In early October 2024, CoinMarketCap published its latest quarterly report on the state of the cryptocurrency market. This comprehensive analysis covers essential data from Q3, including Bitcoin, native coins of L1 blockchains, stablecoins, and various Web3 sectors.
Here’s a breakdown of the most interesting insights from the report.
BTC Growth Ahead of Schedule?
The crypto market is believed to operate in four cycles, alternating between bear and bull markets. During bear markets, most crypto assets stagnate, projects lose funding, and interest in the sector wanes. In contrast, bull markets see rising prices, investment floods into startups, and Bitcoin becomes a buzzword for everyone—even your taxi driver and your kid’s teacher.
Historically, Bitcoin’s bull market phase begins between 518 and 546 days after the halving event, which serves as a catalyst for growth. The halving reduces mining rewards by half, affecting miners' profitability and ultimately BTC’s price.
In 2024, BTC’s price surge occurred over 100 days earlier than expected. This suggests that the current bull market peak could arrive sooner than anticipated, possibly between mid-May and mid-June 2025.
Bitcoin price dynamics. Source: coinmarketcap.com
The report suggests that Bitcoin may disrupt its usual four-year cycle this year, potentially starting a bull run earlier than expected. This shift is driven by institutional adoption of cryptocurrencies, evolving market dynamics, and increasing confidence from traditional investors.
The report highlights developments like the approval of Bitcoin and Ethereum ETFs and ongoing Bitcoin accumulation by public companies like MicroStrategy, Semler Scientific, and Metaplanet. Additionally, nearly half of hedge funds have invested in crypto in 2024, and during the Bitcoin 2024 conference, Donald Trump announced his intention to use BTC as a reserve asset.
As a result, Bitcoin is becoming more closely tied to the stock market, shedding its reputation as a "high-risk asset."
Users Prioritize Profits Over Technology
There’s a long-standing debate within the crypto community: what’s the real attraction? On one hand, users are captivated by the innovative potential of blockchain technology and the solutions it offers. On the other hand, many are primarily focused on profit.
The legendary meme. Source: x.com
CoinMarketCap's report sheds light on this debate with hard data. By examining the growth in market capitalization across different cryptocurrency categories, it's possible to pinpoint what really captivates crypto enthusiasts—technology or profits.
Out of 52 sectors in the crypto economy, 19 saw positive market cap growth in Q3 2024. The top five sectors include AI and Big Data, the Tron ecosystem, media, memes, and gaming.
While AI & Big Data reflect users' interest in technological solutions, the meme and gaming sectors clearly highlight a desire for quick and easy profits.
Despite AI-powered tokens showing the highest growth, the overall market cap for the AI sector still trails behind memes. Specifically, the total market cap of the AI & Big Data sector stands at $39 billion, while memes are valued at $52.4 billion.
Top 5 crypto categories by market cap growth in Q3 2024. Source: coinmarketcap.com
Additionally, it’s important to highlight the sectors with the largest drops in market capitalization:
- Data storage: -39.2%
- DeFi and lending: -36.5%
- Privacy and anonymity solutions: -30.7%
- Infrastructure interoperability: -26%
- DAO governance tokens: -17.6%
- Yield farming: -12.7%.
The growing interest in meme coins is impossible to ignore. In 2024, they evolved from what used to be seen as useless tokens with funny images into functional assets used to drive engagement and activity within certain projects.
From the data, we can conclude that during Q3 2024, the market shifted towards more speculative and consumer-focused sectors.
Bitcoin: Strong Holders Gain Control, Mining Revenue Falls
According to market auction theory, there are two main types of traders: short-term (ST) and long-term (LT). Short-term traders, also called "weak hands," prefer quick positions, while long-term traders, known as "strong hands," hold onto assets for extended periods.
When an asset is mostly held by long-term traders, it suggests unrealized growth potential, while short-term dominance signals a weakening trend.
The CoinMarketCap report indicates that the number of long-term BTC holders has been growing faster than short-term holders. This shift toward "strong hands" began in April 2024, when the total crypto market capitalization fell by 20% in just five days.
Share of long-term and short-term BTC holders (Blue: LT, red: ST, gray: BTC price). Source: coinmarketcap.com
April 2024 saw Iran launch a massive missile strike on Israel, leading to a sharp decline in both the stock and crypto markets. On April 12, a record $400 million in crypto positions were liquidated (for comparison, current liquidation volumes range from $100–$150 million).
