The second quarter of 2024 has been a dynamic and transformative period for the cryptocurrency market, marked by significant shifts and developments. This blog delves into the key price performances, fundraising activities, pivotal events, and regulatory changes that have shaped the landscape over the past three months. As we navigate through this review, we will explore how major cryptocurrencies like Bitcoin and Ethereum have fared, the impact of burgeoning sectors such as memecoins, and the broader implications of regulatory actions and technological advancements.
Q2 2024 Market Review
Price Performance
In Q2 2024, the cryptocurrency market experienced a significant pullback across nearly all top 40 crypto assets. This period marked a divergence between crypto markets and traditional risk assets, particularly technology stocks. Bitcoin and Ethereum managed to hold steady, while alternative layer-1 (alt L1) assets faced major sell-offs. Key alt L1s such as Cardano (-27%), Avalanche (-38%), Near (-18%), Sui (-51%), and Solana (-20%) saw considerable declines. Layer-2 solutions (L2s) also suffered despite improving fundamentals; user activity for Arbitrum almost doubled following a 90% fee reduction due to EIP-4844 at the end of Q1, yet Optimism (-42%) and Arbitrum (-47%) were both well-off local highs.
Memecoins showed mixed results during this quarter. WIF (-38%) and SHIB (-34%) declined, whereas Pepe (+68%) and Bonk (+17%) outperformed the market. Overall, risk aversion dominated most crypto investors’ portfolios, reflected in reduced trading volumes. Exchange volumes dropped significantly from $2.5T in March to $1T in June, a stark contrast to the $4.2T peak seen in May 2021.
Fundraising
Venture capital (VC) investment in crypto continued to rise from its Q2 2023 nadir, with VCs investing $3.2B across 577 deals in Q2 2024. Approximately 80% of this capital was deployed to early-stage companies, with median deal valuations reaching the highest levels since Q4 2021, averaging around $40M. The median fundraising amount for these rounds was roughly $3M. Interestingly, the cohort attracting the most funding was NFTs/Gaming/metaverse, slightly surpassing infrastructure investments.
Key Events
Ethereum ETF Approval: On May 23, 2024, the SEC approved eight spot Ethereum ETF applications, with trading expected to start in July. Historical data suggests a substantial price appreciation following such announcements, similar to the 36% increase seen with the BTC ETF earlier this year. The ETH ETF is likely to attract significant inflows, bolstered by Ethereum’s inherent characteristics like its staking and smart contract capabilities, making it a more appealing asset to traditional investors.
Potential Major BTC Sales: The German and U.S. governments collectively moved approximately $400 million worth of Bitcoin to centralized exchanges in late Q2, raising concerns about potential selling pressure. Additionally, Mt. Gox is set to begin asset distribution in July, potentially releasing $9 billion worth of BTC to the market. However, it is believed that only a small portion of these assets will be sold immediately, as many claimants might opt to hold or have already sold their claims for profit.
Solana ETF Submission: VanEck filed for a Solana ETF on June 27th, marking the first such registration in the U.S. While this is seen more as a marketing event than a serious product attempt, the move highlights growing interest in diverse crypto ETFs. However, the SEC’s stance and the classification of Solana as a security suggest a Solana ETF might only materialize with a more crypto-friendly regulatory environment, possibly post-2025.
Poor Airdrop Performance: Q2 saw a number of protocols with highly anticipated airdrop campaigns, such as Blast, LayerZero, and ZkSync, entering the market. Unfortunately, these airdrops resulted in disappointment for many investors as the assets traded at or below their last fundraising round valuations and experienced sharp sell-offs after their listings.
Legal and Regulatory
Regulatory Powers (Chevron Decision): The Supreme Court’s decision to strike down the Chevron ruling of 1984 will likely slow down crypto regulation efforts. This ruling reduces the power of federal regulators like the SEC to enforce their interpretations of the law, potentially curbing their direct enforcement capabilities.
SEC Actions and Updates: The SEC has been active in pursuing actions against various crypto entities:
- Metamask: Consensys is being sued for allegedly violating federal securities laws with MetaMask’s swaps and staking products.
- Staking Services: Ethereum staking services Lido (LDO) and Rocket Pool (RPL) were deemed unregistered securities.
- Uniswap: The SEC issued a notice of impending enforcement action against Uniswap for allegedly acting as an unregistered securities broker and exchange.
Markets in Crypto Assets (MiCA) Implementation: MiCA regulations in the EU aim to enhance transparency, market integrity, and consumer protection. These new rules significantly impact stablecoin issuers, requiring them to hold liquid reserves in EU banks and comply with stringent operational standards. This has led exchanges like Binance to restrict non-compliant stablecoins for EU users, with Circle (USDC) being the primary compliant issuer so far.
Final Thoughts
The second quarter of 2024 has been dynamic for the cryptocurrency market, characterized by significant developments and volatility. Despite market downturns, Bitcoin and Ethereum held steady while altcoins and Layer-2 solutions faced steep declines. The approval of the Ethereum ETF is poised to drive substantial inflows, mirroring the BTC ETF’s earlier impact.
Venture capital investment has rebounded, especially in early-stage companies and the NFT/gaming/metaverse sectors, indicating strong long-term confidence in blockchain technology. Key events, such as major government Bitcoin sales and ongoing regulatory actions, have further influenced market dynamics.
Regulatory developments, including the Supreme Court’s Chevron decision and the implementation of MiCA in the EU, are shaping a more transparent and protected market environment. These factors suggest a potentially longer and less volatile cycle compared to previous ones.
As the crypto market evolves, staying informed and leveraging data-driven insights is crucial. Strategic investments, awareness of regulatory trends, and technological advancements offer opportunities to capitalize on the transformative potential of blockchain in the coming months and years.
Stay tuned to MV Global for further updates and insights as we navigate this rapidly evolving market.
About MV Global
Established in 2019, MV Global has emerged as a force in the Web3 landscape focused on early-stage investments and venture building. Our mission is clear: to partner with mavericks, visionaries and free thinkers to leverage blockchain-enabled technologies to build for the future.
