Investor debate: 2024 cryptocurrency market success and failure and 2025 forecast

Original: Unchained; Compiled by Yuliya, PANews

In 2024, a year full of challenges and opportunities, the cryptocurrency market has experienced ups and downs. At the end of the year, the Chopping Block program invited four industry Dragonfly Managing Partner Haseeb Qureshi, Dragonfly General Partner Tom Schmidt, Superstate CEO Robert Leshner, and Robot Ventures Managing Partner Tarun Chitra to review the key moments of the year. PANews compiled the text of this podcast.

The biggest winner

Haseeb:

I think the biggest winner this year is HyperLiquid. This decentralized perpetual contract trading platform has carried out the most successful token airdrop of the season, which can be called the 'Uniswap moment' of this cycle. Although there is still a long way to go in terms of true decentralization, the way its tokens are distributed and the community response are encouraging. As a VC, we really regret not being able to participate in it - in fact, almost all VCs tried to invest in HyperLiquid, but they were all rejected. This kind of "perfect birth" project is really impressive, especially in terms of product capabilities, execution, and technical delivery.

Robert：

"From my perspective, the biggest winners this year are all the US-based crypto founders and companies. We've seen a major turning point: from the extreme hostility and resistance we faced before, to the positive momentum we see now. As a US-based crypto founder, this transition is exciting. Finally, I don't have to worry about doing crypto in the United States anymore."

Tarun：

"I would choose the entire DeFi (decentralized finance) space. Remember the 36-month bear market predicted by Degen Spartan? DeFi was once seen as the problem child of the cryptocurrency world, and the valuations of the public chains that had not yet landed were often ten times that of DeFi projects. But now, DeFi has made a strong comeback. As someone who works hard in the DeFi space, it is really gratifying to see such developments."

Tom：

My choice might be a little surprising - it's Tether (USDT). They've done really well this year and are arguably one of the most profitable companies in the world. For years, a lot of people have been waiting for Tether to fall or have major problems, but the opposite has happened. It's become more and more successful and more regulated. Tether has not only continued to grow, but has also become an important case study in the cryptocurrency industry, especially in terms of stablecoin applications and the global trend of dollarization.

Biggest Loser

Robert:

The anti-crypto camp is undoubtedly the biggest loser this year, including some members of both houses of Congress and some people in the executive branch, especially some members of the SEC and those who pushed for 'Operation Disconnect 2.0'. They mistakenly believed that suppressing the cryptocurrency industry would advance their political careers, but it turned out to be a completely failed strategy. I hope this can change the political landscape in the future and make political suppression of cryptocurrencies no longer a viable political means.

Tarun:

I would say the biggest losers this year are the many second-tier Layer 2 projects and application chains. At the beginning of 2023, the market generally believed that there would be thousands of L2 projects, and each L2 technology stack would spawn a large number of application chains for specific purposes. But reality has proved that this assumption is completely wrong. Just look at the continued turmoil in the Cosmos ecosystem. Previously, people thought that successful applications like Blur would launch their own application chains or L2s, such as Blast, but the actual effect was not ideal. Instead, we see that users tend to concentrate on a few top L2 projects.

Haseeb:

I think financial nihilism is the biggest loser this year. In the first half of this year, the view that everything in cryptocurrency is a meme coin and all technology is meaningless was once prevalent. But the reality is that the proportion of Memecoin trading volume to total trading volume has dropped significantly from 20-30% in the early days to 10% or even lower now. The market has shown more enthusiasm and confidence in real technological innovation and substantial progress. If you think all technology is worthless, then you are indeed a big loser this year.

Tom:

I would say the biggest losers are those who gave up crypto and switched to artificial intelligence this year. This is a classic case of 'game over, we're back'. When asset prices fall, investors leave, developers change careers, and market sentiment is extremely negative, but cryptocurrencies always make a comeback in different ways. I personally know a lot of people who either sold cryptocurrencies, closed their companies, or moved to other fields. This is a pity because in this field, you really need firm belief to succeed. Those who lacked this belief and switched to AI may now regret it.

Biggest Surprise

Tarun:

Without a doubt, the two projects that surprised me the most this year were Pump.fun and BonkBot. I remember we talked about Pump.fun on the show in January and February this year, when it was just starting out and provided an innovative way for users to create assets. I don't think memecoin would have developed so quickly without Pump.fun. The other one is BonkBot, a Telegram bot that focuses on memecoin trading. In terms of revenue, BonkBot is a hidden champion, and like Pump.fun, both companies achieved $100 million in revenue in their first year. The speed at which the memecoin infrastructure has developed really surprised me.