In poker and trading, there's a phrase, "knock out the weak hands," which means eliminating weaker players (or traders) to maximize profits.
Thus, as long-term BTC holders continue to gain dominance, this could lead to a potential rally for the entire cryptocurrency market.
BTC Mining Revenue Continues to Fall
The report also points to a decline in mining revenue. As of October 2024, daily earnings from BTC mining are just under $30 million.
Mining revenue vs BTC price chart. Source: blockchain.com
Ideally, mining should remain profitable. In this case, miners can continue operations smoothly—paying taxes, maintaining mining farms, covering electricity costs, etc. But when mining becomes unprofitable, miners may reduce or halt operations, leading to a drop in the network's hash rate.
For the health of the Bitcoin network, the cost of mining BTC must be lower than its market value.
Estimates suggest the cost to mine one BTC is around $40,000. With BTC trading between $60,000 and $63,000 in October 2024, mining farm operators should theoretically be content.
However, it's not that simple. With the April halving (when the block reward was reduced from 6.25 BTC to 3.125 BTC), mining profitability also halved. Miners now earn half as many coins while incurring the same costs.
To restore mining companies' profitability to pre-halving levels, they either need to earn more coins (which would require an increase in the hash rate and expenses), or the price of BTC needs to double from its April 2024 levels.
The Growing Popularity of The Open Network and Toncoin
Among the top five Layer 1 blockchain coins, Toncoin has recorded the highest price growth this year, with a 256% increase. Toncoin is the native currency of The Open Network (TON), a Layer 1 network closely linked to the messaging app Telegram.
Despite the arrest of Telegram CEO Pavel Durov in Paris this past August, user interest in Toncoin hasn’t diminished. Over the last six months, TON's popularity has quadrupled, with its total value locked (TVL) rising from $100 million in April 2024 to $400 million in October 2024.
TON Blockchain’s TVL Dynamics. Source: defillama.com
This surge in success may be attributed to the rise of tap-to-earn games—internal Telegram apps (Mini Apps) that reward users with project tokens. Among the most popular apps are Notcoin and Hamster Kombat.
Interestingly, Ethereum, the leading blockchain, only ranks fifth in this list. This decline may be linked to the recent FUD surrounding the project. As reported by the analytics platform Lookonchain, Ethereum ICO participants began selling off their assets in late September. One large holder, for example, sold 19,000 ETH, valued at around $47.5 million at the time.
The Ethereum community is hopeful that the upcoming Pectra upgrade, scheduled for Q4 2024, will restore investor confidence in the project.
Solana’s Performance During the Meme Coin Boom
The 2024 crypto market has been dominated by meme coins, and blockchains that facilitate their creation have seen a surge in user interest. Solana and Tron are the most notable examples.
The launch of pump.fun, a platform designed for meme coin creation, sparked a wave of activity on the Solana network. As of October 2024, Solana leads all Layer 1 blockchains in daily active addresses.
Daily active unique wallets on Solana. Source: dune.com
The meme coin craze has since spread to other platforms. In August 2024, Tron launched SunPump, a version of pump.fun, while BNB Chain followed suit with GraFun.
User Interest in Alternative Stablecoins
According to CoinMarketCap, stablecoins saw a 5.4% rise in market capitalization during Q3 2024, despite the overall crypto market dropping by 11%.
Stablecoin market cap growth in Q3 2024 and token distribution. Source: coinmarketcap.com
One of the standout performers in the stablecoin sector this year was USDe from Ethena Labs. Launched in February 2024, USDe now ranks fifth in market capitalization among stablecoins as of October.
USDe's success is largely due to the rewards that Ethena users receive. Additionally, the rising value of ENA, another token from the same project, has brought more attention to USDe. Former BitMEX co-founder Arthur Hayes even forecasted that ENA could reach $10 (it’s currently trading at $0.35).
Apart from USDe, PayPal’s stablecoin PYUSD also stood out this year. In Q3 alone, PYUSD’s market capitalization surged by 86%, placing it in the 7th spot among stablecoins.
What to Expect in Q4 2024?
CoinMarketCap anticipates a more stable crypto market in the final quarter of 2024. The upcoming U.S. elections are expected to reduce some uncertainties, boosting institutional investor confidence.
Historically, Q4 has always been a bullish period for the crypto market, especially for Bitcoin: over the past 10 years, BTC has seen an average increase of 90% during this quarter. With potential catalysts on the horizon, the crypto market may end the year on a high note.
