.Data as of December 31, 2024.
[3] Source: Coin Metrics.Data as of December 31, 2024.
[4] Source: Coin Metrics.Grayscale Investments.Data as of December 31, 2024.Past performance does not represent future results.
[5] Source: Bloomberg, Grayscale Investments.Data as of December 31, 2024.
[6] Investopedia, data as of December 23, 2024.Michael Saylor “called MicroStrategy is a Bitcoin funding operation company.”
[7] Markets.com
[8] Source: Bitcointreasuries.net, Bloomberg, Grayscale Investments.Data as of December 31, 2024.
[9] Spot Bitcoin ETP net inflows of $16.5 billion in the fourth quarter, calculated in the value at the time of inflow.In the fourth quarter, ETP’s Bitcoin holdings increased by $18.6 billion at year-end price.Source: Bloomberg, Grayscale Investments.Data as of December 31, 2024.
[10] Microstrategy, as of January 3, 2025.
[11] Artemis, FTSE, Grayscale.As of January 6, 2025.
[12] Artemis, FTSE, Grayscale.As of January 6, 2025.
[13] Artemis, FTSE, Grayscale.As of January 6, 2025.
[14] Dexscreener.As of January 2, 2025
[15] Chain Catcher
[16] Blockworks
[17] Ernst & Young, “Money Analysis”
