Author: Grayscale Source: Grayscale Research Translation: Shan Ouba, Golden Finance

The fourth quarter of 2024 The crypto market has surged significantly, a trend evidenced by the FTSE/Grayscale Crypto Industry Index family. The market's gains largely reflected positive reactions to the U.S. election results.

Smart contract platform competition is fierce. Although Ethereum is still the leader in the field, its performance is not as good as Solana, which is second in market value. At the same time, investors are increasingly focusing on other alternative Layer 1 networks, such as Sui and The Open Network (TON).

The Grayscale research team has updated the Top 20 asset list, which covers a diverse range of assets in various crypto industry sectors that we believe will have the greatest potential in the next quarter. Higher potential. New assets added this quarter include HYPE, ENA, VIRTUAL, JUP, JTO and GRASS. It should be noted that the prices of these assets fluctuate greatly and investment risks are higher.

The Grayscale Crypto Industry Index System provides a comprehensive framework to help understand investable digital assets and the technical principles behind them. Based on this framework, Grayscale collaborated with FTSE Russell to develop the FTSE Grayscale Crypto Industry Index Series to measure and monitor the crypto asset class. Grayscale Research incorporates these indices into its ongoing analysis of digital asset markets.

Crypto market valuation surges in Q4 2024, primarily due to U.S. Positive market reaction to the election results. According to the Composite Crypto Market Index (CSMI), the total crypto industry market capitalization grew from $1 trillion to $3 trillion during the quarter.

Comparing crypto market capitalization to traditional public and private market asset classes, the current market size of the digital asset industry is comparable to the global inflation-linked bond market and is the largest U.S. high-yield That's more than twice that of the bond market, but still significantly smaller than the global hedge fund industry or the Japanese stock market.

As market valuations rise, many new tokens qualify for inclusion in the crypto industry framework Standard (minimum market capitalization requirements for most assetsto US$100 million). In this quarter’s rebalancing, we added 63 new assets to the index series, which now covers 283 tokens.

The consumer and cultural crypto industry saw the largest number of new tokens, reflecting continued strong returns from memecoin and the appreciation of assets related to gaming and social media. The largest asset added this quarter by market capitalization was the Ethereum Layer 2 protocol Mantle, which now meets our minimum liquidity requirements.

Smart contract platforms may be the most competitive market sector in the digital asset industry. Although 2024 is a big year for Ethereum, with Ethereum receiving U.S. spot exchange-traded product (ETP) approval and completing a major upgrade, Ethereum (ETH) has underperformed competitors such as Solana.

Investors have also set their sights on other Layer 1 networks, including the high-performance blockchain Sui and the TON blockchain integrated with Telegram.

In building infrastructure for application developers, designers of smart contract blockchains face multiple design choices that impact the “blockchain trilemma” Dilemma”: network scalability, security, and decentralization. For example, blockchains that prioritize scalability typically exhibit high throughput and low transaction fees (like Solana), while blockchains that prioritize decentralization and security are likely to have lower throughput and higher fees (like Solana) Ethereum).

Regardless of its design, the value of a smart contract platform mainly comes from the network fee income it generates ability. Fee income is often seen as the main driver of blockchain token value appreciation in this market, although metrics such as total locked volume (TVL) are equally important. The data shows that there is a significant statistical relationship between fee income and the market value of the platform.

This quarter’s Grayscale Research Top 20 includes the following smart contract platforms:

•Ether Square (ETH)

•Solana (SOL)

•Sui (SUI)

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•Optimism (OP)

Quarterly Grayscale Research Team Hundreds of digital assets are analyzed to guide the rebalancing process of the FTSE/Grayscale Crypto Industry Index family. Subsequently, we will publish a list of the Top 20 assets in the crypto industry that have high potential in the next quarter.

This quarter, we pay special attention to the following three major market themes:

1. U.S. election and its potential impact on regulation in areas such as DeFi and staking;

2. The continued breakthroughs in decentralized AI technology and the trend of AI agents using blockchain;

3. The continued growth of Solana’s ecosystem.

Against this backdrop, the six new assets added this quarter include:

• Hyperliquid (HYPE): A Layer 1 blockchain focused on supporting on-chain financial applications. The main application is a fully on-chain perpetual contract decentralized exchange (DEX).

•Ethena (ENA): Ethena has launched a new stablecoin called USDe, supported primarily by hedging positions in Bitcoin and Ethereum.

Virtual Protocol (VIRTUAL): A protocol for building AI agents on the Ethereum Layer 2 network Base, allowing the creation and co-ownership of tokenized AI agents.

•Jupiter (JUP): The largest DEX aggregator on Solana, TVL ranks first among all Solana applications.

•Jito (JTO): Liquidity staking protocol on Solana, generating more than $550 million in fee revenue in 2024.

Grass (GRASS): A decentralized data network that allows users to share idle bandwidth through a Chrome extension and the bandwidth is soldUsed by AI companies to train machine learning models.

These assets represent the most growth potential and innovative sectors in various crypto industries, providing investors with diversified choices.

Note: Shading indicates new data for the upcoming quarter (Q1 2025) Increase assets. *An asterisk indicates the industry to which assets not included in the Cryptocurrency Industry Index belong. Source: Artemis, Grayscale Investments. Data as of December 20, 2024. For illustration purposes only. Assets are subject to change. Grayscale, its affiliates and clients may hold positions in the digital assets discussed here. All assets in our top 20 list have high price volatility and should be considered high risk.

In addition to the new themes mentioned above, we remain confident in the areas we have focused on in previous quarters, such as Ethereum expansion plans, asset tokenization, and decentralized physical foundations Facility (DePIN). These themes are also reflected in this quarter’s Top 20, including the continued selection of protocols such as Optimism, Chainlink, and Helium, which respectively represent the leading positions of these tracks.

This quarter, we removed projects such as Celo from the Top 20. Although the Grayscale research team still recognizes the value of these projects and believes that they remain an important part of the crypto ecosystem, we believe that the adjusted Top 20 asset portfolio may provide a more attractive risk-reward ratio in the coming quarter.

Investing in the crypto asset class involves risks, some of which are unique to crypto assets, including smart contract vulnerabilities and regulatory uncertainty. Additionally, all assets in our Top 20 list are highly volatile and risky and may not be suitable for all investors. Therefore, when considering investing in digital assets, investors should comprehensively evaluate potential risks based on their own investment portfolio and financial goals.

Index definition:

FTSE/Grayscale Crypto Industry Index (CSMI) measures the world’s major Price returns for exchange-listed digital assets.

Comment:

[1] As of December 20, 2024, the Crypto Sectors total market index rose 58% this quarter. Data source: FTSE, Grayscale Investment.

[2] Data source: FTSE, Grayscale Investment, as of December 20, 2024.

[3] Data source: FTSE Russell, as of December 20, 2024

[4] Data as of December 20, 2024.

[5] USDe collateral may include other liquid stablecoins.

[6] Bitget.