Tom:

There are two aspects of surprises I want to share. First, the launch of World Liberty Financial, a presidential candidate associated with a DeFi token, and Trump also holds a wallet, which is really incredible. But what is even more unexpected is its sales performance. Normally, ordinary meme coins or NFTs can be sold out in a short period of time, but this presidential-related DeFi token has only sold 25%, and sales continue to decline. Both of these points are far beyond my expectations.

In addition, I would like to add to the point mentioned by Tarun. As early as the beginning of 2024, I predicted that the application layer would generate a lot of revenue. For example, Photon, Banana Gun and even Uniswap, these applications have generated hundreds of millions of dollars in revenue, exceeding most DeFi protocols. Although I did not specifically predict the meme coin infrastructure, the application did perform well, with revenue and profitability exceeding many protocols.

Haseeb:

My two biggest surprises are: First, the rise of the "Tap to earn" model is unexpected, although there is almost no news now, such as the Hamster Combat game in Iran, which even attracted the attention of the military. Second, there have been no major cryptocurrency security incidents this year (L1/DeFi), which shows that the security of the industry has improved significantly. Although TVL (total locked volume) has rebounded sharply, we have not seen huge losses like in previous years, which is a positive sign.

Robert:

I would add changes at the infrastructure level. The rise of Solana and Base as meme coin infrastructure is surprising. Both platforms have performed well in new user activity due to low transaction fees and convenient token issuance mechanisms, and the speed and scale of adoption have exceeded expectations.

Best New Mechanism

Tom:

I think it has to be Pump’s bonding curve and LP lock-in mechanism. I’m glad to be the first to speak because I have a feeling this will be a popular choice.

Robert: I think the best mechanism is the “yield amplification” model, which can be seen in many stablecoin projects such as Ethena and Usual. At its core, the income generated by a certain underlying asset (which can be any asset such as arbitrage trading, treasury bonds, etc.) is distributed to only a portion of users, thereby significantly amplifying the yield. For example, if the underlying strategy has an annualized yield of 5%, when only a quarter of the users participate in the distribution, the actual yield obtained by these users will be amplified to 20%. This mechanism has played an important role in the development of Ethena, and I believe we will see more projects adopt similar mechanisms in the coming months.

Tarun:

From my perspective, there are two outstanding mechanism innovations this year. The first is the liquidity guidance mechanism of meme coins; the second is the innovation related to basis trading, especially the market maker lending pools. This type of lending pool can be traced back to the GLP pool launched by GMX at the end of 2021. Now it has developed into the Jupiter JLP pool on Solana and the HLP pool of HyperLiquid.

The innovation of this mechanism is that it solves a key problem of decentralized exchanges: in centralized exchanges, exchanges can directly provide mortgage loans to market makers, while decentralized exchanges previously lacked similar mechanisms. Through these lending pools, users seeking returns can deposit assets into the pool, and perpetual contract traders can borrow these assets for market making and pay fees to depositors. This greatly improves the capital efficiency of decentralized perpetual contract trading, and is also one of the important reasons why the current decentralized perpetual contract trading volume has reached a record high.

It is worth mentioning that the rapid development of projects like HyperLiquid is largely due to this lending pool mechanism. At present, the scale of Jupiter's JLP pool has reached 1.5 billion US dollars, and these infrastructures provide important support for on-chain basis trading. Although decentralized perpetual contract trading may never be completely comparable to centralized exchanges in terms of capital efficiency, this mechanism does greatly narrow the gap.

Haseeb:

This is indeed an important innovation. So about the specific operation of these lending pools, such as JLP or HLP, are there specific third parties operating?

Tarun:

It depends on the specific project. For example, GMX's liquidity provision is programmatic, and the target weight is determined by governance or multi-signature. HyperLiquid's HLP directly manages the strategy by the project team. JLP and GLP are similar to AMM (automatic market maker), and anyone can perform arbitrage operations. The key is that this mechanism allows LP users who want to earn returns and traders who need funds for market making to achieve effective docking.

