Top Cryptocurrency Trends to Watch in 2024:
Highlights
In this new blog series, we provide concise summaries of the Binance Research team's findings and invite you to dig deeper into the original reports.
This article previews Binance Research's recent report that looks at the top cryptocurrency narratives to follow as we head into the new year.
Although it is too early to say if we are in a bull market, recent developments in areas such as Bitcoin, DeFi, stablecoins and NFTs project a positive outlook for the ecosystem in 2024.
The year 2023 has seen a resurgence of enthusiasm in the crypto launchpad development. Although it is too early to definitively declare the return of a bull market, things look more hopeful than they have for a while. Based on observing recent events and trends, the Binance Research team put together a summary of several key narratives and metrics to monitor in the coming months. Below, we show you the main trends in the crypto sector to follow as we enter the new year.
Bitcoin
2023 has been an eventful year for Bitcoin and featured significant developments across the spectrum of the investment landscape. On the side of developments native to the crypto space, we saw the emergence of the Ordinals protocol, which allowed innovations such as opt-ins, often called “Bitcoin NFTs”, to gain prominence. On the traditional finance side, optimism around the seemingly imminent approvals of a bitcoin Spot ETF in the United States has led more traditional institutional investors to set their sights on the cryptocurrency ecosystem.
Considering these developments, BTC has outperformed many other key assets and indices, both traditional and cryptocurrency. As of December 5, 2023, BTC's market capitalization had increased by 162% year-on-year. Below, we'll look at some of the most significant BTC developments to watch in 2024.
BTC Spot ETF Approvals in the United States:
Although the possibility of having regulated bitcoin spot Exchange Traded Funds (ETFs) in the United States has existed for some time, a notable positive evolution in this area was observed in 2023. In August, US courts ruled in favor of Grayscale in its dispute with the US Securities and Exchange Commission (SEC) over its application to convert its Grayscale Bitcoin Trust (GBTC) into a spot ETF. of BTC.
This favorable ruling led many other participants, such as Fidelity, Invesco, and BlackRock, the world's largest asset manager, to file their own BTC spot ETF applications in the following months. Currently, the SEC has a total of 13 BTC spot ETF applications under review. Of all these, the nearest final deadline is in January 2024, while the latest is in August.
Halving the Bitcoin:
There are two mechanisms that incentivize Bitcoin miners to validate transactions and protect the blockchain: block rewards and transaction fees; The former generally represent the majority of miners' income. Block rewards are paid for each newly mined block, which occurs every 10 minutes on average, and are halved every 210,000 blocks, which occurs approximately every four years.
Considering BTC's fixed maximum supply of 21,000,000 units, the halving generates further scarcity designed to increase its price over time and thereby reinforce the narrative of BTC as a "digital gold" or safe-haven asset . When the Bitcoin blockchain launched in 2009, block rewards started at 50 BTC per block. Having experienced subsequent halvings in 2012, 2016 and 2020, the current reward is 6.25 BTC per block. The next halving is expected to take place in April 2024, after which the reward will be 3,125 BTC per block.
Ordinals and inscriptions
One of the most important Bitcoin developments in 2023 was the arrival of ordinals and inscriptions . The Ordinals protocol was launched earlier this year and involves tracking individual satoshis (sats) based on what founder Casey Rodarmor calls "Ordinal Theory."
Satoshis are the smallest units of a bitcoin. 1 BTC is equivalent to 100,000,000 satoshis. The Ordinals protocol allowed each satoshi to be assigned a unique identifier. Since then, arbitrary content such as text, images, videos, etc. could be “enrolled” into these sats and create “inscriptions,” often referred to as “Bitcoin NFTs.”
Total BTC enrollments
Ordinals and inscriptions also led to the appearance of BRC-20 tokens in March 2023, which enabled the use, minting and transfer of fungible tokens in Bitcoin for the first time. While inscriptions are the non-fungible implementations of the Ordinals protocol, BRC-20 tokens are the fungible counterpart.
After the initial euphoria from the launch of ordinals and BRC-20 tokens, the market calmed down a bit before rising again. November experienced a notable resurgence in activity and became the month with the most registrations in history with a total of more than 8,300,000, 362% more than the October lows.
