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Bitcoin Mining Earnings Soar by 270% in Q2, Polygon Has a New Roadmap; Where’s the Market Headed?
Bitcoin and Ethereum fell by 2.38% and 3.76%, respectively, over the past week. However, the correlation between the two cryptoassets and equities is at a two-year low, signaling a healthy sign of decoupling; over the past month, the correlation was at an average of 0.12. Solana was the best-performing asset among the largest cryptoassets by market cap, with a rise of 10.88% WoW and 5.18% in total value locked (TVL). Polygon came in second in gains, increasing by 3.21% over the past week, possibly due to their new roadmap dubbed Polygon 2.0. The decentralized exchange Curve increased by 3.16% over the past week on the back of the 40% rally of its native stablecoin crvUSD in the past 7 days. Moreover, assets on Stacks, Bitcoin’s scalability solution, soared by almost 13%, in the aftermath of the new token standard igniting Bitcoin Ordinals, as we discuss later in this report.
Figure 1: Weekly Price and TVL Developments of Cryptoassets in Major Sectors
Source: 21Shares, CoinGecko, DeFi Llama. Close data as of July 10, 2023.
5 Things to Remember in Markets this Week
• Larry Fink’s Change of Heart: Traditional finance key players changing their stance on crypto has been a recurring theme snowballing over the past two years. The latest convert is BlackRock’s CEO Larry Fink, who said that crypto, especially Bitcoin, could revolutionize finance and could be used as a hedge against devaluing currencies around the world. Fink was known for his skepticism around this asset class, describing Bitcoin as an “index of money laundering” in 2017. Since then, the crypto community has been demystifying this ever-evolving asset class which is patiently collecting the harvest of this effort.
• The Bitcoin network is likely to get busy with recursive inscriptions, thanks to BRC-69, a new standard proposed by Bitcoin Ordinals launchpad platform Luminex. Recursive inscriptions were introduced last month by Ordinals developers to overcome Bitcoin’s size limitation that restricts the size of NFTs to 4 MB per block. BRC-69 is designed to simplify the creation of Recursive Ordinals collections, reduce inscription costs, and streamline the on-chain pre-reveal process. The new standard preserves all on-chain resources while achieving a 90%+ optimization of block space, which is dependent on the size of the initial collection and the network fees. This development could mean more activity on Bitcoin’s scalability solutions, such as Stacks. In the long run, recursive inscriptions pave the way for graphic-intensive applications to be built on the Bitcoin blockchain.
Figure 2: Daily and Cumulative Number of Bitcoin NFTs
Source: 21co on Dune Analytics
• Circle Eyeing an Expansion into Japan, Contemplating a Yen-Backed Stablecoin: Japan is emerging as a crypto hub following its revised enactment of the Payment Service Act on June 1st. This legislation only recognizes fully-collateralized and fiat-backed tokens as legal tender, while designating banks and trust companies as custodians of fiat deposits. Mitsubishi UFJ Trust and Banking (MUFG), Japan’s largest bank with $800B in AUM in 2020, has already publicized its intent to launch a fiat-backed stablecoin on Cosmos and the Progmat issuance platform in the spring of next year. In light of these developments, Circle’s founder aims to expand its services in Japan, given the country’s unique positioning and ahead-of-the-game status compared to its European counterparts. Thus, it’ll be worth monitoring the evolution of Japan as an Asian crypto hub and if its model will inspire other major economies to follow suit.
• Bitcoin Miners Surpassed Cumulative Earnings of Past Five Quarters: Bitcoin miners have experienced a significant rebound in revenue following a prolonged period of subdued on-chain activity. In Q2, miners accumulated an impressive $184 million from transaction fees on the Bitcoin network, marking a 270% increase compared to Q1. While the surge in fees can be partly attributed to Ordinals and smart-contract innovations, Bitcoin’s price appreciation played an equal role in boosting miner revenue driven by the multiple catalysts that emerged in 2023 so far. Namely, the announcement of major US asset managers applying for a spot BTC ETF has contributed to the upward momentum of the asset in the past three weeks, in addition to the recurring need for a non-state monetary system that hedges against banking instability and failures, as seen earlier in March.
