According To Binance Research, These Cryptos Could See Big Gains In 2024

Ethan
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No entities in the crypto industry have a better understanding of the market than exchanges. That's why when we saw that the world's largest cryptocurrency exchange had published a report about what's been going on in crypto and what comes next, We knew we had to cover it. 


So today, we're going to summarize this report and tell you exactly what it could mean for the market.

 

These Cryptos Could See Big Gains In 2024


The report we'll be summarizing today is called, quote, the Full year 2023, and themes for 2024. It was published by Binance Research earlier this month and you get the full report by CLICKING HERE. We do suggest giving it a read if you have the time as it's too long to fit all of the details from it into this article. We'll give you the juiciest bits though. 


Bitcoin

So the report begins with a brief overview wherein the authors note that the total crypto market cap has doubled over the last year. What's interesting is that most of these gains came in quarter one and quarter four of last year. It looks like we're on track to see a similar phenomenon this year. 


Anyways, the first part of the report unpacks Everything that's been going on with layer one cryptocurrencies starting, of course, with Bitcoin. 


The authors Take note of new innovations like Ordinals NFTs and BRC-20 which have been increasing network activity and interest in the Bitcoin ecosystem. 


Bitcoin ecosystem


Now, if you want to get a sense of just how much activity Bitcoin experienced, the authors provide this in-depth Infographic, which shows its growth across multiple metrics including price, on-chain activity, etcetera.

 

As you can see, almost All of these metrics are in the triple digits or more with transaction fees rising 1400%. The only outlier is a 9% decline in active Bitcoin wallet addresses. This could be taken as a sign that most of the Tivity Bitcoin experienced over the last year was coming from institutional players and not retail. 


This wouldn't be surprising given that there aren't many retail investors during bear markets. After reviewing some obviously bullish sentiment metrics, the authors analyzed BTC's correlation to the S&P 500 which hit its lowest level in three years. 


This is not surprising given that crypto tends to be more correlated to tech stocks and small-cap stocks measured by the Nasdaq and Russell 2000 respectively. Unfortunately, the authors didn't assess these correlations for BTC. 


Fortunately, though, they did seem to reveal some alpha about BRC-20 that are on their radar. These include Ordi, SATS, and three other BRC-20s, which I'll let you look up on your own time. I'll just remind you though that this report was written by Binance. 


Anyhow, to the author's credit, they took the effort of editing their report to factor in the spot Bitcoin ETF approvals that recently occurred. There's not much to note on that front. 


I'm sure that all of you will know that it seemed to be a sell-the-news event, at least in the short term due to selling from Grayscale's Bitcoin ETF. And naturally, the authors also touch on the halving, which is scheduled to occur sometime in April. 


As most of you will know, this will cut the amount of BTC mined per block in half. This restriction in supply coupled with the same or more demand should cause BTC's price to double or more eventually. 


What's fascinating is that the authors make the argument that Bitcoin is going to require lots of transaction fees for miners to stay incentivized, and point to BRC-20s ordinals and other innovations as the solution. 


This is fascinating because this seems to be a problem that's very much in the future. On that note, the authors predict that Bitcoin layer twos will become popular due to the increase in fees on the base chain arising from these innovations. 


They also predict that we'll see Bitcoin-focused DeFi protocols emerge as a result, allowing people to put their BTC to work. Very exciting stuff. 


Altcoins

Now, this begs the question of what's been going on with all the other layer ones. What's funny is that the authors literally just group them all as quote The other layer ones. Following a few standard statistics for the largest altcoins, the authors unpack everything that's been going on with Ethereum. 


This includes the rising popularity of liquid staking, the shift in activity to Ethereum's layer twos, and the growing use of liquid staking tokens in DeFi, something that many believe to be a risk to ETH itself.


Next, the authors unpack everything that's been going on with BNB, which is technically independent of Binance now. They include the launch of a new data storage platform on BNB called Greenfield, the launch of layer two called OP BNB, and the growth in total value locked in its DeFi protocols. 