The arrival of ordinals introduced a renewal of enthusiasm and innovation in the Bitcoin ecosystem. This is another development that demonstrates that we are in an important period of Bitcoin history as we move towards 2024.
Stablecoin supply
Stablecoin supply is a measure of the amount of capital that is already available to invest in crypto assets at any given time, therefore indicating potential buying pressure. For the first time since Q1 2022, the quarterly net change in supply of the top five stablecoins by market capitalization has turned positive in Q4 2023. It will be worth watching this metric in the coming months to see whether this change was temporary or represents a more sustained upward trend.
NFT volumes
Throughout 2023, non-fungible token (NFT) trading volumes experienced a significant slowdown, declining each month from February to September until reaching new yearly lows. However, in October, this trend finally reversed, and November saw a notable uptick in trading volumes.
One highlight is the growth of Bitcoin NFTs, which were the most popular type of NFT in November, with over $375,000,000 in trading volume. Having surpassed even Ethereum, this is a notable achievement for Bitcoin, as it had long been considered a protocol unsuitable for NFTs and other applications beyond peer-to-peer (P2P) transactions.
Protocol Commissions
As the industry matures and protocols move towards generating revenue, the fees generated by leading cryptocurrency projects will represent an important metric to track. Fees have increased steadily throughout 2023. In November, fees for the top 20 cryptocurrency projects across all sectors were more than 88% higher than in January.
Ethereum is by far the largest fee generator and has accumulated more than double the fees of any other protocol. Decentralized finance (DeFi) protocols are collectively the second largest fee generator after Ethereum. There, Lido and Uniswap are market leaders. Although DeFi and layer 1 (L1) projects have been dominant in generating fees this year, NFTs also represent a significant portion of fee income. Here, OpenSea leads firmly with almost double the fees of Manifold and more than double the fees of Blur.
In short, commission generation is an indicator of a sustainable business model, so it was encouraging to see these numbers grow throughout 2023. As we move into the new year, it will be important to keep a close eye on which protocols and subsectors can demonstrate the best growth in terms of commissions.
Capa 1
Although Ethereum remains the dominant smart contract L1 in most metrics, other alternative L1 solutions have also shown promising potential throughout 2023, some even surpassing Ethereum. Watching this trend in 2024 will be critical to seeing if Ethereum retains its dominance in the L1 landscape.
Solana has had the most notable performance in 2023, particularly thanks to the market capitalization of the SOL token increasing by around 56% in November. Toncoin has also made considerable progress this year with The Open Network and Telegram's partnership announcement in September being a big key aspect.
Many other developments took place in all major L1s. Following its Shanghai upgrade in April, Ethereum enabled staked ETH withdrawals, giving rise to huge liquid staking and LSDFi markets in DeFi. With continued growth of the ecosystem, BNB Chain launched opBNB, an optimistic L2 based on OP Stack and BNB Greenfield, a next-generation data storage platform.
SocialFi
The social potential of blockchain-based applications had long been anticipated, leading to the emergence of SocialFi , short for “social finance,” which represents the convergence of DeFI and social media. 2023 saw a product-driven rebound in this subsector, where friend.tech in particular captured the attention of many.
As of late November, friend.tech was able to generate over $25,000,000 in protocol fees since its launch. After increasing in August and September, its daily activity has slowed in recent months. However, the product is still in its beta mode, and a full launch is expected soon.
The attention that friend.tech garnered, especially from influencers outside the crypto space, demonstrated the potential of Web3 social applications. Other launchpad development services notable projects in this area include Farcaster, Lens Protocol, and Binance Square . In 2024, SocialFi's ability to gain more momentum will determine the shape of social interactions on Web3 for years to come.
Conclusions
The final months of 2023 brought with them a refreshing shift in sentiment in and around the crypto industry. Amid growing hype, the arrival of new market participants and growing enthusiasm, it is essential to monitor key indicators and stay ahead of significant narratives. This article highlights the main talking points and the most important metrics we should track as we move towards 2024.