ETF Approvals, Regulatory Frameworks, and Market Dynamics

The first half of 2024 was a challenging time for the crypto market. There was an increase in both regulatory scrutiny and institutional adoption. Despite these challenges, the market has shown an upward momentum, with the total crypto market capitalization increasing over the past six months.

The crypto industry is gaining institutional adoption, so it’s important to review significant market developments regularly. The crypto markets peaked in late 2021, and we are now nearing the three-year mark since that peak. This is a good time to step back and examine the state of the markets and key developments in various areas of the Web3 space.

Today, we will look at Coinpedia’s half-year report for the first half of 2024. We will explore the landscape of major crypto and Web3 sectors, including layer-1 and layer-2 solutions, stablecoins, decentralized finance, non-fungible tokens, and institutional adoption.

Top Crypto News In H1 2024

SEC-approved spot Bitcoin ETF trading

The US Securities and Exchange Commission (SEC) approved US-listed Bitcoin exchange-traded funds (ETFs) in January. The SEC I approved 11 applications from BlackRock, Ark Investments, Fidelity, Invesco, VanEck, and others to launch ETFs tracking Bitcoin, despite warnings from officials and investor advocates about associated risks.

The Bitcoin ETFs are listed on the New York Stock Exchange (NYSE), Nasdaq, and Chicago Board Options Exchange (CBOE). 

US House passed crypto bill despite warnings from SEC

In May, the U.S. House of Representatives passed a bill to establish a new legal framework for crypto currencies, despite a warning from the U.S. securities regulator about potential financial risks.

US passed the “Financial Innovation and Technology for the 21st Century Act,” establishing a regulatory framework for cryptocurrencies and outlining the responsibilities of the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC).

Sam Bankman-Fried sentenced to 25 years in prison

Crypto entrepreneur Sam Bankman-Fried was sentenced to 25 years in prison for defrauding hundreds of thousands of customers after the collapse of FTX, a popular digital currency exchange.

Despite acknowledging Bankman-Fried’s intelligence, U.S. District Judge Lewis A. Kaplan harshly criticized him and his crimes before issuing a sentence that was half of what prosecutors wanted and much less than the 105 years recommended by probation officers.

SEC accelerates spot Ether ETF approval process

The U.S. Securities and Exchange Commission could approve ether spot price exchange-traded funds (ETFs) by July 4, as talks between asset managers and regulators reach the final stages, sources told Reuters. It previously gave an initial greenlight for spot Ether ETF in May. 

Eight asset managers, including BlackRock, VanEck, Franklin Templeton, and Grayscale Investments, seek SEC approval for the funds.

Terraform Labs and Do Kwon agreed to pay the SEC a combined $4.5 billion in a civil fraud case

Terraform Labs and its former CEO Do Kwon have agreed to a settlement with the SEC to pay $4.5 billion in disgorgement and civil penalties. The settlement also permanently bans Kwon and Terraform Labs from trading crypto asset securities, including all tokens in the Terra ecosystem.

Binance faced trouble in Nigeria

Binance, the world’s largest cryptocurrency exchange, is facing legal battles in Nigeria as the country cracks down on the industry for allegedly facilitating criminal activity and undermining the naira.

In February, two Binance senior executives, Tigran Gambaryan and Nadeem Anjarwalla, were arrested in Nigeria for allegedly ignoring criminal activities like tax evasion and money laundering.

According to the government, Binance is responsible for weakening the Naira currency. In the first half of 2024, the Nigerian currency depreciated by nearly 40%, marking it as the worst-performing currency during that time.

Overview of the Crypto Market Cap

In the initial six months of 2024, 89% of sectors witnessed a reduction in market capitalization, with more than 30 industries experiencing losses ranging from 20% to 40% in value. During the second quarter, only three sectors recorded positive growth, underscoring the tough market conditions.

Nevertheless, certain “unicorns” have managed to continue their expansion and increase their market presence. Following a surge in Memecoin popularity in March and early April, the market’s attention has returned to stablecoins, which saw an 8.6% increase in market cap, as well as AI and big data sectors, which grew by 2.5%.

The total crypto market started peaking from $1.7 trillion and due to the launch of the Bitcoin ETF it made a high near $2.75 trillion in March. However, the market cap then declined toward $2 trillion in May following bearish market sentiment and several pump and dump news.

Blockchain Upgrades And Performance: Layer 1 And Layer 2

Ethereum Dencun Upgrade

Ethereum, ranking second only to Bitcoin, implemented the eagerly awaited “Dencun” upgrade. This upgrade aims to boost growth on layer-2 networks such as Arbitrum and Polygon by lowering their data fees. Technically classified as a hard fork in blockchain terms, the Dencun upgrade was initiated at Ethereum epoch 269,568 at 13:55 UTC (9:55 a.m. ET) and completed at 14:10 UTC on 13 March.