Best Meme

Haseeb:

My vote goes to Justin Sun’s birthday photo. As you may remember, this highly regarded entrepreneur in our industry and said to be well-liked by his employees posted a photo on his birthday. The photo was obviously AI-generated because he actually had 14 fingers in the photo. This may be the most embarrassing moment for one of the most successful entrepreneurs in the crypto industry, but this meme really stood out to me and I think I will remember it for a long time.

Robert:

While this may not be a typical meme strictly speaking, I have to give the best meme to Pudgy Penguins. Maybe it’s because they just launched the PENGU token, which opened at a fully diluted valuation of $5 billion. Although I don’t own any Pudgy Penguins or PENGU tokens, I have to acknowledge their achievements: they continued to build in a bear market, and turned an ordinary meme into a huge success through continuous promotion and in-depth operation. Now they have launched peripheral products such as penguin dolls and meme coins, and the community is thriving.

Tarun:

I’m going to choose Bonk. Mainly because BonkBot is a genius marketing method that helped Bonk grow from near zero to a multi-billion dollar market value in a year. If there is a most successful “blue chip” meme coin in the Solana ecosystem, it is Bonk.

Tom:

This choice is indeed difficult, but I would like to nominate Hugo Martingale, the operator of this Polymarket intern Twitter account. Their content is novel and interesting, and they often make witty remarks in the comment section. It is a very high-quality account.

Haseeb:

I'm glad to see that not everyone chose memecoin. To be honest, we may have discussed memecoin too much this year. I hope to talk less about memecoin next year.

Best/Worst Transformation

Robert:

I'm going to combine the two awards for "Best Transformation" and "Best Recovery Story" and give it to MicroStrategy. Although their decision to transform from a mediocre business intelligence software company to a Bitcoin leveraged ETF was made five years ago, 2024 is the year that this transformation has really been recognized by the market. Not only did they break through the historical highs of the Internet bubble, they also created an amazing business model: by issuing convertible bonds, obtaining funds at a higher premium than Bitcoin, and then continuing to buy Bitcoin, forming a perpetual funding mechanism.

Tarun:

I would nominate Babylon Protocol. Although their transformation technically began in 2023, it was not truly realized until 2024. Babylon originally only provided Bitcoin timestamping services for the Cosmos chain, and later they developed "remote staking" technology, which allowed users to use Bitcoin as collateral for staking. Now their TVL (total locked value) has reached 6 billion US dollars. Transforming from a single timestamping service to a business of this scale is one of the most successful business model transformations I have ever seen.

Tom:

I would nominate the Democratic Party's "worst transformation". From Trump's incident at Mar-a-Lago, to Biden's executive statements related to digital assets, to Kamala's vague statement on cryptocurrency investment, the whole process seems very chaotic. In contrast, Trump has adopted a simple and direct strategy, saying what people want to hear and doing what people want, such as "releasing Ross". The Democrats' performance on this issue is as disappointing as shooting two inches in front of the goal and missing it completely.

Haseeb:

The best transformation I chose is the transformation of the NFT community to meme coins. For example, Miladys launched the CULT token and Pudgy Penguins launched PENGU. The market value of these meme coins even exceeded the original NFT projects. Interestingly, this transformation did not arouse opposition from the community, and no one accused them of turning away from NFT. Although these tokens seem to have no practical use, this transformation strategy has been surprisingly successful. This may be related to the choice of public chain. Many high-quality NFT projects are on Ethereum, while meme coins are more developed on Solana. This natural friction may explain why this transformation came relatively late.

Tom:

Interestingly, we’ve seen in the crypto space that sometimes simple “vibe coins” are more popular than tokens that are trying to create serious value. This seems to prove that when issuing new tokens, there is no need to overcomplicate things, and people prefer to have multiple simple tokens rather than a complex conversion mechanism.

Most disappointing project

Tom:

I think it was the rebranding of MakerDAO to Sky. The most obvious evidence of this failure is that even after the rebranding, people still called it Maker instead of Sky. Although DAI is still large compared to USDS, they are said to be considering reversing this rebranding, which is obviously an unnecessary and ineffective decision.

Haseeb:

I chose Bitcoin L2 projects as the biggest failure. At the beginning of the year, the market had high hopes for Bitcoin L2, expecting billions of dollars in TVL and believing that the Bitcoin ecosystem would embrace DeFi. But the reality is that even with multiple projects launched, they have all become "ghost towns". Almost no one discusses these projects, and it is rare to hear founders express their intention to launch projects on Bitcoin L2.

