When historians look back at 2024, they'll likely mark it as the year Bitcoin finally crossed the Rubicon. A new all-time high, a key topic in the U.S. presidential election, the approval of not one but 11 Bitcoin ETFs, a halving event, and a global economy grappling with inflation. 

This year, Bitcoin proved to be a Rorschach test for everything. In troubled economies like Argentina and Turkey, it was seen as a lifeline against crushing inflation. To Wall Street's elite, it became a financial instrument worthy of BlackRock's blessing. For cypherpunks and developers, it emerged as a fresh canvas, ripe for scaling innovations. And to governments worldwide, it transformed from a threat to be contained into an opportunity to be seized.

Bitcoin itself was evolving. The network that once prided itself on its simplicity was exploring new horizons. Re-enabled opcodes like OP_CAT and revolutionary papers like BitVM brought programmability and self-custody innovations to Bitcoin's base layer. Layer 2s emerged like daisies, while liquid staking derivatives offered yield generation. 

BlackRock's iShares Bitcoin Trust (IBIT) became the fastest ETF to reach $10 billion in assets under management, accomplishing in weeks what took its gold counterpart decades. As institutional money flooded in, Bitcoin found its way into retirement portfolios.  This simultaneously thrilled Wall Street and sent shivers down the spines of Bitcoin purists. The ETF boom had made Bitcoin more accessible than ever – 62% of Americans could now buy it through their brokerage accounts as easily as Apple stock. But this convenience came at a cost. "Not your keys, not your coins" became less a rallying cry and more a whispered reminder of Bitcoin's original vision, drowned out by the sound of institutional trading desks.

Yet Bitcoin has always thrived on contradictions, and its global adoption story reveals its chameleon-like nature.  In the U.S., under Trump's crypto-friendly administration, it became a legitimate institutional asset. In India, despite regulatory headwinds, 75 million users embraced it as a tool for financial empowerment.  In Turkey, where inflation stalked the economy at 50%, Bitcoin became the de facto savings account for millions. In Argentina, watching inflation devour their currency at 140%, citizens weren't pondering the merits of institutional custody – they were using Bitcoin to preserve their life savings. Across Latin America and Africa, Bitcoin wasn't an investment thesis–it was a necessity. 

This duality defined 2024. Each region saw in Bitcoin what it needed most. This adaptability, far from diluting Bitcoin's purpose, proved its ultimate strength. Like a mirror that shows different facets to different viewers while remaining fundamentally unchanged, Bitcoin maintained its core properties while serving vastly different needs across the globe.

As 2024 draws to a close, Bitcoin stands at a crossroads. It has achieved the legitimacy its early advocates dreamed of, but perhaps not in the way they imagined. The ETF phenomenon, while transformative, introduces the very risks Bitcoin was designed to avoid. The network's scalability challenges have finally begun to be confronted and the 2025 horizon is glowing bright with possibility.

Are Bitcoin ETFs a gateway to mass adoption or a Trojan horse for centralization? Can Bitcoin staking redefine the network’s utility, or will it fragment its ethos further? As Layer 2 solutions and tokenized BTC unlock new possibilities, will Bitcoin finally achieve scalability—or are we just repeating the debates of the past with a shinier veneer? Has Trump's victory and the end of the Gensler era ushered in a new chapter for crypto in America? From OP_CAT's revival to record-breaking ETF flows, from MEV on Bitcoin to the dawn of recursive covenants, read on for answers, insights, and the data shaping the State of Bitcoin in 2024.

#Institutional Adoption: The ETF and Microstrategy

The U.S. Bitcoin ETFs launched in January 2024, marking Bitcoin’s official integration into traditional financial markets. Records were broken on all accounts in terms of inflows, speed of adoption, and total AUM. 

#1. Bitcoin ETFs: Institutional Demand

  • Bitcoin ETFs like BlackRock’s IBIT amassed $20B AUM in 137 days, breaking records. By comparison, the previous fastest ETF, JEPI, took 985 days to reach the same milestone.
  • Total BTC held by the ETF custodians recently passed 1m coins, >5% of current supply.
  • Hedge Funds and Advisors make up a significant ownership share of the ETFs.

