What drove the 6.4% jump in cryptocurrency adoption in the first half of the year?

Author: Assad Jafri, Cryptoslate; Compiler: Wuzhu, Golden Finance

According to the latest market size report from Crypto.com, the global cryptocurrency market holdings increased significantly in the first half of this year.

The number of holders increased by 6.4% from 580 million at the end of 2023 to 617 million in June. The growth was mainly due to key developments in the Bitcoin and Ethereum ecosystems, especially the launch of spot exchange-traded funds pegged to the two digital assets.

Bitcoin (BTC) remains the dominant cryptocurrency, with holdings increasing by 5.9% to 314 million by mid-year, accounting for 51% of all cryptocurrency holders.

Meanwhile, Ethereum (ETH) saw a significant increase in adoption, increasing by 9.7%, bringing the total number of ETH holders to 136 million, accounting for 22% of the global market.

Growth drivers

The report said that two major events drove the rise in BTC adoption. The launch of the U.S. spot Bitcoin ETF and the fourth Bitcoin halving in April both played a key role.

The halving event reduced miners' block rewards from 6.25 BTC to 3.125 BTC, enhancing Bitcoin's appeal as "digital gold" and attracting the interest of a large number of institutional investors. The report estimates that between 388,000 and 1.6 million individuals have invested in BTC through U.S. spot ETFs, further driving its adoption.

Ethereum's growth was driven primarily by the Dencun upgrade in March, which significantly reduced transaction fees on the Ethereum Layer 2 (L2) network. The upgrade enhanced Ethereum's scalability, leading to a surge in L2 activity, which now accounts for approximately 90% of all transactions on the Ethereum network, up from 77% before the upgrade.

In addition, liquidity re-staking programs in the Ethereum DeFi ecosystem pushed DeFi's total locked value (TVL) to $100 billion in the first quarter, almost 2x higher than the previous quarter.

Institutional Adoption

The report highlights strong growth in March and April, with monthly gains of 1.7% and 1.6%, respectively, coinciding with the Bitcoin halving and Dencun upgrade. Institutional investors have played a key role in Bitcoin’s continued growth during this period, with U.S. spot Bitcoin ETFs attracting more than $14 billion in inflows as of the end of June.

Ethereum has also benefited from increased institutional interest, particularly ahead of the SEC’s drop in its investigation into ETH and the regulator’s approval of a spot ETH ETF – both of which boosted investor confidence in Ethereum and the market as a whole. The initial surge in interest led to a rise in ETH prices to $3,900 in June.

Since their respective launches, spot ETFs have performed well, with Bitcoin-related funds setting multiple records in the ETF market.

However, despite significant market growth in the first half of the year, the market has struggled to break through all-time highs in recent weeks due to increasing macroeconomic pressures and worsening geopolitical situation in the Middle East.

At press time, BTC is trading at $59,121 and ETH is trading at $2,612 — both are down significantly from their highest prices this year.