After that, they unpack everything that's been going on with Solana. Solana seems to have solved its outage issues and is planning a new validator client called FireDancer that will increase its speed and decentralization. 


The report's authors also touched on all the airdrops that have been happening for Solana, including the one for Pyth Network. 


The report's authors also touched on the growth of Solana's DePIN and payments ecosystems. Those of you who read our recent summary of Messari's Deepin report will know that Solana seems to be the number one block chained for deepened cryptos, and is also trying to position itself as a payment rail for USDC. 


Now following the Solana analysis, the authors turn their attention to Avalanche and focus on the impressive growth its subnets have seen. 


In case you missed the news, Avalanche launched a subnet for an order book-based dex, and its gaming-based subnets have seen some serious adoption, notably the shrapnel subnet. Other notable subnets can be seen here. 


The top Avlanche subnet table


You'll notice that the largest one is Meld which was once the top project on Cardano. And speaking of cryptos with blockchain Chain ecosystems, the authors also give a brief overview of Cosmos. 


This is telling given that it's not the largest layer one by market cap after Avalanche and technically isn't really a layer one either. Now logically, this suggests that Binance or at least Binance research are watching the cosmos ecosystem very closely. 


on-chain activity of the top 5 cosmos app chain


Here are the specific cosmos projects that they have their eye on. For those listening, they are Osmosis, Cosmos itself, Axler, Noble, and Celestia, which we recently reviewed here on this website.

 

Oddly enough, the authors didn't seem to have that much to say about Cosmos itself. What's even more odd is that the authors grouped most of the other layer ones into another subsection and only provided a couple of sentences for some. We reckon this underscores which cryptos Binance is taking seriously. 


Layer 2s

Now in the second part of the report, the authors look at the growing layer two landscape. For anyone unfamiliar, layer twos basically process multiple transactions on a separate chain and submit them as a single transaction to the layer one blockchain they're connected to. 


This increases speed and lowers costs. Lo and behold, layer twos have been extremely popular as of late. To put things into perspective, the total value of layer two blockchains tripled last year. 


According to the authors, the summer of 2023 was called the L2 summer. It seems we missed the memo about that one. Anyhow, the authors highlight the fact that Ethereum's layer two is now more popular than Ethereum itself based on transaction volumes. 


This is eye-opening, and it foreshadows a scenario where layer twos start to compete with the base chain for fees, something that many analysts have predicted. 


Another eye-opening statistic is the number of active wallets on layer twos, which stood at over five hundred thousand at the end of last year, more than double that of Ethereum. The silver lining is that all of this activity is resulting in lots of data being published to Ethereum by its layer twos, slightly increasing the demand for ETH. 


list of all  larger layer ones use optimistic roll-up technology.


Now, the peculiar thing about these layer twos is that almost all of the larger ones use optimistic roll-up technology. The authors don't explain why this is, but they do provide a list of the largest optimistic-based layer twos. 


It reveals that Arbitrum and Optimism collectively hold most of the layer two TVL. The authors go on to do a deep dive into every single one of the largest layer twos. We don't have the time to go through all of these here but we already have articles about a few of them. 


Now at the end of this part of the report, the authors provide some guidance on what to watch in the L2  landscape in 2024. They note Ethereum's upcoming Dencun upgrade, crypto projects that provide roll-ups as a service, the decentralization of roll-ups, and zero knowledge technologies as being areas to watch. 


DeFi    

And this ties nicely into the third part of the report which is all about decentralized finance or DeFi. As with most crypto niches, DeFi saw explosive growth in 2023. And once again to their credit, The authors note that most of this increase in total value locked came from the value of the coins and tokens increasing. 


In other words, The rise in DeFi's TVL was mostly due to rising crypto prices and not new inflows. As a fun fact, It's believed that the demand for leverage in DeFi is highly correlated to ETH's price. This makes perfect sense given that ETH, and now also sETH is the most popular form of collateral in DeFi.