#2. Grayscale’s Decline

  • GBTC lost its market leader share due to its 1.5% management fee and redemption inefficiencies. AUM plummeted as users exited for low-cost ETFs, shedding 152k BTC in one month.

#3. MicroStrategy’s Strategy

  • MicroStrategy, under Michael Saylor, has accumulated 402,100 BTC, valued at ~$39.8B. Their approach relies on convertible notes and equity raises to finance further Bitcoin purchases.
  • Despite criticisms, MSTR remains a top BTC holder and a proxy for Bitcoin exposure, trading at a 3x premium to vanilla Bitcoin exposure.

#4. Broader Implications

  • Bitcoin’s volatility has reduced as institutional adoption grows. ETF options trading further legitimizes Bitcoin as a long-term store of value for every portfolio.
  • The ETFs serve as a low-friction entry point for retail investors and financial advisors but face criticism for promoting custodial exposure over self-custody.

AUM Gold vs. BTC

#BRC-20s, Ordinals, and Runes

Ordinals and Runes emerged via Taproot and SegWit upgrades, introducing NFTs and fungible tokens to Bitcoin. These innovations spiked activity but remain controversial, with critics arguing they bloat the network with spam, while the supporters highlight their role in enhancing transaction fee sustainability and reinforcing Bitcoin's permissionless innovation.

  • Bitcoin transaction activity surged due to collectibles, temporarily increasing network fees. In May 2024, fees surpassed 75% of miner revenue during peak Ordinals hype, marking historic highs.
  • The mempool size, which peaked in late 2023 at 350m bytes, has normalized over time, and Runes improved UTXO management.
  • Ordinals, Runes, and BRC-20s passed the baton throughout the year, with each category having its dominant moment in terms of transaction share (Runes being the most dominant)

Bitcoin Transaction Type

#2. Marketplaces and Adoption:

  • Platforms like Magic Eden and OKX dominate trading, more than 95% of total volume. Adoption increased due to simplified user experiences and cross-chain bridging with Solana.
  • Despite being up-only at the beginning of the year, Ordinal collections have fallen 50%+ off their post-halving highs.
  • Protocols like Liquidium allow loans using Ordinals and Runes as collateral, expanding Bitcoin-native DeFi. Stablecoins (e.g., USDh by Hermetica) aim to leverage BTC as collateral, despite technical limitations.

#3. Cultural and Economic Shifts:

  • Memecoins, digital art, and decentralized markets reshape Bitcoin’s use case. While the cycles are speculative, the innovations highlight Bitcoin's censorship-resistant and permissionless nature.

#Tokenized Bitcoin: BTC on EVM Chains

Using tokenized Bitcoin on EVM chains is currently the most popular way to unlock utility for Bitcoin, not L2s. Thanks to WBTC's custody change, the market dynamics for tokenized Bitcoin changed drastically this year.

#1. Tokenized BTC and DeFi Utility:

  • Tokenized Bitcoin, like WBTC, tBTC, and emerging alternatives (e.g., cbBTC), make up more than 25% of DeFi TVL.
  • While Ethereum serves as a testbed for DeFi innovation, Bitcoin-first solutions (e.g., Bitcoin L2s) aim to remove reliance on custodians and align better with Bitcoin’s ethos. L2s are still far away from being launched.

DeFi TVL by Bitcoin Wrapper

#2. Failures and Lessons Learned:

  • Early wrappers like renBTC, imBTC, and HBTC failed due to adoption issues, hacks, or centralization risks. Our "Bitcoin Wrapper Graveyard" highlights critical vulnerabilities.
  • WBTC’s dominance faces challenges post-BitGo’s custody transition, eroding user trust, and Coinbase’s cbBTC quickly emerged as an alternative, surpassing 20k BTC in TVL.

#3. tBTC and Decentralized Alternatives:

  • tBTC offers a decentralized wrapper model, avoiding centralized custody risks. With strong adoption in protocols like Aave and GMX, tBTC’s 4x growth in supply in 2024 signals demand for decentralized alternatives.

#4. Bitcoin-Backed Stablecoins:

  • Stablecoins collateralized by Bitcoin, such as USDe and crvUSD, are gaining traction, with 30-60% of their collateral being BTC. But these introduce risks that Bitcoiners don’t want to expose themselves to.
  • Purely Bitcoin-backed stables remain a key opportunity, aligning with Bitcoin’s decentralized and open ethos.

