Part 1 of our recap of Bitcoin developments in 2024 included the launch of US-based spot ETFs, the halving, and increased corporate adoption. But other milestones, too, reflected Bitcoin’s deepening integration into mainstream asset management, such as the approval of options trading on the ETFs and the launch of bond-focused ETFs. But we also had innovations pertaining to the network itself, where L2 developments did much to advance Bitcoin’s “technology layer” thesis.
On December 4, 2024, Bitcoin surpassed the $100,000 milestone for the first time and traded over the $2 trillion market cap level for several days. The breach of the 100K level was the exclamation point on an ultra-bullish November, a month in which Bitcoin recorded its biggest-ever daily rise, having gained $8,343– a massive +10.4% on November 11th.
Figure 1: Bitcoin breaks the all-important $100,00 level on December 4th
While not a development for Bitcoin per se, $100,000 is a hugely symbolic level that was anticipated for years and again underscores the premier digital asset’s unstoppable momentum.
In addition to the ETF approvals, there are numerous other factors driving this price discovery:
☑ Unsustainable debt loads
☑ Macro uncertainty
☑ Armed conflict and broader geopolitical risk
☑ Persistent inflation
☑ Post-halving supply dynamics
As more individuals, companies, and increasingly sovereign entities adopt it, the $100K milestone will be seen as just one more step towards Bitcoin’s adoption as a global monetary alternative.
Two ETF filings in December provided us with a good clue as to the direction the US market for Bitcoin ETFs is headed.
The first is the ‘Bitcoin Standard Corporations ETF’ from Bitwise Asset Management, which aims to offer exposure to companies adopting a Bitcoin treasuries standard with a minimum of 1000 BTC (and bench-marked to the Bitwise Bitcoin Standard Corporations Index). The second is the ‘Bitcoin Bond’ ETF’ by Strive, which will target convertible bonds issued by companies like MicroStrategy that have invested significant portions of their capital in Bitcoin, the proceeds of which are utilised for further Bitcoin purchases.
Figure 2: New ETF filings underscore the current innovation happening around Bitcoin as a strategic asset class
Both of these filings reflect the more favourable regulatory environment for digital assets anticipated under the second Trump term as well as marking a significant technical evolution by allowing exposure via corporate treasuries and convertible bonds linked to BTC holdings.
What’s underpinning this? Bitcoin’s fixed supply. It forces a unique game theoretical market dynamic where strategies and expectations around its value directly influence its price, often in ways traditional finance doesn’t fully appreciate yet. This is why “too volatile” and “backed by nothing” narratives persist despite ample evidence to the contrary and a steady return to boot.
Additionally, the launch of options trading on Blackrock’s Bitcoin ETF (IBIT) in November was a major development and marked a significant step forward for the institutionalisation of Bitcoin. Unsurprisingly, IBIT options ended their first day in the top 1% of all options products traded, with 353,716 contracts in the opening session.
Figure 3: As with the spot ETFs, options trading saw impressive volume on its opening day
The approval of options trading spotlights the rising demand not just for straightforward exposure to digital assets but tools to generate yield and hedge/manage risk and will have significant implications for market structure, liquidity, and volatility. Case in point: Grayscale’s updated proposal filings for Bitcoin and Ethereum Covered Call ETFs in November which flew slightly under the radar.
The finer point is that the US market isn’t simply going down the path of launching a billion ETFs tied to speculative crypto projects. Instead, we’re seeing innovations that reflect the current maturity of digital assets (e.g. Bitcoin treasure and bond-focused ETFs), Bitcoin corporate treasury-focused ETFs, options trading, etc. These products reflect the evolution of how Bitcoin is now being positioned within institutional portfolios, i.e. strategically, not speculatively, and as a tool for generating yield and accessing debt markets. Or to put it another way, the US market is tapping into the next stage of crypto’s maturation. This ‘second-mover advantage’ means less experimentation with esoteric products — and more focus on institutional utility.
There is no question that Bitcoin L2 development was a huge development in 2024, albeit slightly under the radar, and there area number of reasons why it is happening.
First and foremost, the scalability and usability of Bitcoins’ base layer are limited due to relatively low transaction throughput and high fees during periods of congestion. L2s like Stacks, Lightning, and Rootstock are paving the way for the development of innovative economic activity on the network through increased efficiency and reduced costs to make Bitcoin more viable for everyday use cases. This is, in turn, is attracting a wider range of users and applications, from micropayments to cross-border remittances, built by a growing number of developers flocking to the space.
