- The U.S. election results propelled Bitcoin to new all-time highs. Although crypto is a bipartisan issue, Grayscale Research expects that unified Republican control of the White House and Congress should result in legislation and regulatory oversight more conducive to industry innovation. President-elect Trump’s nominations for key cabinet positions appear consistent with a pro-crypto policy agenda.
- Other major crypto market developments included the launch of options on Bitcoin ETPs, heavy Bitcoin buying by MicroStrategy, a surge in volume on Korean crypto exchanges, innovations with AI agents, and market focus on Dogecoin.
- 2024 has been a favorable period for crypto returns, and Grayscale Research believes the bull market can continue next year.
Prior to November, Bitcoin had already appreciated 57% in 2024, but gains over the last month have since lifted its year-to-date returns to 110%. Unlike in prior months, the favorable crypto market environment in November extended well beyond Bitcoin: our Crypto Sectors Market Index (CSMI), which measures the returns across a broad range of digital assets[1], gained 59% during the month and now also has positive returns for the year (Exhibit 1).
Exhibit 1: Bitcoin has appreciated 110% this year
Although crypto is a global phenomenon, Grayscale Research sees the recent U.S. election results as a potential turning point for the digital assets industry. The next president and Congress will likely take up comprehensive crypto legislation and help shape agency oversight through the appointment and confirmation of key regulators. These decisions could affect many aspects of blockchain adoption and development in the United States, including asset tokenization, stablecoin usage, and integration of decentralized finance (DeFi) applications with traditional systems.
At the constituent level, polling data show that crypto is a bipartisan issue, with slightly higher levels of Bitcoin ownership among Democrats than Republicans. But among current and incoming members of Congress, Republicans have been more consistently supportive of digital asset innovation, and President-elect Trump has vocally embraced the industry. We therefore see Republican control of the White House and Congress as a positive outcome for crypto markets (for details, see our earlier election report). The nominations of Scott Bessent for Treasury Secretary and Howard Lutnick for Commerce Secretary are encouraging early signs from the incoming administration, given both candidates’ past statements and professional experience with crypto.[2]
Although many assets appreciated after the U.S. election, Bitcoin and the broader crypto market were among the best-performing market segments on a risk-adjusted basis (i.e., account for each asset’s volatility). Equity markets generally appreciated, led by financials, possibly on expectations for lower tax rates and deregulation of certain industries (Exhibit 2). Meanwhile, the Chinese Yuan depreciated, possibly on the threat of higher U.S. tariffs[3], and the price of gold also declined, possibly reflecting a reduction in the tail risk of a contested election result.
Exhibit 2: Crypto markets outperformed traditional assets in November
Like those of many physical commodities, Bitcoin’s price returns are characterized by a high degree of momentum (statistical persistence), which can give the appearance of price “cycles”. While each of these periods had its own specific drivers, past Bitcoin cycles may have been partly related to the four-year halving schedule. As Bitcoin matures and is adopted by a broader array of traditional investors, and as the supply impact of the four-year halving declines, the recurring cycles in Bitcoin’s price may diminish. While Bitcoin’s price may always exhibit some momentum—like many physical commodities—changes will probably not occur at regular four-year intervals.
Nonetheless, past cycles may offer some guidance about Bitcoin’s typical statistical behavior. Bitcoin’s price reached a cyclical low in November 2022 and has been appreciating for about two years. The last four Bitcoin price cycles averaged 2.2 years, and the last two cycles averaged almost three years. For the current cycle, cumulative returns to date look broadly comparable to the last two bull markets (Exhibit 3). While fundamental variables like the state of the economy and the strength of the U.S. Dollar will ultimately drive Bitcoin’s price, history suggests the latest upswing in prices could continue.
