Source: Grayscale; Compiler: Deng Tong, Golden Finance

The results of the US election pushed Bitcoin to a record high. Although cryptocurrency is a bipartisan issue, Grayscale Research predicts that unified Republican control of the White House and Congress should result in legislation and regulatory oversight more conducive to industry innovation. President-elect Trump’s nominations for key cabinet positions appear to be consistent with a pro-cryptocurrency agenda.

Other major cryptocurrency market developments include the launch of Bitcoin ETP options, MicroStrategy’s massive purchase of Bitcoin, a surge in trading volume on South Korean cryptocurrency exchanges, the innovation of artificial intelligence agents, and the market’s focus on Dogecoin .

2024 is a favorable period for cryptocurrency returns, and Grayscale Research believes the bull market may continue next year.

Before last November, Bitcoin had appreciated 60% in 2024, but last month’s gains brought its year-to-date return to 110%. Unlike previous months, favorable crypto market conditions extended well beyond Bitcoin in November: Our Crypto Industry Market Index (CSMI), which measures returns across digital assets, was up 59% for the month, There are now positive returns for the full year as well (Table 1).

Chart 1: Bitcoin has appreciated 110% this year

Although cryptocurrencies are a global phenomenon, But Grayscale Research sees the recent U.S. election results as a potential turning point for the digital asset industry. The next president and Congress will likely adopt sweeping encryption legislation and help shape agency oversight by appointing and confirming key regulators. These decisions could impact many aspects of blockchain adoption and growth in the United States, including the tokenization of assets, the use of stablecoins, and the integration of decentralized finance (DeFi) applications with legacy systems.

At the voter level, polling data shows that cryptocurrency is a bipartisan issue, with Bitcoin ownership rates slightly higher among Democrats than among Republicans. But Republicans have been more steadfast in their support of digital asset innovation among current and incoming members of Congress, and President-elect Trump has publicly supported the industry. Therefore, we believe Republican control of the White House and Congress is a positive outcome for crypto markets (see our previous election report for details). The nominations of Scott Bessent as Treasury Secretary and Howard Lutnick as Commerce Secretary are imminent given both candidates’ past statements and professional experience with cryptocurrencies. The early signs are encouraging. [2]

While many assets appreciated in value following the U.S. election, on a risk-adjusted basis (i.e., taking into account the volatility of each asset), Bitcoin and the broader cryptocurrency market were the best performers. goodone of the market segments. The stock market appreciated broadly, led by financial stocks, likely on expectations of lower tax rates and looser regulations in some industries (Exhibit 2). At the same time, the yuan depreciated, possibly due to the threat of higher U.S. tariffs[3], while gold prices also fell, possibly reflecting reduced tail risks from a contested election outcome.

Exhibit 2: Cryptocurrency markets outperformed traditional assets in November

As with many physical commodities, Bitcoin’s price returns are characterized by a high degree of momentum (statistical persistence), which can give the appearance of price “cycles.” While each period has its specific drivers, past Bitcoin cycles may be partly related to the four-year halving schedule. As Bitcoin matures and is adopted by a wider range of traditional investors, and the supply impact of the four-year halving declines, Bitcoin price cycles may become less cyclical. While Bitcoin’s price may always show some momentum — like many physical commodities — changes may not happen every four years.

Nonetheless, past cycles may provide some guidance on Bitcoin’s typical statistical behavior. Bitcoin’s price reached a cyclical low in November 2022 and has continued to appreciate for about two years. The past four Bitcoin price cycles have averaged 2.2 years, and the last two have averaged nearly three years. For the current cycle, cumulative returns to date look roughly comparable to the previous two bull markets (Chart 3). While fundamental variables such as economic conditions and the strength of the U.S. dollar will ultimately drive Bitcoin’s price, history suggests that recent price increases are likely to continue.

Chart 3: Pre-cycle Bitcoin price tracking

In November, the broader trend surrounding Bitcoin The financial market structure continues to mature. U.S.-listed spot Bitcoin exchange-traded products (ETPs) saw another $6.5 billion in net inflows, some of which may have flowed into spot/futures “basis trades.” Bitcoin ETP options also began trading last month. As of November 30, open interest in Bitcoin ETP products with listed options was $7 billion, of which approximately 70% were calls and 30% were puts. Improvements in the market structure surrounding spot Bitcoin ETPs could ultimately have an impact on proxy investments like MicroStrategy stock. MicroStrategy is a publicly traded company nominally in the software business, but primarily as a Bitcoin investment vehicle. [4] In November, the company purchased $12 billion in Bitcoin for its balance sheet and announced plans to purchase a total of $42 billion in Bitcoin over the next three years. [5]

From the perspective of the encryption industrySee, the best-performing segments are consumer and cultural, largely due to the strong performance of Dogecoin (DOGE), which is up 161% for the month (Chart 4). Although Dogecoin originated from Memecoin, its blockchain is derived from a fork of Bitcoin [6] and has faster block times than Bitcoin, Bitcoin Cash, and Litecoin, and is comparable to Bitcoin Transactions per second. [7]

Dogecoin is the largest asset in the consumer and cultural fields based on market value. On November 12, Trump announced plans to establish the Department of Efficiency, abbreviated as DOGE, co-led by Musk, and blockchain received more attention. [8] The department aims to reduce waste and promote structural reforms. Although there is no direct relationship between the proposed units, the sharp increase in attention to Musk and the DOGE meme may have spurred demand for the token and boosted its price.