 

In any case, the authors go on to take a closer look at five sectors within DeFi. The first is liquid staking, which you'll recall has been very popular particularly on Ethereum. If you want a sense of just how popular liquid staking is, Liquid staking protocols are now the largest DeFi protocols on most chains. 


Next, The authors look at lending where most of the increase in total value locked has come from Tron, specifically a single protocol called Just Lend. Regardless, the next DeFi sector the authors analyzed is DEXs, aka decentralized exchanges. 


What's insane is that DEXs saw combined trading volumes of nearly one trillion dollars in 2023. Now we had to triple-check that figure because it is truly mental. More importantly, it foreshadows DEXs competing with centralized exchanges or CEXs. 


Another DeFi sector that could become popular meanwhile is LSTfi, a new class of DeFi protocols that are built on liquid-staked coins and tokens. The authors point to the difference in liquid staked tokens, and LSTfi TVL as proof. Twenty-nine billion dollars versus one billion dollars. Likely, more liquid state tokens will eventually flow into LSTfi. 


The last Defi sector the authors examine is tokenized real-world assets or RWAs, which have been a big narrative as of late. 


As the term suggests, RWAs are, well, real-world assets that are tokenized on a crypto blockchain. The biggest class of RWAs is stablecoins, which are essentially tokenized fiat. 


Besides stablecoins, the biggest class of RWAs is tokenized treasuries, of which there are apparently almost one billion in circulation. This is surprising considering that investing in US securities presumably requires KYC, yet most of the DeFi protocols offering RWA exposure presumably don't. 


Now as it happens, regulations are a big part of why we're not yet convinced that RWAs will in fact be a big narrative during the next crypto bull market. 



Also Read:

Top 10 Free Tools To Maximise Your CRYPTO Gains in 2024



Stablecoins

Because stablecoins happen to be what the fourth part of the report is all about. The authors start by saying that the total market cap of stablecoins actually contracted by 5% last year. The TLDR is that each stablecoin's market cap fundamentally grows because of a specific demand driver. 


For USDT, the main demand driver is leverage. For USDC, the main demand driver is DeFi, and so on. Whereas USDT's market cap has grown, USDC's had been shrinking until fairly recently. 


Then there's BUSD whose market cap decline is to blame for most of the overall stablecoin market cap decline. In case you missed the memo, Paxos was ordered to stop issuing BUSD in February last year. Binance meanwhile discontinued BUSD trading late last year and it seems it will be phased out completely in the coming weeks. 


The decline of BUSD has resulted in an eerily familiar scenario. The third largest stablecoin by market cap is a decentralized stablecoin, maker DAOs, Dai. Once upon a time, the third largest stablecoin by market cap was also decentralized, Terra's UST. 


Thankfully, Dai doesn't have the same issues that UST did. At the same time, two relatively new stablecoins have rushed to fill in part of the void left by BUSD. These are TUSD and FDUSD, steam, the former of which reportedly has connections to Tron and the latter of which was very recently launched, presumably by an entity affiliated with Binance given its zero fee FDUSD trading. 


The authors then pivot to talking about a growing niche within the stablecoin ecosystem, and that's collateralized debt positions or CDPs. Put simply, CDPs involve locking up some amount of crypto to mint a stable coin. 


There are multiple CDP stablecoins out there, each with its own unique mechanism. 


NFTs, Predictions    

In the fifth part of the report, the authors discuss another crypto niche that's been flying under the radar, and that's NFTs. They begin by saying that 2023 was a, quote, interesting year for NFTs, which is code for a bloodbath. 


NFTs, Predictions chart


As you can see though, NFT trading exploded at the end of 2023. As you might have guessed, this was mainly driven by the hype around ordinal NFTs on Bitcoin, as well as the resurgence of NFTs on Solana due to the hype around its ecosystem late last year. 


