2024 Digital Assets Outlook

Following the immediate aftermath of the crypto market’s year-long deleveraging, 2023 ushered in substantial evolution and growth across various corners of the blockchain industry and cryptocurrency asset class. 

The report provides an in-depth analysis of key developments shaping the year, focusing specifically on (1) general market and price activity, (2) the role played by infrastructure providers, institutions and regulators, (3) evolution across the blockchain platforms underpinning the on-chain economy, and (4) the applications that drove adoption.

1. Market Performance & Activity: The year 2023 was marked by a notable recovery in cryptocurrency prices, with total market capitalization doubling. This resurgence was influenced by macroeconomic factors and a low price floor set by the FTX bankruptcy, which marked the end of a broader market deleveraging that spanned most of 2022. Conversely, except for the tail end of Q4, venues across which investors allocate to the sector saw less activity than recent years. 
2. Market Infrastructure & Regulation: Endogenous factors altered the landscape of centralized exchanges and stablecoins, highlighted by the relative decline of Binance’s dominance, growth of Coinbase’s offerings, and rise in USDT dominance. Crypto’s relationship with traditional banking experienced setbacks, particularly due to regulatory and banking crisis related headwinds in the U.S. However, positive developments like filings for spot Bitcoin ETFs indicated growing institutional adoption. 
3. Blockchain Platforms and Scaling: Ethereum continued to lead among Layer 1 blockchains, focusing on a rollup-centric roadmap for scalability. Competing blockchains like Solana, Avalanche, and Cosmos pursued various scalability strategies, slowly gaining market share – Solana’s integrated approach seeing the most success towards the end of the year. The growth in rollups and the development of blockchain bridges marked significant progress towards interoperability and enhanced scalability for modular chains like Ethereum.
4. On-chain Applications: While blue-chip lending and exchange protocols remained relatively flat, liquid staking providers like Lido grew dominance, and DeFi meaningfully expanded into areas like real-world asset tokenization. The non-fungible token (NFT) sector experienced intense competition, reducing the market share of platforms like OpenSea, and the introduction of Ordinals on Bitcoin spurred the growth of NFTs on its network. Additionally, the rise of decentralized social protocols marked a new era of blockchain application development.

Often, 2023 felt like a year simultaneously playing out across opposite universes. Prices broadly doubled despite relatively tepid investor activity, reflected by multi-year lows in volume and venture deals. Many institutions shied away from servicing crypto market participants, yet recent ETF filings mark the most prominent progress towards institutional adoption. Regulatory bodies warned the market about the risks of the sector and levied enforcement actions, but the judicial branch pushed back on regulatory overreach. And an Ethereum upgrade allowing for stake to be withdrawn led to the rapid growth in total ETH staked and aided the rise of a new dominant DeFi player. The following sections examine some of these nuances.