Image: Bitcoin is moving away from its legacy concept, and Bitcoin maximalists are sceptical
H1 has been a positive period for Bitcoin and cryptocurrencies. New trends, developments, and positive market sentiment foretell a promising year, potentially aiming for new highs.
Summary:
- The SEC’s approval of Bitcoin Spot ETF and the fourth halving led to Bitcoin's market cap surpassing $1.36 trillion and a new all-time high (ATH) per coin of $73,800.
- Competing Layer 1 solutions to keep gaining ground in the following months.
- SocialFi’s path this year will determine the success of social platforms in the Web3 world.
2023 was key for the entire crypto community as the waves tossed between economic challenges and global conflicts, and cautious optimism. This year has already started with transformative developments in the cryptocurrency space.
A tide of confidence was seen in the U.S. after the SEC’s green light SEC’s green light on Bitcoin Spot ETFs, which lured more mainstream investors. With such changes, Bitcoin (BTC) has outstripped most major assets and indices in the financial spectrum. On June 5th, Bitcoin's market cap surpassed $1.36 trillion after setting a new all-time high (ATH) per coin at $73,800.
Though it’s too early to call it a solid bull market, the recent events in Bitcoin, DeFi, and stablecoins indicate that the cryptocurrency landscape will enjoy a bright future for the remainder of the year. Below are the trends and developments to watch out for in H2 2024.
Stablecoin Supply Dynamics
The stablecoins supply indicates the existing funds flow that is ready to be invested in crypto assets, showing the possibility of market activity. In a major twist of events, Q4 2023 has witnessed the initial positive net change in the supply of the top five stablecoins market capitalizations since Q1 2022.
This phenomenon should be closely monitored in the next months to determine whether it is only a temporary change or a more long-term one. Below are the quarterly incremental supply dynamics of the top five stablecoins.
Image: Net stablecoin supply change, DeFiLlama
Protocol Fee Changes
The trend started in 2023 when, in November, the fees generated by the top 20 crypto projects in multiple sectors of activities were more than 88%above those of January.
Ethereum is the largest fee generator, with more than two times the fees of any other protocol. DeFi protocols are second in fee generation after Ethereum, with Lido and Uniswap leading the way.
This year, DeFi projects and Layer 1s (L1s) generated the most fees, but the NFT sector, led by OpenSea, is also a significant contributor.
Bitcoin’s Market Dominance to Be Challenged
The first cryptocurrency, Bitcoin (BTC), has come a long way since its launching 2009. Originally designed to send money directly between peers, it is now seen as 'digital gold'—a safe option compared to traditional financial tools in a shaky geopolitical world.
As Bitcoin’s network grows, new solutions like layer 2s, Runes, and Ordinals, among others, are popping up. These additions aim to empower the network to handle more transactions and become more inclusive towards its diverse users’ needs.
However, not everyone in the Bitcoin community is happy about these changes. According to CryptoLists, many users see the network as only the third in terms of usability, falling behind Ethereum and the Binance Smart Chain.
More Value-Creating Layer 2 Solutions to be Introduced to the Market
Layer 2 solutions have been a big step forward for Bitcoin–and a big promise. They work on top of the existing Bitcoin network to speed up transactions and make them more efficient without changing the system's basic rules–a method set to reduce traffic and speed up the whole process.
The main benefit of layer 2 solutions is that they allow the Bitcoin network to handle more transactions every second than it could before. This is critical to extending Bitcoin's adoption as a way of doing daily transactions globally.
The Lightning Network is an excellent example of a layer 2 solution that tackles Bitcoin’s issues with handling large transactions by letting users make small payments quickly. This works exceptionally well for web3 gaming and content creation, where traditional Bitcoin payments are slow and expensive.
The Rise of SocialFi
SocialFi’s integration of blockchain technology into social applications blends decentralized finance (DeFi) with social applications. The year 2023 saw the rise of product-driven growth within this sector, friend.tech being especially attractive.
By November, the friend.tech platform was generating more than $25 million in protocol fees. The blockchain-based social media platform offers token-gated chats through tokens called 'keys' that can be traded, allowing users to profit potentially from a content creator's growing popularity. The hype around friend.tech, particularly among influencers who are not the usual faces of the crypto world, shows the explosive growth of Web3 social applications.
SocialFi’s path in H2 2024 will be critical in determining the success of social platforms in the Web3 ecosystem.
Bottom line: Bitcoin and Cryptocurrencies to Tackle New Horizons
Bitcoin and the crypto industry’s future is rather ambiguous. The adoption of more regulations for cryptocurrencies could bring further stability and legitimacy to the market, while clear regulatory guidelines would foster greater trust and confidence among investors.
With the increasing developments in Bitcoin, DeFi, stablecoins, and NFTs, along with the positive market sentiment, this year promises an intriguing season, possibly even setting records. However, with a surging frenzy and the entrance of new market players, the opportunities and tendencies should, therefore, be treated with a mix of optimism and care.