2024 Annual Report on the Encryption Industry: Market Recovery and Emerging Trends

In 2024, the cryptocurrency market ushered in its fourth bull market, although its development trajectory differed from most expectations. On the 15th anniversary of Bitcoin's birth, changes in macroeconomic policies became the main driving force of the market, including the approval of the US spot ETF, interest rate cuts by central banks around the world, and Trump's re-election. These changes brought cryptocurrency back into the public spotlight, while ETFs opened new channels for capital injection. Bitcoin reached a historical high of $108,135 on December 17, propelling the total market capitalization of the entire cryptocurrency market to a new record of $3.91 trillion.

This annual report comprehensively covers the encryption market landscape, analysis of Bitcoin and Ethereum, decentralized finance (DeFi) and non-fungible token (NFT) ecosystems, as well as the performance of centralized and decentralized trading platforms. Here are seven key highlights:

1. In the fourth quarter of 2024, the total market capitalization of the cryptocurrency market increased by 45.7%, ending the year at $3.91 trillion, a year-on-year growth of 97.7%.

2. The dominance of the Bitcoin market is further consolidated, currently accounting for 53.6% of the total market capitalization of the encryption market.

3. Bitcoin's performance in 2024 for the whole year and the fourth quarter is better than that of major asset classes.

4. The market value of AI agents will soar by 322.2% in the fourth quarter of 2024, rising from 4.8 billion dollars to 15.4 billion dollars.

5. In the fourth quarter of 2024, the trading volume of the top ten Ethereum Layer 2 solutions increased by 48.3%, with one Layer 2 platform accounting for 48.3% of the trading volume.

6. In the fourth quarter of 2024, the spot trading volume of centralized trading platforms reached $6.45 trillion, a quarter-on-quarter increase of 111.7%, setting a new historical high.

7. In the fourth quarter of 2024, Solana surpassed Ethereum to become the dominant chain for DEX trading, accounting for more than 30% of all DEX transactions.

Market Overview

In the fourth quarter of 2024, the total market capitalization of the cryptocurrency market rose by 45.7% (approximately $1.07 trillion), ultimately closing at $3.40 trillion. Although market momentum weakened in the third quarter, after a brief bottom consolidation, the market began to rebound in the middle of the fourth quarter, especially after Trump won the U.S. presidential election.

In 2024, the total market capitalization of the cryptocurrency market nearly doubled, growing by 97.7%. The market cap reached a historic peak of $3.91 trillion in mid-December, before falling back to $3.40 trillion. Meanwhile, the average daily trading volume in the fourth quarter of 2024 was $200.7 billion, an increase of 128.2% compared to $88 billion in the third quarter.

Dominance of the Bitcoin Market

The market share of Bitcoin continues to rise, although the growth rate has slowed, with a 0.9% increase in the fourth quarter of 2024. XRP has performed particularly well, with its market share rising to 3.5% (an increase of 2.0%), jumping from 7th place to 4th, surpassing a well-known token and Solana (SOL).

It is worth noting that Dogecoin (DOGE) has become a new member in the top 7 by market capitalization, replacing USDC. This is the first time since April 2021 that USDC has fallen out of the top 7. Meanwhile, Ethereum (ETH) continued to weaken in the fourth quarter, with its market share dropping from 13.4% in the third quarter to 11.8%, marking a new low since April 2021.

Bitcoin Performance Analysis

The fourth quarter of 2024 is a milestone quarter for Bitcoin (BTC), as it first broke through the $100,000 mark, reaching an all-time high of $108,135 on December 9, before slightly retreating and closing the year at $93,508. This means that Bitcoin's annual increase was 121.5%.

The rise of Bitcoin began from a low point of $54,000 in the third quarter, with another significant surge following Trump's victory in the U.S. presidential election. This upward momentum was also supported by the Federal Reserve's interest rate cuts, with the market generally expecting the continuation of monetary easing policies in 2025.

At the same time, the average daily trading volume in the fourth quarter surged from 31.1 billion USD in the third quarter to 62.6 billion USD, a month-on-month increase of 101.3%. On December 6, when Bitcoin broke through 100,000 USD, the spot trading volume exceeded 190 billion USD, setting a new annual high.