Layer 1 Blockchains

The total market cap for Layer 1 Smart Contracts stands at $696 billion, down 3.57%. Ethereum leads among major L1s with a 62 % dominance, its highest since 2024, triggered by the SEC’s approval of Ethereum Spot ETFs.

BNB and Solana saw market cap increases of $42 billion and $18 billion YTD, respectively, boosting their market shares. Solana tops in daily active addresses with over 1.6 million, followed by BNB with 1 million. Both SUI and TON ecosystems have experienced increased network activity in the first half of 2024 due to recent grants and popular projects.

Layer 2 Blockchains

Arbitrum and Base saw the biggest TVL increases in the first half of the year, with gains of $8.2 billion and $6.8 billion, respectively. Coinbase’s Base Network has quickly become a standout since its launch in August 2023, now ranking as the third-largest L2 by TVL, only behind Arbitrum and Optimism.

Base has gained traction thanks to its active developer community, which deploys a record 22,000 contracts daily, attracting major apps like Friend.Tech and Farcaster.

In April, Linea’s user activity spiked with the launch of its “Linea Voyage: The Surge” campaign, which encouraged users to engage with DeFi protocols for a chance to win airdrop points.

In early May, Arbitrum experienced a boost in transactions, likely driven by a rise in DeFi activities, as Uniswap (Arbitrum) transaction volume exceeded $150 billion.

By June, Base had surpassed Arbitrum in user activity, probably due to the launch of Coinbase’s smart wallet, which allows users to transact on-chain on Base without gas fees.

However, Mode Network had the highest percentage gain in TVL, growing 26 times since its January 2024 mainnet launch. Mode, a DeFi-focused L2 built on the OP stack and supported by Optimism, EigenLayer, Renzo, and EtherFi, has seen significant growth primarily due to its successful airdrop campaign.

Stablecoin Performance In H1 2024

Fiat-collateralized stablecoins dominate 96.6% of the total real-world assets market cap, followed by government securities at 1.65%, commodities at 1.21%, and other categories.

USDT remains the leading stablecoin, achieving new market cap highs and growing by 22.4% in the year’s first half. It remains the most traded token and serves as the base pair for nearly 70% of all spot trading volume on centralized exchanges.

After a decline last year, USDC recovered and increased its market cap by 32%. This growth is likely due to Circle’s efforts to attract institutional clients and the establishment of Coinbase International, which expanded USDC’s presence in markets outside the U.S.

Launched in February 2024, Ethena’s USDe has seen a remarkable 934% increase in market cap. Offering a high yield of 33.5%, USDe has attracted significant capital. Despite the airdrop and the launch of its native token ENA, USDe’s market cap continues to expand.

Senators Introduced Stablecoin Bill

On April 17, 2024, Senators Kirsten Gillibrand and Cynthia Lummis introduced the bipartisan Lummis-Gillibrand Payment Stablecoin Act. This bill regulates payment stablecoins, aims to protect consumers, ensure U.S. dollar dominance, and upholds the dual banking system.

It limits stablecoin issuance to U.S. dollar-backed ones approved by regulators, excluding algorithmic types. The Federal Reserve supervises these arrangements, ensuring one-to-one reserves and adherence to U.S. financial regulations. The bill was developed with insights from major U.S. regulatory bodies.

Ripple Plans To Launch Stablecoin

On April 4, Ripple revealed plans to introduce its own stablecoin, pegged 1:1 to the US dollar, later this year alongside XRP. This move is seen as crucial for Ripple, aiming to connect traditional finance with decentralized finance.

The announcement received positive feedback from both the crypto and traditional financial sectors due to rising institutional interest in stablecoins.

Performance Of Bitcoin And Altcoins In 2024’s H1

Bitcoin Price Trend: Right after the approval of the US Spot Bitcoin ETFs, BTC experienced a 16.0% drop to a quarterly low of $39,505. It then surged by 85.0%, reaching a new all-time high of $73,098, before retracting by 18.0%. However, it recovered and ended the quarter at $71,247.

Trading volume increased during the first quarter of 2024, averaging $34.1 billion daily, an 89.8% rise from $18.0 billion in the fourth quarter of 2023.

However, following Bitcoin’s halving in April 2024, the network’s 30-day moving average hashrate fell by 7%, from a peak of 626 exahash per second (EH/s) to 580 EH/s. According to Coinmetrics researchers, this decline in hashrate shows miners’ challenges as they adjust to lower block rewards and a stagnant Bitcoin (BTC) price. This resulted in a significant decline for BTC price, plunging it toward $58K recently.