Exhibit 3: Bitcoin’s price tracking prior to cycles
Broader financial market structures around Bitcoin continued to mature during November. The U.S.-listed spot Bitcoin exchange-traded products (ETPs) saw another $6.5bn in net inflows, a portion of which has likely been directed to the spot/futures “basis trade”. Options on the Bitcoin ETPs also began trading last month. As of November 30, open interest across the Bitcoin ETP products with listed options stood at $7bn, about 70% of which were calls and 30% were puts. Improving market structure around the spot Bitcoin ETPs may eventually have implications for proxy investments like MicroStrategy shares. MicroStrategy is a public company nominally in the software business but serving primarily as a Bitcoin investment vehicle.[4] In November the firm purchased $12bn in Bitcoin for its balance sheet and has announced plans to purchase a total of $42bn over the next three years.[5]
From a Crypto Sectors standpoint, the best-performing market segment was Consumer & Culture, largely due to the strong performance of Dogecoin (DOGE), which gained 161% during the month (Exhibit 4). Although Dogecoin originated as a memecoin, its blockchain was derived from forks of Bitcoin[6] and boasts faster block times than Bitcoin, Bitcoin Cash, and Litecoin, as well as transactions per second comparable to Bitcoin.[7]
Dogecoin is the largest asset in the Consumer & Culture sector by market cap. The blockchain received more attention on November 12 when Trump announced plans to establish a Department of Government Efficiency, with the acronym DOGE, co-led by Musk.[8] The department is intended to reduce government waste and drive structural reforms. Although no direct relationship exists between the proposed department, the sharp increase in attention on Musk and the DOGE meme may have stimulated demand for the token and lifted its price.
Exhibit 4: Consumer & Culture Crypto Sector outperformed on memecoin demand
Besides Bitcoin and Dogecoin, the largest increases in market cap last month were for XRP and Stellar Lumens (XLM), two related projects in the Currencies Crypto Sector originally focused on cross-border remittances, but since expanded to other use cases like asset tokenization and support for central bank digital currencies (CBDCs). Since the end of October, XRP has appreciated 281% and XLM has gained nearly 470%. The U.S. election outcome may offer more regulatory clarity for crypto projects working on remittance applications, which could improve the fundamentals for both projects. However, recent returns may also be driven by idiosyncratic fund flows. In particular, the sharp appreciation in XLM corresponded with a surge in trading volume on the Korea-centric Upbit exchange, perhaps indicating outsize speculative trading in XLM by Korean investors (Exhibit 5). The short-term outlook for XLM may therefore depend on whether demand from these sources can continue, more so than the project’s underlying fundamentals.
Exhibit 5: Volume surged on the Korea-centric Upbit exchange
With the Smart Contract Platforms Crypto Sector Solana continued to outperform the Ethereum network’s Ether token, partly due to extensive memecoin trading on Solana.[9] Solana now generates fees comparable to the Ethereum Layer 1, but has only around one quarter of the market cap.[10] If Solana can continue to expand adoption beyond memecoins — in categories like decentralized physical infrastructure (DePin) or stablecoin payments, for example — Grayscale Research believes it may continue to experience higher fee growth and token price outperformance. Among the larger smart contract platform blockchains[11], the best performers were Cardano (+216%), Polkadot (+127%), and Sui (+77%).[12]
Although Ether has underperformed Bitcoin and Solana this year, it has performed roughly in line with the Smart Contract Platforms Crypto Sector as a whole (Exhibit 6). Ethereum has certain competitive advantages that may support adoption over the coming year, including a solid lead in asset tokenization efforts and an extensive network of application developers. Grayscale Research thinks that Ethereum is “playing the long game”: bootstrapping network effects by keeping fees low for Base and other Layer 2s. In a post-election regulatory environment, trends in institutional adoption of digital assets may help determine whether Ethereum’s scaling strategy will support its leading position among smart contract platforms over time.
