By Damian Martinez, journalist at G&M News.
Following a notable 109% surge in 2023, crypto markets experienced a continued rise in the first half of 2024, with total market capitalization up by 37.3%. This growth was largely driven by a 60.2% gain in the first quarter of the year, while the second quarter reversed some of these gains as market capitalization declined by 14.3%.
The successful launch of spot BTC exchange-traded funds (ETFs) in the United States in January 2024 marked a pivotal moment for the industry and ushered in a period of bullish sentiment and positive flows. While the initial price reaction was muted, the following months saw strong advances as the market digested the impact of the ETFs on attracting new capital, increasing accessibility to a greater pool of investors, and reinforcing the growing acceptance of crypto as a mainstream investment.
Notably, the first half of the year showed several narratives gain momentum, points meta, restaking hype, memecoins frenzy, and airdrop seasons, among several others. While some of these narratives may have died down, they have undoubtedly been big contributors to on-chain activity and transactions in the first half of the year.
Looking ahead, the market should keep a close eye on the Fed’s interest rate policies, the approval and traction of the spot ETH ETFs, and the emergence or resurgence of crypto-specific narratives by monitoring on-chain metrics.
Bitcoin
Bitcoin (BTC) activity has continued to accelerate on all fronts. Metrics kept on improving, while the Ordinals-driven new era of BTC progresses in both the fungible and non-fungible token (NFT) directions. The ecosystem saw another supply shock, with Bitcoin’s mining block reward halving to 3.125 BTC per block, following the 4th Bitcoin Halving in April 2024. All of this, while BTC spot ETFs successfully got approved in the U.S., paving the way for over 14.7 billion dollars in net inflows. Overall, Bitcoin has had a positive start in 2024.
Moreover, BTC has seen increases in many key metrics when considering both year-to-date performance and performance over one year. Other than the significant market cap increase, the rise in transactions is also of note. The continued elevation in Lightning Network capacity is encouraging thinking about its important use case, while the consistent rise in hash rate and mining difficulty are a positive indicator of the growing robustness of the Bitcoin blockchain. It is relevant to note that both hash rate and mining difficulty are key indicators of security, and higher values imply a greater amount of computing power is required to attack the network. Thus, the growing numbers here reveal that Bitcoin’s attack resistance properties continue to be strong and rising.
Comparing BTC’s performance to other traditional investments, Ethereum (ETH) and Bitcoin come out on top, with their 48% and 43% returns, respectively, year-to-date. Alphabet and Amazon’s equities are the only other investments that are up over 25% this year. The major stock market indexes are much further behind, with many displaying single digit returns. Gold, the commonly touted Bitcoin alternative, rose only 13%, while crude oil is up around 14% this year.
Spot ETF approval
One of the defining narratives of the first half of this year has been the approval of spot BTC ETFs in the United States in January 2024. This has helped to add a new source of institutional demand to the Bitcoin market, a factor that enhances the diversity and depth of investment interest compared to previous cycles. Now, all sorts of US-based institutional investors, from hedge funds to pension funds, have a very direct, straightforward, and easy-to-understand way to get exposure to the crypto markets.
The ETF wrapper is something that institutional investors understand very well and are comfortable with, thus it is a great way to introduce some of the more conservative investor base to the crypto markets. While this institutional interest is largely limited to Bitcoin for now, there is growing anticipation that it will expand to include Ethereum soon.
In terms of the leading ETF providers, BlackRock has dominated, with over 17.7 billion dollars in inflows. Grayscale and Fidelity have also done quite well, with the three firms having over 80% of the market. Interest has also spilled over to other nations, including Hong Kong, which approved spot Bitcoin and spot Ether ETFs in April 2024.
Although volumes have been relatively limited compared to the U.S. counterparts, this is a move in the right direction. European ETPs, which are essentially the same product as the U.S. spot ETFs and have been available since 2015, are also seeing significant growth.
SEC filings show that the top holders of the U.S. spot BTC ETFs are split between hedge funds, asset managers, and banks. While it is encouraging to see the likes of Morgan Stanley in the top 10 holder list, it is notable that many of the others are hedge funds, which often focus on shorter-term strategies, rather than holding. Nonetheless, the market should also understand the presence of traditional institutional investors, such as the State of Wisconsin. It will be interesting to see what sort of investors these products can attract over the second half of the year.
Crypto gaming
Crypto gaming projects have gained notable steam during the first half of 2024, with the total combined market capitalization of crypto gaming tokens peaking at 32 billion dollars in March 2024. Since then, the sector has cooled off along with the rest of the market, and now sits at a combined market capitalization of 17.8 billion dollars.
Web3 gaming is clearly still in its infancy. At a total valuation of 17.8 billion, the entire Web3 gaming valuation accounts for just 0.7% of the total crypto market capitalization, which is about equal to the market capitalization of Dogecoin. This is 9.4% of the total valuation of the Web2 gaming industry, which is expected to reach a value of 189 billion dollars in 2024. The total Web2 gaming industry is projected to reach 225 billion by 2029.
Despite its apparent nascency, venture capital (VC) investors have demonstrated a significant appetite for Web3 gaming relative to Web2 gaming. According to Konvoy’s “Q1 2024 Gaming Industry Report”, venture funding surged by 94% quarter-over-quarter, with the number of funding rounds increasing by 28%. Tech, platforms, and game studios utilizing Web3 technologies significantly contributed to these figures.
Colleen Sullivan’s research “Good Game, Well Played” gives the following statistics: among the largest gaming tech and platform VC deals, 7 out of the top 10 were Web3-related, accounting for 56.4 million out of the 76.6 million total funding. Similarly, for game content VC deals, Web3 games made up 7 out of the top 10 deals, representing 203 million out of the 333 million total funding.
The growing appetite investors have for gaming-related Web3 projects could be an early sign, at least in the eyes of VC investors, that “Web3 gaming” is becoming synonymous with “gaming” itself. Looking on-chain, BNB, Ethereum, and Polygon remain the leading chains for gaming projects. Combined, these three chains support over 50% of the total number of gaming projects.
As of 2024, the total number of Web3 games sits at 2,716, supported across 51 different blockchains. Besides, 27.6% of these games are currently live, and 23% are in development. A combined total percentage of 29.7% are in their alpha or beta testing phase. That indicates that there is still a lot of room for progress in this segment.