Following an analysis of NFT marketplaces and their surprisingly low volumes, the authors turn to their predictions. Really says a lot, doesn't it? Anyhow, they predict that there will be continued innovation around NFTs, including NFT derivatives trading. 


They also believe that the biggest NFT collections will stay the biggest and that Bitcoin NFTs will continue to be a new niche to watch. Note that some Bitcoin NFT projects recently raised money. 


Now in the sixth part of the report, The authors cover two narratives that are likely to be big during this crypto bull market, GameFi and SocialFi. If you read our aforementioned article about the biggest crypto narratives, you'll know that these will be big because they're less financial in nature, so less regulation in theory. 


Regarding GameFi, the authors note the biggest blockchains for gaming are currently BNB, Ethereum, Polygon, and Solana. The caveat is that only around 28 % of blockchain games are currently live. As such, this blockchain leaderboard may change as the remaining 72% come online. 


Regarding SocialFi, meanwhile, The authors say that most SocialFi activity in 2023 centered around friend.tech, which was a flash in the pan in retrospect. For context, friend.tech effectively allowed those with large followings to sell shares of themselves to their fans in exchange for various perks. Not our thing, I must say. 


graph showing trading volume of friend.com


As you can see, the trading volume on friend dot tech fell off a cliff towards the end of last year, as did the activity on most SocialFi platforms. For what it's worth, the authors believe that AAVE's profile-focused SocialFi layer, dubbed Lens Protocol, We'll revive SocialFi activity in the future. Sounds about right. 


In the seventh part of the report, the authors assess the state of VC investing, which is how much money crypto projects have been raising these days. Quite a lot as it turns out. It seems that the four largest raises totaled over one billion dollars. 


top 10 raises by Web3 focus projects


The catch is that these were mostly companies, not projects. The only exception was Solana's Wormhole Bridge, which raised a whopping two hundred and twenty-five million dollars last November. 


I'll quickly note that this could foreshadow a wormhole airdrop given its similarities to the Pyth network and similarity in activities before its own airdrop? Be sure to keep your eyes out for that one. 


In terms of sectors, infrastructure-related cryptos and companies saw the most funding rounds with a whopping thirty-eight percent of all VC capital being allocated to such entities. This includes Wormhole, FYI. Notably, the biggest investors were Coinbase, A16z, and Animoca Brands. 


Now in the final part of the report, the authors give their predictions for the biggest crypto themes of 2024. 


  • The first theme they predict will be big this year is Bitcoin and its ecosystem. This is again due to all the innovation around ordinals NFTs, BRC20s, layer twos, and other aspects of Bitcoin. 
  • The second theme they predict will be big in2024 is DePIN and decentralized social media, aka DeSo. 
  • The third is AI. 
  • The fourth is RWAs. 
  • The fifth is additional DeFi innovation. 
  • The sixth is institutional adoption. 
  • The seventh is crypto security. 
  • And the last is new tools that will onboard more users to Web 3. 



What It Means For Crypto

So this brings me to the big question, and that's what all of this means for the crypto market. Well, the short answer is that it's additional evidence to the idea that crypto is starting to expand beyond financial use cases. 


This is evident in everything from the use of layer twos to the growth of Depin. Don't get me wrong, most of the crypto's use cases are still very much related to finance, and even these newer non-financial niches involve lots of it. 


The thing is that there's a very clear trend toward building the kind of infrastructure that lends itself to nonfinancial use cases. The fact that VCs seem to be investing heavily in infrastructure cryptos is additional evidence of this idea. 


With more infrastructure, crypto will be able to offer more use cases, and this will ultimately increase its adoption. We suspect that next year's Binance research report will reflect this fact. 


Between now and then, we have what may be a once-in-a-lifetime opportunity to partake in investing in some of this next-generation infrastructure. It goes without saying that we won't get the same entry point that many of the VCs did. 


But if these crypto projects deliver, the gains will be large nonetheless. The only hurdle to these gains is finding these quality crypto projects and doing your due diligence on them. 

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