Exhibit 4: Consumer and Cultural Cryptocurrency Industry Outperforms on Meme Coin Demand

In addition to Bitcoin Outside of Coin and Dogecoin, the biggest increases in market capitalization last month were XRP and Stellar Lumens (XLM), two crypto-related projects that initially focused on cross-border remittances but have since expanded to other use cases such as asset tokenization. Monetization and support for central bank digital currencies (CBDC). Since the end of October, XRP has gained 281% and XLM has gained nearly 470%. The U.S. election results may provide more regulatory clarity for cryptocurrency projects working on remittance applications, which may improve the fundamentals of both projects. However, recent returns may also be driven by idiosyncratic fund flows. In particular, XLM’s sharp appreciation corresponds with a surge in trading volume on the South Korea-centric Upbit exchange, which may indicate large-scale speculative trading of XLM by Korean investors (Chart 5). As such, XLM's short-term prospects may depend on whether demand from these sources is sustained rather than on the project's fundamentals.

Chart 5: South Korea-centered Upbit exchange’s trading volume surges

With the help of smart contract platform, Crypto industry Solana continues to outperform the Ethereum network's Ethereum counterpart, in part due to widespread meme coin trading on Solana. [9] Solana now generates fees comparable to Ethereum Layer 1, but has only about a quarter of its market capitalization. [10] If Solana can continue to expand adoption beyond meme coins, into categories such as decentralized physical infrastructure (DePin) or stablecoin payments, Grayscale Research believes it may continue to experience higherFee growth and token price performance. Among the larger smart contract platform blockchains[11], the best performers are Cardano (+216%), Polkadot (+127%), and Sui (+77%). [12]

Although Ethereum has underperformed Bitcoin and Solana this year, its performance has been broadly in line with the overall performance of the smart contract platform cryptocurrency industry (Exhibit 6). Ethereum has certain competitive advantages that may support adoption in the coming year, including a solid lead in asset tokenization efforts and a broad network of application developers. Grayscale Research believes that Ethereum is “playing the long game”: bootstrapping network effects by keeping Base and other Layer 2 fees low. Trends in institutional adoption of digital assets in a post-election regulatory environment may help determine whether Ethereum’s scaling strategy will support its leading position among smart contract platforms over time.

Chart 6: Ethereum lags behind Solana this year

Developers continue to explore blockchain In terms of innovative applications of technology, the recent market focus has been on projects related to decentralized artificial intelligence (deAI). It’s a diverse category, but many projects focus on leveraging economic incentives based on blockchain infrastructure to develop components of AI technology in a decentralized manner, including data collection and storytelling, computation, and model training and reasoning. In a recent report, Grayscale Research introduced the latest experiment in “AI influencers”: autonomous AI agents active on social media, capable of making and receiving payments using blockchain wallets. Another innovative market area is decentralized science (DeSci), where projects leverage blockchain technology to help create a transparent, accessible and collaborative scientific research environment. A DeSci event attended by key industry players in early November brought more attention to applications in this segment. [13]

Cryptocurrency valuations rose sharply in November, with a series of market signals indicating that speculative traders are currently taking relatively long-term positions. Without more fundamental news, the cryptocurrency market is likely to be more range-bound in the short term.

Looking ahead to next year, however, Grayscale Research believes the bull market is likely to continue, especially if the macro backdrop remains favorable (i.e. the economy avoids recession and the Fed lowers interest rates). Investors around the world are adopting Bitcoin as a unique form of currency that offers digital scarcity and censorship resistance. We believe that demand for these functions will continue to grow as long as the Fed fails to control rising debt burdens and framers introduce friction into the fiat currency system through sanctions and other capital controls. Beyond Bitcoin, market structures are evolving to enable investors to moreEffectively accessing crypto assets, the incoming Congress may bring greater regulatory transparency in the United States. Market, developers continue to bring exciting new applications to market, such as those related to decentralized artificial intelligence. While 2024 is going to be a very good year for the crypto market, we see no reason why 2025 can’t be just as good or better.

References

[1] The FTSE/Grayscale Crypto Sectors series indexes are weighted by the square root of the market capitalization of the constituent stocks, thereby lowering the value of Bitcoin and The relative weighting of other large-cap tokens.

[2] Source: DL News, AP, WSJ.

[3] Source: Reuters.

[4] Source: Financial Times.

[5 ] Source: Financial Times.

[6] Dogecoin is a fork of Luckycoin, Luckycoin is a fork of Litecoin, and Litecoin is a fork of Bitcoin.

[7] The average block interval in the past year is: Dogecoin (1.1), Bitcoin (9.9), Bitcoin Cash (10.3) and Litecoin (2.5); the average daily transaction volume per second over the past year is: Dogecoin (6.2), Bitcoin (6.2), Bitcoin Cash (0.8), Litecoin (3.3). Source: Coin Metrics, Grayscale Investments. Data as of November 29, 2024. For illustration purposes only.

[8] Source: X.com.

[9] Source: Dune Analytics. Note that this does not include Dogecoin, which has its own blockchain.

[10] Source: Artemis. Data as of November 30, 2024.

[11] Defined here as a company with a market capitalization of more than US$5 billioncompany.

[12] Source: Artemis. Data as of November 30, 2024.

[13] Source: Unchained Crypto.