Figure 4: L2 development on Bitcoin surged in 2024, highlighting its growing role as a technology layer
But ultimately, it is the unrivaled security and trust of the network that makes Bitcoin finality so coveted–even while there are so many other blockchains that on the surface appear to be better-suited for the development of smart contracts and other applications.
One important recent development has been the launch of sBTC on the Stacks main net. In simple terms, sBTC is a synthetic asset that allows for a decentralised, trustless two-way peg system between Bitcoin and the blockchain. The sBTC system is designed to maintain Bitcoin’s security properties while expanding its utility, allowing for more complex financial applications and interactions via the Stacks Proof of Transfer (PoX) based network (and without altering the core Bitcoin protocol).
What’s important here is that this is a decentralised innovation, unlike previous solutions like wrapped Bitcoin (wBTC) that relied on centrally controlled custodians.
Of course, we have yet to see exactly how this additional complexity will impact Bitcoin from a scalability standpoint and whether there’ll be any uncertainty regarding how regulators might view sBTC along with potential implications for Bitcoin (even though we all want to believe everything will be hunky-dory post Gensler).
2024 saw a surge in Bitcoin mining projects embracing renewable energy sources. Companies like TeraWulf, Hut 8, and others along with numerous smaller operations, are leading the charge. These projects leverage hydroelectric, solar, and wind power to fuel their mining operations, significantly reducing their carbon footprint.
The shift towards renewable energy in Bitcoin mining is crucial for several reasons. Firstly, it addresses the industry’s environmental concerns, mitigating the impact of energy consumption on climate change. Secondly, it fosters the growth of renewable energy infrastructure, incentivising further investment in clean energy technologies. Finally, it enhances the long-term sustainability of Bitcoin mining, ensuring its continued operation in an environmentally responsible manner.
At the same time, Bitcoin mining has proven an important opportunity for developing economies to leverage their natural resources. For example, in Match 2024, Ethiopian Investment Holdings and Hong Kong-based West Data Group inked an agreement to expand bitcoin mining data centers using its abundant hydro-power energy resources and favourable laws. In November, Ethiopian Electric Power reported earnings of nearly $55 million, or 18% of revenue, from Bitcoin mining, utilizing excess energy from the Grand Ethiopian Renaissance Dam. With $1 billion invested this year, Ethiopia aims to become a top 5 global mining hub. Similar projects are also underway in Kenya.
Figure 5: Bitcoin’s renewable energy mix continues to outperform other industrial sectors
What this ultimately all means is that the shows that the proportion of sustainable energy sources in the Bitcoin network has continued to increase at a higher pace than any other industry, as seen in Figure 4. Additionally, the growth of renewable energy sources, the use of waste heat from ASICs for various processes, and the conversion of methane gas from landfills or oil fields into electricity are all fueled by bitcoin mining.
In the last two years, this has opened the floodgates to miners seeking its comparatively positive reception to bitcoin mining, coupled with its abundance of energy sources — chiefly hydro — to its optimal weather and cheap energy costs.
Although it’s still early, the trend of nation-states accumulating Bitcoin as part of broader institutional adoption is becoming a major area of development. While it’s true that the incoming Trump administration has done much to publicise the notion of a Bitcoin strategic reserve (see Part 1) with many other countries announcing plans to follow suit, this trend has been building for some time as the need to combat the effects of inflation, currency debasement, and crippling deficits increases.
It’s well-known that El Salvador has emerged as a landmark case, becoming the first country to recognise Bitcoin as legal tender in 2021. El Salvador’s treasury holdings have risen to nearly 6,000 BTC, a significant increase from the 2,381 held at the beginning of 2024, and currently valued at $569.6 million.
It’s important to note that these purchases continue despite the IMF’s persistent warnings about the potential negative impact of Bitcoin’s volatility on El Salvador’s economy and financial stability. However, the IMF’s pressure stems largely from its conditionality for financial assistance, which hinges on El Salvador limiting its bitcoin adoption. President Nayib Bukele, however, remains unwavering in his support for Bitcoin.
Figure 6: Sovereign adoption is gathering pace, with several nations looking to establish a Strategic Bitcoin Reserve
Throughout 2024, several other countries announced plans to make allocations, such as Qatar, which is rumored to be considering a significant Bitcoin investment through its Sovereign Wealth Fund. Others, such as Norway, have already disclosed indirect Bitcoin exposure through its Sovereign Wealth Fund’s holdings in companies like Coinbase, MicroStrategy, and Block Inc.
While the specific approaches vary, these examples illustrate a growing trend of sovereign interest in Bitcoin. This shift suggests that governments are increasingly viewing Bitcoin not merely as an asset, but as a viable component of treasury finance and a strategic tool for innovation.
Clock here if you missed Part 1
