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

For HTX Ventures, this has also been a fruitful year. Benefiting from the wave of innovation, we supported 28 leading projects and funds exploring new frontiers in the crypto market. These projects span multiple fields including 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 expected to show exciting progress in 2024, which we will closely monitor in 2025. These tracks include the Bitcoin ecosystem, infrastructure (Infra), Meme, artificial intelligence (AI), and the TON ecosystem. The report provides an in-depth analysis of the current status, challenges, and future opportunities for each track, along with a macroeconomic context and market outlook.

Bitcoin Ecosystem

market dominance

In the past year, Bitcoin's market dominance increased from 45.27% to 56.81%. This means that the majority of the current liquidity in the crypto market is primarily concentrated in the Bitcoin ecosystem, and it is continually growing.

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, a growth of 613,708 coins. Over 12 months, the ETF's holding ratio increased from 3.15% to 6.25%. ( as of December 4, 2024 )

A new market centered around Bitcoin as the core asset, using ETFs and US stocks as channels for capital inflow, and leveraging publicly listed companies as vehicles to infinitely absorb US dollar liquidity has officially launched. Therefore, the necessity for Bitcoin to further develop its ecosystem and improve capital utilization efficiency has become increasingly prominent, which will also be realized by increasing BTC demand and raising prices.

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 hype around Bitcoin ETF concepts, the trading volumes and token prices of earlier Bitcoin Layer 2 projects (such as the Lightning Network, Stacks, and Liquid Network) have surged significantly. These older Layer 2 projects have also witnessed further technological advancements. Various Layer 2 solutions have emerged on Bitcoin, including Spiderchain (Botanix), ZKRollup (Nexio and Critea), EVM-compatible chains (BOB and B Squared), and sidechains (Merlin), among others. As of now, the total locked value (TVL) of Bitcoin Layer 2 has reached $3 billion, contributed by 19 projects. Assuming all Bitcoin Layer 2 projects are launched in the next few years, the total TVL is expected to grow by 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 a general market decline in the second quarter, activity on the BTC Layer 1 continued to grow steadily. However, although the Bitcoin market saw a recovery in the third quarter, this growth momentum failed to sustain.

Other Bitcoin Infrastructure

With the increase in Bitcoin's utilization, other infrastructures, including interoperability solutions and security layers, have also begun to emerge.

interoperability

Bridging and WBTC are currently the mainstream interoperability solutions on Bitcoin. Since the Bitcoin network does not directly provide composability to build 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 years.

Security Layer

However, these interoperability solutions may pose a threat to the security of underlying assets, as hacker attacks occur from time to time. To this end, 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 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 being unlocked. 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 has enabled the Bitcoin mainnet 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, as well as the emergence of infrastructure like Bitcoin Layer 2, Bitcoin Restaking and LST, and Bitcoin cross-chain bridges, the entire ecosystem has rapidly developed. Subsequently, after the Bitcoin conference in July 2024, the market will shift its attention to native BTCFi that can achieve decentralization and non-wrapping models, such as stablecoins.

Currently, through cryptographic techniques such as Discreet Log Contracts (DLC) and Adaptor Signature, developers can program financial contracts that rely on external events within Bitcoin scripts, ensuring the permissionless nature of stablecoins 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 means preventing malicious behavior from project parties by increasing the cost of wrongdoing, rather than achieving complete decentralization from the smart contract level. A stablecoin project set to launch its mainnet soon is adopting this solution.

The real change comes from OP_CAT. As long as OP_CAT passes, developers will be able to use high-level programming languages native to Bitcoin, 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 directly use the popular high-level programming language TypeScript to write smart contracts. 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 experience 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 of Layer 2 fees and performance; the rapid development of other high-performance Layer 1s; the ongoing deepening of the multi-chain landscape; projects represented by EigenLayer improving 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 development 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 for 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 having their own developments.

• zkSync and StarkNet: Continuous iterations 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 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, 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 an emerging hotspot in the primary market this year, with multiple related projects such as Babylon, Taro, BounceBit, and Corn completing financing this year, primarily bringing smart contract and scaling capabilities 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 efficiency and has gained good development and market attention this year, with projects such as EigenLayer and Satori receiving tens of millions in investments from top-tier capital.

Investment and Financing Events

Infrastructure remains a key player in this year's investment and financing. Layer 1, modular public chains, and infrastructure related to the Bitcoin ecosystem have all attracted capital. Currently, Layer 1 represents the most concentrated technical development and exploration in the crypto field, and this track will continue to be a focus for development resources and capital in the future.

Meme

Important retail fund entry after the implementation of the encryption easing policy

In 2024, the Meme track once again became a hotspot in the crypto market. As an ecological stronghold, it not only promoted community consensus but also integrated with fields such as DeFi and GameFi, creating new use cases. For example, Solana successfully invigorated the activity and vitality of its ecosystem by vigorously promoting the innovation and development of Meme projects. From the early Bome and Slerf at the beginning of the year to mid-year projects, these projects showcased a strong "lottery attribute" with their Bonding Curve pricing model and low market cap launch approach, attracting widespread attention. Furthermore, the decentralized characteristic of "anyone can deploy Meme" in some projects has driven greater ecological prosperity, with over half of Solana's Meme projects originating from these platforms, including dozens of projects with 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 to the crypto market due to their simplicity and low entry barriers. The launch of certain platforms allows users to purchase Meme assets with fiat currency, and the post-election political-related Meme craze provides a strong sense of participation for new players. Looking ahead, the crypto policies of the Trump administration and related governance trends will bring potential news impacts to the market or give rise to new Meme hotspots. For example, if the "Department of Government Efficiency" led by Elon Musk (abbreviated as "DOGE") gains attention, it could trigger another surge in Dogecoin.

As the crypto market environment becomes more relaxed, it is expected that more retail investors will enter, and Meme projects will become an important channel for capital inflow. The significant price increases after exchanges list Meme coins fully illustrate this trend, which may continue to drive the development of this sector in the future.

Meme Infrastructure

As the market users have an increasing demand for fair issuance,