In comparison, the stock market performed strongly in the fourth quarter, with the Nasdaq index up 8.0% and the S&P 500 index up 3.0%. The US Dollar Index (DXY) also performed well, rising by 7.0%, mainly driven by the depreciation of other major currencies. The Japanese Yen (JPY) was the worst performer in the fourth quarter, falling by 8.0%, nearly erasing the gains from the end of the yen arbitrage trading.

AI Agent Market Analysis

AI agents have rapidly emerged as a new category since a certain AI project launched on Solana in early October. Although the "Terminal of Truths" pioneered the AI agent KOL in the X prototype, this narrative trend has mostly faded. However, the market capitalization growth of this category in the fourth quarter of 2024 is astonishing, with an increase of 322.2%, rising from $4.8 billion to $15.5 billion.

Currently, Solana and a certain Layer 2 chain are the only blockchains with significant AI agent projects. By the end of 2024, a certain Layer 2 chain has significantly captured market share from Solana and GOAT through projects like AIXBT and Virtuals Protocol (VIRTUAL). However, after Solana launched GRIFFAIN and AI Rig Complex (ARC) at the end of December, it has begun to reclaim some market share.

Layer 2 Ecosystem Development

Ethereum Layer 2 continues to grow in Q4 2024, with the top 10 Layer 2 platforms achieving an average daily transaction volume of 15 million. The transaction volume increase is mainly driven by a certain Layer 2 platform, which reached an average daily transaction volume of 7.2 million in Q4, a 78.7% increase from 4 million in Q3. In contrast, Ethereum's mainnet processed an average daily transaction volume of about 1.2 million in Q4. In Q4, 48.3% of the transactions among the top 10 Layer 2 occurred on that platform.

At the same time, Taiko has become the second most active Layer 2, surpassing Arbitrum, with Taiko capturing 20.6% of the trading share in the fourth quarter, ahead of Arbitrum's 13.7%. Taiko's trading volume increased by 85.5% quarter-on-quarter, while Arbitrum only grew by 14.0%. The significant growth of Taiko can be attributed to the deployment of multiple DeFi protocols on this relatively new chain.

Centralized Exchange Performance

In the fourth quarter of 2024, the spot trading volume of the top 10 centralized exchange platforms (CEX) reached $6.5 trillion, a quarter-on-quarter increase of 111.7%. This is the first time that the quarterly trading volume has surpassed the $6 trillion mark. The total trading volume of the top 10 CEXs in 2024 was $17.4 trillion, compared to $7.2 trillion in 2023.

A well-known exchange continues to maintain its dominance, with a market share of 34.7% among the top 10 CEXs at the end of December. Notably, the exchange's trading volume surpassed the $1 trillion mark in December, marking the second time it reached this milestone in 2024.

Upbit is the fastest-growing CEX in the fourth quarter, with its trading volume increasing from $135.5 billion to $561.9 billion, a quarter-over-quarter growth of 314.8%. Following South Korea's announcement of a lockdown on December 3, Upbit's trading volume surged. During this turbulent period, the average daily trading volume reached approximately $21 billion, which is six times its normal average daily trading volume.

Decentralized Exchange Platform Trends

In the fourth quarter of 2024, Solana became the dominant chain for decentralized exchange (DEX) trading, with a market share exceeding 30%. In the fourth quarter, Solana's trading volume reached $219.2 billion, a quarter-on-quarter increase of 152.0%. In comparison, Ethereum's trading volume was $184.3 billion, with a market share between 25% and 28%. Nevertheless, Ethereum still leads Solana on an annual basis, accounting for 33.5% of DEX trading volume, while Solana's market share is 25.2%.

At the same time, a certain Layer 2 platform successfully surpassed Arbitrum in the fourth quarter, maintaining its leading position. Its market share exceeded 14% in the fourth quarter, while Arbitrum's market share remained between 10% and 11%. This Layer 2 platform reached a market share of 19.0% in December, a quarter-on-quarter growth of 206.5%. Its trading volume was $116.7 billion, while Arbitrum's was $79.2 billion.

Tron is the fastest growing chain among the top ten chains, with a month-on-month growth of 232.7%. Its trading volume increased from $2.9 billion in the third quarter to $9.6 billion in the fourth quarter. By December 2024, Tron will have a market share of 2.1%, becoming the sixth largest chain.