Exhibit 6: Ether underperformed Solana this year
Away from the election, developers continued to explore innovative applications of blockchain technology, with recent market attention focused on projects related to decentralized artificial intelligence (deAI). This is a diverse category, but many projects are focused on using economic incentives, grounded in blockchain infrastructure, to develop the components of AI technology in a decentralized way, including data collection and story, computation, and model training and inference. In a recent report, Grayscale Research wrote about the latest experiments with “AI influencers”: autonomous AI agents active on social media and able to make and receive payments using blockchain wallets. Another innovative market segment has been Decentralized Science (DeSci), where projects leverage blockchain tech to help create a transparent, accessible, and collaborative environment for scientific research. A DeSci event attended by major industry figures in early November brought additional attention to applications in this market segment.[13]
Crypto valuations increased sharply in November, and a range of market signals suggest speculative trader positioning is now relatively long. Without additional fundamental news, crypto markets could be more range-bound over the very short term.
Looking into next year, however, Grayscale Research believes the bull market can continue, especially if the macro backdrop remains favorable (i.e., the economy avoids recession and the Federal Reserve reduces interest rates). Investors around the world are adopting Bitcoin as a unique form of money, offering digital scarcity and censorship resistance. The demand for these features will continue to grow, in our view, as long as governments fail to rein in rising debt loads and policymakers introduce friction into fiat money systems through sanctions and other capital controls. Beyond Bitcoin, market structures are evolving to give investors more efficient access to crypto assets, the incoming Congress could bring greater regulatory clarity in the U.S. market, and developers continue to bring exciting new applications to market, like those related to decentralized AI. Although 2024 has been a very good year for crypto markets, there is no reason, in our view, why 2025 can’t be as good or better.
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[1] The FTSE/Grayscale Crypto Sectors family of indexes are weighted by the square root of constituent market capitalization, thereby reducing the relative weight of Bitcoin and other large cap tokens.
[4] Source: Financial Times.
[5] Source: Financial Times.
[6] Dogecoin is a fork of Luckcoin, which was a fork of Litecoin, which is a fork of Bitcoin.
[7] Over the last one year mean block intervals in minutes were: Dogecoin (1.1), Bitcoin (9.9), Bitcoin Cash (10.3), and Litecoin (2.5); over the last one year average daily transactions per second were: Dogecoin (6.2), Bitcoin (6.2), Bitcoin Cash (0.8), Litecoin (3.3). Source: Coin Metrics, Grayscale Investments. Data as of November 29, 2024. For illustrative purposes only.
[9] Source: Dune Analytics. Note that this does not include Dogecoin, which has its own blockchain.
[10] Source: Artemis. Data as of November 30, 2024.
[11] Defined here as those with a market capitalization greater than $5bn.
[12] Source: Artemis. Data as of November 30, 2024.
[13] Source: Unchained Crypto.
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Index Definitions: The FTSE Grayscale Consumer and Culture Crypto Sector Index includes digital asset networks, protocols, and applications that seek to deliver and support consumption-centric activities across a variety of goods and services. The FTSE Grayscale Smart Contract Platform Crypto Sector Index includes digital assets that are general purpose networks that provide programmable functionalities. These platforms primarily support the broad development and execution of self-executing contracts. The FTSE Grayscale Financials Crypto Sector Index includes digital asset networks, protocols, and applications that seek to deliver financial transactions and services. The FTSE Grayscale Currencies Crypto Sector Index includes digital assets that serve three fundamental roles – medium of exchange, store of value, and unit of account. FTSE Grayscale Utilities and Services Crypto Sector Index includes digital asset networks, protocols, and applications that seek to deliver practical and enterprise-level applications and functionalities. The FTSE/Grayscale Crypto Sectors family of indexes measure the price return of digital assets listed on major global exchanges. The S&P 500® Financials comprises those companies included in the S&P 500 that are classified as members of the GICS® financials sector. The Barclays Global Aggregate Index is a market-weighted index of global government, government-related agencies, corporate and securitized fixed-income investments. The Bloomberg-Barclays US Treasury Index measures the total returns of nominal US government notes and bonds with greater than one year remaining maturity.