Dec 2024 Market Commentary: Bitcoin & Stablecoin Growth
Author: Hillroute Date: December, 27, 2024
Executive Summary:
Stablecoin Surge: Stablecoin market capitalization saw a significant increase, rising from $172B in November 2024 to $204B by December 24, marking an 18.6% growth. Ethena Labs launched USDtb, which has a $65M TVL and is backed by BlackRock. Ripple introduced RLUSD. Stablecoins are expected to comprise 10% of the U.S. money supply in the future (currently at 1%), driving global financial influence.
Bitcoin and Altcoins: Bitcoin reached $100K for the first time, boosted by ETF demand and geopolitical events. The market saw decreased dominance, with “altseason” emerging. Altcoins like XRP, Solana, and Stellar showed significant gains. Grayscale’s crypto portfolio surged 85%, signaling strong altcoin potential. Bitcoin’s dominance decline opens the door for altcoins to lead market rallies.
Regulatory Landscape: Hong Kong is offering tax breaks to crypto investors to boost its crypto hub status. Russia implemented a new crypto tax law, while speculation grows around Trump potentially designating Bitcoin as a reserve asset. Florida is exploring Bitcoin for pension funds, aligning with the anti-CBDC stance.
Crypto Market Growth: South Korea saw retail crypto trading surpass stock market volumes. Binance exchange led with $24B inflows, continuing to dominate with 250M users. BlackRock recommended 1-2% Bitcoin allocations for institutional portfolios, signaling rising institutional demand.
Corporate Developments and Technological Innovations: Google’s quantum breakthrough raised concerns over Bitcoin’s encryption, but experts reassured the market, noting that blockchain innovations continue to shape the evolving crypto landscape. MicroStrategy joined the Nasdaq-100, linking Bitcoin to passive investments, while Microsoft rejected a Bitcoin treasury proposal. The NCPPR urged Amazon to reconsider the proposal at its AGM. Bitcoin mining profitability also showed positive trends in December, highlighting crypto’s increasing integration into traditional finance.
Stablecoin & Digital Asset Trends
Stablecoin market capitalisation Surges to $204B in December
In December 2024, Stablecoin market capitalisation saw a significant increase, rising from $172B in November 2024 to $204B by December 24, marking a 18.6% growth, with Tether (USDT) at $139B and USD Coin (USDC) at $43B.
Ethena’s USDtb Stablecoin Hits $65M TVL on Day 1
Ethena Labs launched USDtb on December 16, securing $65M in TVL on its first day. Backed 90% by BlackRock’s liquidity fund, USDtb aims to provide stability in bearish markets and is poised for growth as stablecoin legislation progresses.
Ripple Launches RLUSD Stablecoin
Ripple’s RLUSD stablecoin, launched on December 17, is backed by U.S. dollar deposits and bonds, offering a $1 peg. Approved by NYDFS, it will be listed on major platforms across key regions, with European access pending due to MiCA regulations.
Stablecoins Could Account for 10% of U.S. Money Supply
A report from Standard Chartered predicts stablecoins could make up 10% of the U.S. money supply in the future (currently at 1%) and foreign exchange transactions. Growth will be driven by regulatory clarity, particularly in cross-border payments, with stablecoins becoming increasingly influential in global finance. Currently, stablecoins account for about 1% of the U.S. M2 money supply and FX transactions, but their share is expected to grow as adoption expands.
Market Dynamics: Bitcoin and Altcoins
MARA Purchases 6,474 Bitcoin with Convertible Notes
Mining company MARA, formerly known as Marathon Digital, purchased 6,474 Bitcoin via a $1B 0% convertible note offering, bringing its holdings to 34,797 BTC ($3.3B). The company plans to use additional funds to buy more Bitcoin during market dips. This strategy, similar to MicroStrategy’s, faces risks due to Bitcoin price volatility but is supported by a long repayment horizon.
Bitcoin Hits $100K for the First Time
Bitcoin hit $100K for the first time on December 5, further rising to hit its all-time high of $108,000 on December 17. Key drivers include Bitcoin ETF demand, the April halving event, and geopolitical factors like Trump’s election victory. Additionally, speculation about a Bitcoin national reserve and rising corporate adoption, led by companies like MicroStrategy, contributed to the surge. Bitcoin’s market capitalization also surpassed $2T, solidifying its position as a key asset in global markets.
Bitcoin Dominance Signals ‘Altseason’
Bitcoin’s dominance fell to 56% in November, below its two-year support line, indicating the start of “altseason.” Analysts predicted a rally for Ether, with it surpassing $4,000 in December, driven by increased demand for Ether ETFs. XRP too is expected to reach $2.57 levels by the end of 2024, with an XRP ETF and regulatory changes acting as potential catalysts. Additionally, the departure of SEC Chair Gary Gensler on January 20, 2025, alongside Trump’s inauguration, is expected to boost crypto market sentiment.