In addition, celebrity tokens are also a major failure. There was a time when people thought that celebrity tokens would be better than ordinary meme coins because they were endorsed by celebrities. For example, MOTHER belongs to this category. But these are essentially social tokens, and they have performed extremely poorly over time. The market thought this would become a huge opportunity, but now it seems that this expectation has completely failed.

Robert:

I would nominate Friend.tech and the fall of the Social Fi craze it helped to drive. Earlier this year, Friend.tech was considered the hottest startup in the crypto space, but its development cycle was extremely short. From the initial conception to the highly sought-after, to the launch of version 2 and the Friend token, it quickly fell silent. Now the value of the product and token is almost zero. This may be one of the few projects that truly self-destructed. While projects like Farcaster are still developing, the development of the entire crypto social field faces huge challenges.

Best Comeback Story in 2024

Tom:

I would nominate Coinbase. Coinbase often becomes the market's "punching bag" when cryptocurrency prices fall. In 2023, they laid off thousands of people, and many people thought they might go bankrupt. But with the launch of the Bitcoin ETF, Coinbase has gained new development opportunities as the custodian of the ETF. Although their overseas business is not particularly outstanding, it is growing steadily. In addition, they have obtained a stay of execution in the lawsuit with the SEC, and it can be said that they have achieved a series of important victories in 2024. It is worth noting that this is the second consecutive year that Coinbase has been named the best recovery story, and this "double recovery" is indeed impressive.

Haseeb:

I would like to nominate Magic Eden. They were once considered a "second-tier" NFT trading platform after OpenSea and Blur. But by entering the Bitcoin ecosystem, especially in the layout of BRC-20 tokens and Ordinals, they have achieved amazing trading volume. The performance in the Solana ecosystem is also quite good. Recently, they also launched a platform token, which can be said to have achieved a perfect transformation.

Robert:

In addition to the previously mentioned MicroStrategy, I would like to nominate the entire Bitcoin ETF ecosystem. After years of rejection and failure, this year finally saw a breakthrough. This is thanks to Grayscale suing the SEC and winning, and the success of the Bitcoin ETF paved the way for the Ethereum ETF. These ETF products have performed quite well and can be regarded as a model of resurrection from "death". Although some people may think that this is more of a "winner" rather than a "recovery" story, institutions such as BlackRock have indeed demonstrated strong strength in this process.

Tarun:

I chose the Move ecosystem as the best recovery story. Sui has a market value of $50 billion, Movement has a startup capital of more than $5 billion, and many DeFi protocols have also been launched on these public chains. In the third and fourth quarters of 2023, when Solana gained a lot of attention, the Move ecosystem seemed to be ignored. But now they have clearly achieved a strong recovery through improved user experience and optimization of other functions.

Moderator: From these cases, we can see that in the cryptocurrency market, even projects that have experienced lows are likely to achieve a strong recovery as long as they have the right strategic positioning and execution. This also reflects the resilience and innovation of this industry.

2025 Forecast

Haseeb:

I have three predictions. First, Bitcoin will hit $150,000 and then pull back; second, DeFi tokens will usher in explosive growth; third, the price of AI-related tokens will rise sharply, but the actual application of the underlying protocol may be relatively limited.

Robert:

I am more optimistic about Bitcoin and expect it to reach $180,000, but there will not be a sharp decline. Secondly, I think the United States will introduce special legislation for cryptocurrencies for the first time, which will be an important milestone for the industry. Finally, I predict that there will be an AI crypto scam that attracts media attention.

Tarun:

My predictions focus on three areas. First, there will be a wave of consolidation in the application chain and L2 track, and we may see multiple mergers, mainly due to high operating costs and trading volume concentration issues. Second, the total market value of AI agent-related tokens will increase by at least 5 times, a significant increase from the current $10 billion. Finally, Solana's inflation rate will be reduced by at least 25%.

Tom:

I also have three predictions. First, money games like Farcaster or "Button" will become mainstream and gain virality on platforms such as TikTok. Second, there will be new crypto asset ETFs approved, but they may be relatively traditional currencies such as XRP or Litecoin, rather than the emerging assets expected by the crypto community. Third, we may see a major application-level security incident, perhaps due to a supply chain attack or a library vulnerability.