Author: Cosmo Jiang, Partner of Pantera Capital; Translation: Golden Finance xiaozou

We believe that this year is It’s been a very constructive year for the crypto industry, with major developments in price action, market structure milestones, and regulatory and major shifts. From the passage of the FIT21 bill, to the successful launch of ETFs, to the election of the first-ever U.S. president who supports cryptocurrencies, we have seen the capital, innovation and regulatory environment once again be favorable.

The following is a review of major encryption events in 2024.

After a strong 2023, the market predicts some positive developments in the first half of 2024 Catalyst, rising prices:

-The launch of the highly anticipated Bitcoin ETF in January is the most noteworthy big event. The ETF began to see strong inflows shortly after its launch, leading to strong price action throughout February and March.

- February saw a surge in on-chain activity against the backdrop of a new wave of retail participation, primarily meme coin trading activity on Solana.

- In the following month, Ethereum’s major upgrade EIP-4844 significantly reduced the transaction costs of Ethereum L2s.

Subsequently, as risk assets fell across the board in April, the market encountered some challenges. Headwinds have surfaced, mainly in the form of changes in macro expectations, and higher inflation data suggests that interest rates are likely to move higher in the long term. In addition, the conflict between Israel and Iran has raised geopolitical concerns. The end of April ushered in Bitcoin’s third halving, but surrounded by these unfavorable factors, this halving event did not bring much short-term excitement.

In May of this year, we started to see the first signs of good news for cryptocurrencies. It started when Trump turned to support cryptocurrencies in a speech on May 8. Some positive legislative developments soon followed, including House passage of the FIT21 bill and the surprise approval of an Ethereum ETF.

But the reality is that progressOn and off, there are fewer tangible catalysts to get excited about after May. This continued and we saw significant pullbacks across asset classes throughout the remainder of the summer. Ethereum ETFs began trading in July, but they failed to become a positive catalyst for the market due to weak market conditions.

In September, driven by the Federal Reserve’s first interest rate cut, the macro environment began to improve. Markets continue to rebound from the oversold conditions of the summer as expectations for the U.S. election increase and both parties begin to openly support cryptocurrencies.

On November 5, the results of the US election were announced, and the market began to operate at high speed.

Markets have been rising since the U.S. election, with Republicans taking control of the presidency and both chambers of Congress, in anticipation of Initiatives to support industry. We believe that the crypto industry and its supporters had a clear impact on the election. The new Congress is the most pro-crypto Congress we have ever seen, with a majority of House members and a majority of newly elected senators taking a pro-crypto stance. In the case of the popular vote, the margin of victory was smaller than the estimated single-issue electorate encrypted electorate. In many ways, the digital asset industry can legitimately argue that this is the swing vote, and like pivot security in the capital stack, it could have huge sway in the future. An enthusiastic pro-crypto White House, coupled with supportive majorities in both chambers, should create the best environment for constructive crypto legislation.

Bitcoin has long benefited from a clear way to use, tax and regulate. This clarity sets it apart from other industries. It’s now a mouth-watering prospect that entrepreneurs looking to leverage tokens and blockchain to build serious value-added businesses may soon benefit from similar clarity, and we believe a wave of innovation should follow. While Bitcoin has taken up a large part of the discussion since the election, not much has changed with it, aside from the possible establishment of a strategic Bitcoin reserve in the United States. Everything could change meaningfully for other productive projects. In the long term, the passage of stablecoin and market structure legislation should have a much greater impact on altcoins than it does on Bitcoin.

Therefore, retail capital’s re-participation in the broader cryptocurrency market has begun to take shape. Coinbase saw strong weekend trading volumes, as evidenced by a surge in the number of “last cycle coins,” or the most recognized and accessible coins on the retail distribution platform. As a result, Bitcoin’s dominance has seen a monthly decline for the first time in nearly two years. We are increasingly convinced that we are now closer to the “second phase” of the cycle, when innovation value is representedLong-tail tokens that create blockchain solutions may start to outperform.

We have observed that the bull market cycle has two obvious stages. The first phase is the early stages of a rally, when Bitcoin tends to outperform the rest of the market. The second phase is the late stage, when long-tail coins or “altcoins” tend to outperform the rest of the market.

We believe that the remaining coins are now accelerating.

It is worth noting that the performance of altcoins in the second phase was so great that As for altcoins outperforming Bitcoin throughout the first two cycles—non-Bitcoin tokens accounted for 65% and 55% of total market capitalization growth respectively. We are now seeing some early signs that we are in the second phase of the rise, with the US election being the catalyst for this phase.

There are many reasons to be optimistic about the digital asset market. As I reflect on stories from the past few years:

– 2021 has been a boom time for innovation and excitement, with many people entering the cryptocurrency space for the first time.

– 2022 is a natural outbreak of speculative excess across all asset classes.

– 2023 is shaping up to be a year of headwinds for the industry – whether it’s rising system leverage and capital outflows, waning consumer interest, or regulators being Forced to overreact to an underreaction to the previous year’s excesses.

– 2024 is the year when headwinds turn into tailwinds. We're starting from a healthier position, with capital inflows starting (mostly from Bitcoin ETFs). User activity has started to pick up, and more importantly, regulators are starting to loosen their regulations and are being pushed back in court.

2025 is expected to be a tailwind year for the industry to accelerate:

– Election Changing the model of the blockchain industry. When you think about the reasons for rejection by potential investors and innovators, the answer is often a lack of regulatory transparency. This pessimistic situation may soon pass.

– Fundamentals will ultimately drive prices higher. Fundamentals, as measured by on-chain activity and new innovations like AI agents and DePIN, are improving in real time. However, the price recovery of long-tail coins is still in its early stages.

– As digital assets become more mainstream, capital flows should improve. Bitcoin ETF issuance should continue to grow, and more ETFs may follow (such as Solana). Institutional allocators and sovereign entities are reaching out to us because they can no longer ignore digital assets.

The risk/reward for new investments in this area has improved. Yes, asset prices rise from the bottom, but risk reward and reward are probability functions, and the likelihood of a rise increases significantly. While Bitcoin may be closer to midgame, I believe we are still in the early stages of digital asset price performance.