The dominance of Bitcoin surged in 2024’s first half as it touched above 53% from the January’s low of 50%.

Ethereum Price Trend: Ethereum kicked off 2024 on a strong note. Financially, EigenLayer remains a key driver, consistently expanding in total value locked (TVL). On the network front, the Dencun upgrade stands out as Ethereum’s most significant enhancement to date, effectively reducing rollup fees as promised.

Ethereum began 2024 on a rising note, mirroring Bitcoin’s sharp surge following the approval of a spot ETF. In March, the price of ETH climbed above $4,000, but it subsequently fell below $3,000 as a result of various negative market developments. By May, the price of ETH experienced another surge following the SEC’s approval of a spot Ethereum ETF and the conclusion of the SEC’s investigation into Ethereum.

Solana Price Trend: On March 18, 2024, Solana witnessed a significant surge, surpassing the $200 threshold for the first time in two years and achieving its highest value since 2021. Much of Solana’s recent trading activity has been on decentralized exchanges (DEXs) like Jupiter and Raydium, where traders have been actively buying memecoins such as Bonk and Slerf.

Additionally, DEXs based on Solana have consistently captured market share from Ethereum-based DEXs like Uniswap for almost several months.

However, SOL prices faced multiple setbacks due to network outages, resulting in increased volatility in the starting of this year. Recently, Solana saw a surge in institutional interest as 21Shares, VanEck filed for Solana ETFs and BlackRock is getting ready to file an exchange-traded fund (ETF) for Solana (SOL).

Meme coins Price Trend: Memecoins achieved the highest average returns of 1,312% among the top tokens by market capitalization. Memecoins launched in March, such as Book of Meme (BOME), Brett, and Cat in a Dog’s World (MEW), climbed into the top 10 largest memecoins by market value by the first quarter’s end. 

Solana memecoins outperformed Ethereum memecoins by a factor of 8 year-to-date. Additionally, memecoins remained the most popular category in the first half of the year.

In the second quarter, MEME, WIF and Slerf prices dominated the chart along with Bonk and Pepe. Notably, BRETT meme coin made significant moves as it recorded a surge of as high as 7,727% in the first half of 2024. Currently, the market cap of memecoins is at $46.6 billion.

ETF Becomes H1 2024’s Main Attraction

Since the U.S. approved spot Bitcoin ETFs on January 10, 2024, the global count of these ETFs has exceeded 70, attracting over $28 billion in new inflows. There is now a collective $72 billion in Bitcoin held by global institutions in these ETFs, significantly impacting market dynamics. These institutions typically adjust their holdings based on market volatility due to their asset allocation strategies.

In the U.S., over 1,000 institutions have invested in Bitcoin ETFs, totaling more than $11.5 billion, with hedge funds being the primary investors. According to recent SEC Form 13F filings, investment levels vary, with 18 institutions holding over $100 million, 102 holding over $10 million, and 371 holding over $1 million in Bitcoin ETFs. 

Over 1,000 U.S. institutions hold Bitcoin ETFs, with investments surpassing $11.5 billion, primarily in hedge funds. According to recent SEC Form 13F filings, investment levels in Bitcoin ETFs vary: 18 institutions hold assets over $100 million, 102 hold over $10 million, and 371 hold over $1 million. Generally, BTC ETF assets are a minor part of these institutions’ total assets under management.

The leading holders, with assets exceeding $100 million, include prominent hedge funds and asset management companies like Millennium Management, Jane Street Group, and Schonfeld Strategic Advisors. Investments in cryptocurrencies represent only a small fraction of their comprehensive asset management.

SEC set to approve spot ETH ETF: On May 23, 2024, the SEC approved Ethereum Spot ETFs for the U.S. market, resulting in a 17.7% increase in ETH prices on that day. Recently, the SEC has expedited the approval process for its trading, and analysts anticipate a final approval for spot ETH ETF trading by July 4.

NFT Market In H1 2024

The global non-fungible token (NFT) market is experiencing a significant decline in sales. According to the latest data, average NFT sale prices have dropped by nearly 70% in six months. For example, in the second quarter, the average NFT price was approximately $193, but by June, it had fallen to about $79.17.  

The average sale price of NFTs fell by 59.11 percent in the second quarter of 2024 compared to the first quarter. Several BRC-20 NFTs dominated the market and Pizza BRC-20 NFTs, created on the Bitcoin blockchain, have led rankings of NFT collections with increased sales volume. Following closely are DMarket, Crypto Punks, and Gods Unchained Cards, securing the second, third, and fourth places, respectively, on the list.