Grayscale’s Crypto Portfolio Up 85%
Grayscale’s portfolio recorded an 85%surge in November, fueled by remarkable gains in altcoins like Stellar (+469%) and XRP (+262%). This underscores the growing investor interest in altcoins as Bitcoin’s dominance declines. With market sentiment increasingly positive, analysts highlight the potential approval of an XRP ETF and ongoing regulatory shifts as key factors that could further bolster altcoin performance into 2025.
Solana Bullish Flag Suggests $300+ Rally
Solana’s charts suggest a breakout to $300or higher, repeating the bullish flag pattern seen in January 2024. Analysts predict Solana could reach $320 or even $440 in the long term. Despite recent underperformance, Solana shows potential for significant growth if it surpasses $235.
Ripple’s XRP Surpasses Solana in Market Cap
XRP overtook Solana in market cap, reaching $128B compared to Solana’s $93B. This surge, driven by partnerships and XRP ETF filings, saw XRP peak at $2.90 in December. Ripple’s new tokenized money market fund and potential ETF approval are key drivers behind the rally. Notable events include filings for XRP ETFs by asset managers 21Shares and WisdomTree, as well as Ripple’s launch of the first tokenized money market fund on the XRP Ledger.
Altseason Delayed Due to Lack of Retail Capital
Ki Young Ju of CryptoQuant noted that an altcoin rally will need fresh capital from retail traders. While institutional investments are focused on ETFs, retail traders’ FOMO could ignite the next altcoin surge. Indicators like rising Ether futures and leveraged Bitcoin bets like MicroStrategy suggest that retail traders may be poised to fuel the next altcoin surge.
Regulatory Landscape & Taxation Developments
Hong Kong Tax Breaks for Crypto Investments
Hong Kong proposes tax exemptions on crypto gains for hedge funds, private equity, and family offices to boost its competitiveness as a crypto hub. The consultation also includes breaks for private credit and carbon credits. ZA Bank has launched crypto services, enabling retail users to trade Bitcoin and Ether with fiat, marking a key step in integrating traditional and digital finance. The move aims to position Hong Kong as a major player in the digital economy, competing with regional rivals like Singapore and Switzerland, which offer similar incentives.
Russia’s Crypto Tax Framework
Russia’s new tax law classifies crypto as property, imposing a 13%-15%income tax on sales and exempting miners from VAT. Mining operators must report their activities, with fines for non-compliance. The ruble’s decline and Bitcoin’s rise against it have accelerated crypto adoption.
Trump Eyes Bitcoin as U.S. Reserve Asset, Florida Explores Bitcoin for Pension Funds
Speculation grows around Trump potentially designating Bitcoin as a reserve asset through the “Dollar Stabilization Act,” with analysts predicting that this could lead to the U.S. Treasury purchasing 200,000 BTC annually, driving Bitcoin’s price to $800K-$1M. This move, fueled by BlackRock’s recommendation for 1-2% BTC allocations, could push Bitcoin’s market cap to around $15T.
At the state level, Florida’s CFO Jimmy Patronis is urging the Florida State Board of Administration (SBA) to allocate up to 1.5% of its $205B pension fund to Bitcoin. This proposal, which aligns with Florida’s anti-CBDC stance, positions Bitcoin as a hedge against traditional market volatility and mirrors similar moves by other states like Michigan and Wisconsin.
India’s CBDC Vision
RBI Governor Shaktikanta Das emphasized the transformative potential of the digital rupee in payments and the broader economy. While optimistic, he advocates phased implementation based on pilot results to assess the impact on monetary policy. In his farewell speech on December 10, Das highlighted India’s leadership in CBDCdevelopment, noting that the RBI is a pioneer in launching a pilot CBDC project.
Italy Revises Crypto Tax Hike
Italy is set to significantly reduce its planned tax hike on cryptocurrency capital gains, which was initially set to increase from 26% to 42% by the end of December. Lawmakers have confirmed that the tax increase will be scaled back during parliamentary discussions. The revision follows Bitcoin’s surge in popularity, with BTC recently surpassing $100,000. Lawmakers cite the growing crypto market’s importance in driving the revision.
Crypto Trading & Market Insights
South Korea’s Retail Crypto Trading Outpaces Stock Market
Retail crypto trading in South Korea surged to $18B in a single day, 22% above local stock market volumes. Altcoins like XRP, DOGE, ENS, and HBAR drove the activity, with XRP leading at $6B in volume. XRP’s price rose sharply from $0.50 to $2.90, achieving a 480% monthly gain and becoming the third-largest crypto by market cap. While these trends reflect strong altcoin momentum, analysts suggest a full-fledged “altseason” might still require sustained retail capital inflows across global markets.
Crypto Exchange Volumes Reach $3T Post Trump’s Win
November saw crypto exchange volumes hit a three-year high at $3T, fueled by optimism following Donald Trump’s U.S. presidential victory. Expectations of pro-crypto policies and clearer regulations bolstered activity. Platforms like Kraken saw increased perpetual trading volumes in Bitcoin, Solana, and Dogecoin, while Bitcoin ETFs attracted institutional investors. The global crypto market cap rose to $3.47T, indicating sustained growth momentum into Q1 2025.