#5. EVM Dominance:

  • Despite the hype around Bitcoin L2s, EVM ecosystems and their battle-tested apps still dominate Bitcoin DeFi adoption.
  • Bitcoin L2s hold promise but currently serve speculative purposes (e.g., airdrop farming). More aligned solutions are needed to create productive BTC use cases without altering Bitcoin’s core protocol.

#Bitcoin Staking

Bitcoin staking exploded in 2024 with an onslaught of new protocols that aim to use the hardest money in the world to secure Proof of Stake systems. With over $10B TVL, staking platforms are unlocking Bitcoin’s vast liquidity through native staking, liquid derivatives, and restaking innovations.

#1. Native Staking:

  • Babylon enables BTC holders to stake Bitcoin to secure Proof-of-Stake (PoS) chains while maintaining custody on the Bitcoin Network.
  • 34,938 BTC staked (~$3.53B TVL) with 82.44K active stakers.
  • Covenants and slashing mechanisms ensure PoS security.

#2. Liquid Staking Derivatives (LSDs):

  • Lombard: BTC stakers receive LBTC, which earns Babylon staking rewards and integrates into DeFi (e.g., Curve, Uniswap). Lombard commands $1.68B TVL.
  • Solv Protocol: Unifies Bitcoin staking via its Staking Abstraction Layer (SAL). LSDs like solvBTC aggregate BTC liquidity across chains, with TVL exceeding $3B.
  • Examples: solvBTC.BBN (Babylon), solvBTC.CORE (CoreDAO), solvBTC.ENA (Ethena).

#3. Restaking:

  • Platforms like Lombard and Solv rehypothecate staked BTC for additional DeFi yields (e.g., liquidity provision, lending). Lombard’s restaking TVL alone surpasses $1.04B.

Babylon Finality Providers

Bitcoin staking is early, and platforms rely on points incentives and yield promises to drive adoption. Long-term sustainability hinges on organic utility, and centralization risks arise from dominance by major players like Lombard and Solv, which hold approximately $1.32B in Babylon. Liquid staking offers better flexibility for users but adds additional trust assumptions.

While exciting, there is much to be seen for how staking plays out.

#Scalability: Sidechains, Rollups, L2s

#1. New Developments:

  • Taproot & Opcode Revival: Taproot (2021) and proposals like OP_CAT enhance programmability, privacy, and enable covenants.
  • BitVM: Introduced Turing-complete contracts on Bitcoin without consensus changes, enabling advanced off-chain computation.

#2. Layer-2 Solutions:

Sidechains:

  • Examples: Rootstock (RSK), Liquid Network, Mezo.
  • Sidechains enable features like smart contracts and improved throughput but rely on federated security models or merge mining.

Rollups:

  • ZK-Rollups: Use zero-knowledge proofs for near-instant finality with cryptographic guarantees.
  • Optimistic Rollups: Assume validity with fraud-proof mechanisms, offering greater scalability but delayed finality.
  • Examples: Citrea utilizes zk-STARKs and Clementine for trust-minimized BTC bridges.

State Channels (Lightning Network):

  • Allow off-chain, near-instant payments with minimal fees.
  • 5,380 BTC capacity (+11% annual growth).
  • Shift toward fewer, high-capacity channels, raising centralization concerns.
  • High adoption in advanced economies (U.S., Germany) for large payments, while emerging markets use Lightning for microtransactions.

Lightning Network Map of Usage

#3. Build on Bitcoin (BOB):

  • Settles to Ethereum but prioritizes building a strong Bitcoin economy with tokens like WBTC and tBTC.
  • TVL grew from $1.5M to $238.27M in 2024, driven by integrations like Uniswap V3 and Avalon Finance.

#4. CoreDAO and Ecosystem Growth

  • CoreDAO leverages Bitcoin’s security through Satoshi Plus, combining DPoW and DPoS.
  • Enabled BTC-backed coreBTC for DeFi applications.
  • 2024 Metrics: 95% network growth, 13.3M new addresses, and peak daily transactions of 500,000+.