Ethereum loses dominance in NFT

This year, Ethereum has lost its previous dominance in NFT trading to Bitcoin, due to the introduction of Bitcoin inscriptions and protocols like Ordinals and Runes, which have given Bitcoin a slight edge over Ethereum in total trading volume.

Meanwhile, Solana leads in user activity metrics such as unique wallets and number of transactions, likely driven by its lower fees and faster transaction speeds. However, Ethereum’s NFT trading volume and trader numbers are declining, mirroring a drop in both market capitalization and user activity within its NFT market.

Solana experienced a boost in NFT trading starting in October 2023, primarily due to Tensor’s airdrop campaign, which positioned it as the leading NFT marketplace on the Solana network. Post-TNSR airdrop, however, Tensor’s trading volume declined, and a downturn in Solana’s NFT trading volumes emerged, indicative of a wider slump in the overall NFT market during the first half of 2024.

DeFi Sector Draws Regulatory Attention

Despite a general decrease in Total Value Locked (TVL) across the DeFi sector since the start of the year, Ethereum continues to lead, holding approximately 84.3% of the TVL market share. This dominance is primarily attributed to DEX trading and staking activities. In contrast, Solana’s activity predominantly revolves around meme-related transactions.

In 2024, the DeFi sector saw several high-profile hacks. Notable incidents include the Alpha Finance Hack with losses over $37 million, a $45 million PancakeBunny exploit, and a $130 million breach at Cream Finance. The Poly Network suffered one of the largest breaches, losing over $600 million, although some funds were returned. Other significant attacks included a $120 million loss at BadgerDAO, a $50 million exploit during Uranium Finance’s migration, and a $55 million attack on bZx Protocol.

With the rising activity in DeFi, it has also attracted regulatory attention. In February, the U.S. Securities and Exchange Commission (SEC) widened its dealer definition to include more financial operations, such as those involving crypto securities. This expansion is significant for the digital assets sector, especially decentralized finance (DeFi), indicating increased regulatory scrutiny. If passed, DeFi firms might be required to register themselves with regulatory bodies.

CEX And DEX Performance

Binance continued to dominate the first half of 2024. However, it faced several legal battles around the world. After paying $4.3 billion and CZ getting into prison, Binance faces a block in India which made them pay over $2 million in fines for offering services to Indian customers without license. Additionally, it is currently facing several charges in Nigeria.

Additionally, Coinbase faced significant trouble in the first half. The SEC has requested that the court dismiss a subpoena from crypto exchange Coinbase, which seeks documents concerning the crypto markets and personal communications from SEC Chair Gary Gensler. The SEC contends that the subpoena is irrelevant and excessively burdensome.

For DEX, Uniswap V2 and V3 continued to dominate the market with first and second positions. In February, the SEC proposed new regulations for Decentralized Exchanges. Under these rules, if implemented, any liquidity position over $50 million on decentralized exchanges would be required to register with the SEC.

Hacks in 2024 H1

During the first half of 2024, major losses include an $80 million theft from Orbit Chain, a $290 million loss by PlayDapp, and a $57 million scam involving BitForex. Smaller-scale incidents also resulted in significant damages, such as a $3 million loss by Kraken and a dual-event loss totaling $22.8 million by Uwu Lend.

Funding Report

In January 2024, the sector saw $627.87 million raised, which slightly increased to $661.58 million in February. March marked a significant surge with fundraising reaching $1.06 billion, and this upward trend continued into April, where it peaked at $1.08 billion. However, a gradual decline followed, with May recording $1.01 billion, June at $891.83 million.

Over the last six months, the United States led the investment rounds significantly, with $1.72 billion being raised there. Interestingly, Animoca brands and OKX continued to lead the investment sector in crypto in 2024’s first half. The most notable venture capital investment was Robinhood’s acquisition of Bitstamp. This deal is set to enhance Robinhood’s crypto services by incorporating Bitstamp’s 50 active licenses and registrations worldwide.

Conclusion

The first half of 2024 was marked by significant developments in the cryptocurrency market, including increased regulatory scrutiny and substantial institutional adoption. Key milestones such as the SEC’s approval of Bitcoin ETFs and the establishment of a new legal framework for cryptocurrencies in the U.S. highlighted the period. Despite challenges, the market showed resilience with notable growth in market capitalization.

Looking ahead to the second half of 2024, the expected approval of Ethereum ETFs by the SEC and the recent hype in ETFs of several altcoins with growing institutional adoption are likely to drive further market growth.

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