Binance Hits $24B Inflows with 250M Users
Binance exchange leads 2024 with $24B in inflows, driven by institutional interest, Bitcoin ETFs, and global adoption. The exchange’s user base grew to 250M, with average Bitcoin deposits climbing from 0.36 to 1.65 BTC. Average USDT deposits surged from $19,600 to $230,000, cementing Binance as the first CEX to exceed $100T in trading volume, outpacing DEX competitors.
BlackRock Endorses 1-2% Bitcoin Allocation
BlackRock advises a 1-2% Bitcoin portfolio allocation, citing comparable risk to mega-cap tech stocks like Amazon and Nvidia. Bitcoin’s unique return profile, driven by adoption rather than cash flows, appeals to institutions. With its iShares Bitcoin Trust managing $54B, BlackRock forecasts demand shocks from spot Bitcoin ETFs, pushing Bitcoin prices higher by 2025.
Corporate Developments and Technological Innovations
Google’s Quantum Leap and Its Ripple Effect on Crypto Markets
Google’s new quantum chip, Willow, represents a breakthrough in computational power, solving problems in minutes that would take supercomputers millions of years. However, Willow’s 105 qubits are far from the 13 million needed to break Bitcoin’s encryption. While experts like Vitalik Buterin stress the importance of adopting post-quantum cryptography to future-proof crypto networks, market reactions reveal lingering concerns. BlackRock’s IBIT ETF experienced a 5% drop, its steepest in four months, as social media fueled fears about Willow’s potential threat to Bitcoin encryption. Experts quickly dismissed these concerns, citing the vast gap in required computational capability. Despite the reassurance, technical charts point to further downside, with $51.54 as critical support.
MicroStrategy Joins Nasdaq 100, Linking Bitcoin to Major Passive Investments
MicroStrategy (MSTR) joined the Nasdaq-100 Index on December 23, becoming the first Bitcoin-focused company in the index. With a $92B market cap and $42B in Bitcoin assets, its inclusion exposed Bitcoin-linked stocks to passive investment flows from ETFs like Invesco’s QQQ Trust ($300B AUM). While this milestone boosted MSTR’s demand, reclassification risks as a financial firm could affect its long-term index status.
Microsoft Rejects Bitcoin Treasury Proposal; NCPPR Urges Amazon to Consider the Proposal in the Next AGM
Microsoft shareholders have rejected a proposal to allocate 1%-5% of profits to Bitcoin, with only 0.55% support. The motion, introduced by the National Center for Public Policy Research (NCPPR), suggested Bitcoin as an inflation hedge, but Microsoft’s board highlighted concerns over volatility and its existing treasury strategy. Prediction markets had estimated only a 12-16% chance of approval, contrasting with advocates like MicroStrategy, which has successfully incorporated Bitcoin into its treasury.
Meanwhile, NCPPR is urging Amazon to adopt a Bitcoin treasury strategy, proposing that the tech giant allocate at least 5%of its $88B reserves to Bitcoin as a hedge against inflation. The proposal points to the limitations of the Consumer Price Index (CPI) in measuring currency debasement, using MicroStrategy’s 537% stock outperformance as a case study. If accepted, Amazon could follow in the footsteps of other companies leveraging Bitcoin to preserve value.
Bitcoin: Gold’s Rival, Not a Dollar Replacement – Fed’s Powell
Federal Reserve Chair Jerome Powell reiterated that Bitcoin is a speculative asset competing with gold, not the U.S. dollar. Speaking at the DealBook Summit, Powell dismissed concerns that Bitcoin signals a lack of confidence in the dollar or the Fed. Despite Bitcoin’s 70% rally since 2021 compared to gold’s 52%, he emphasized its speculative nature and the need for consumer protection. Powell also supports crypto firms interacting with banks, provided they do not threaten financial stability.
Bitcoin Mining Economics Show Positive December Trends – JPMorgan
JPMorgan reported a 5% rise in Bitcoin mining profitability (hashprice) in December, driven by Bitcoin’s price gains surpassing the 6% growth in network hashrate, which averaged 773 EH/s. Daily block reward revenue per EH reached $57,300, the highest in seven months but still 40% below pre-halving levels. U.S.-listed miners saw a 94% YTD hashrate increase, now contributing 29% to the global network, though their market cap dipped by 4% in December.
Conclusion
As we move into the final quarter of 2024, the rapid growth of stablecoins and Bitcoin’s dominance signal a transformative phase in the digital asset market. With the rise of institutional investment and a more favorable regulatory environment, it’s clear that both stablecoins and Bitcoin are becoming integral parts of the financial ecosystem. As we continue to navigate this landscape, staying informed on the latest market trends and regulatory shifts will be essential to making informed decisions and positioning for future growth.