Figure 3: Bitcoin Miner Fee Revenue by Quarter
Source: CoinMetrics
• DyDx began its long-anticipated launch on Cosmos. Although mainnet deployment is expected to take place in Q4 of this year, users can start testing the experimental version of the platform to execute limit orders, along with other advanced trading features on testnet. The decision to migrate the platform was driven by the need to reconcile the lack of decentralization introduced by the design limitations of scaling solutions infrastructure and embarking on a meaningful solution that grapples with Ethereum’s scalability issues. That said, DyDx’s successful live launch could inspire other protocols to adopt a comparable model of transforming their dApps into application-specific blockchains that cater to the project’s distinctive needs.
Figure 4: Market Share of Perpetual Decentralized Exchanges Volume
Source: The Block.
What You Should Pay Attention To
• Polygon Labs unveils the infrastructure powering the Polygon 2.0 network. The new architecture comprises four key layers: Staking, Interoperability, Execution, and Proving, with the core innovations centered in the first two components. The Staking layer will facilitate a shared security model, bolstering the security of new chains connected to the wider Polygon network. Interoperability will enable cross-chain messaging and atomic swaps, facilitating direct asset transfers without relying on wrapped assets, which have been vulnerable to smart contract hacks. Additionally, Polygon proposed an upgrade for their flagship scaling product (POS SideChain), transitioning it into what’s known as zkEVM Validium. This unique approach stores data off-chain and utilizes validity proofs to ensure data integrity, reducing computational costs and making it cheaper for users to interact.
To avoid sacrificing data availability, Polygon is going to leverage the existing POS chain validator list to proliferate transaction data across the entire 2.0 ecosystem. If implemented successfully, Polygon could be the first protocol to use a decentralized sequencer to help with ordering transactions on its solution, a key milestone that Arbitrum and Optimism haven’t achieved yet. Polygon’s consolidated architecture could play a key role in improving Ethereum’s scalability issues, and present an effective solution for cross-blockchain transfers that doesn’t rely on vulnerable bridges. The ambitious plan should help offer users a cohesive experience akin to using a unified blockchain platform. That said, Polygon’s announcement has coincided with a surge in deposits into the scaling solution, as shown below, taking the value north of $50M in AUM.
Figure 5: Polygon Newest Scaling Solution AuM
Source: 21co on Dune Analytics
• Multichain Bridge Exploit Leads to Losses North of $130M. Multichain, formerly known as Anyswap, is a cross-chain bridging solution connecting numerous smart contract and scaling networks. On July 6th, the bridge suffered an attack resulting in the unauthorized transfer of more than $120M worth of tokens across multiple bridges. In response, the Multichain team temporarily suspended the entire bridge’s operations as they investigated the mysterious exploit, while Circle and Tether managed to freeze more than $65M in stables. Although Multichain is connected to multiple networks, the Fantom ecosystem has been particularly impacted due to its extensive use of bridged tokens supported by the Multichain team. Thus, we’ll closely observe the network to understand the full extent of the damages incurred by the Ethereum competitor’s universe of assets.
Figure 6: Total Assets Locked in the MultiChain Fantom Bridge
Source: Forked off @salva on Dune
On the flip side, the second-order effect of the 44th hack this year is that the ETH core developers community is now discussing an improvement proposal that could finally protect smart contracts against exploits. Dubbed EIP 7265, the Circuit Breaker proposes to temporarily suspend the outflow of protocol-wide tokens when a predefined metric surpasses a specific threshold and either revert the transaction or impose a delayed settlement. The solution would be agnostic to the underlying protocol. It would only look at token inflows and outflows as the actionable metric, and thus could prove invaluable to the broader crypto stack infrastructure.
Next Week’s Calendar
These are the top 3 events we’re closely monitoring next week:
• Q2 Bank earnings: Data coming in on Friday should paint more color of the stress regional banks are under and the health of lenders.
• 8 Central Bank Representatives from the UK, EU, and U.S. to deliver speeches throughout the week, expected to generate heightened market volatility.
• Polygon’s 2.0 tokenomics: expected to learn more about the revamped token role in the broader Polygon ecosystem, and its evolution.
Source: Forex Factory, CoinMarketCal
Research Newsletter
Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com
Disclaimer
The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.
2024 was a landmark year for bitcoin, solidifying its role as a fully institutionalised asset class.
Institutional inflows into physical bitcoin exchange-traded products (ETPs) reached nearly $35 billion globally, signalling a major shift in how traditional investors view crypto. As bitcoin continued to enhance portfolios’ risk-return profiles, more institutional investors followed suit, reshaping the financial landscape.
Looking ahead, 2025 promises to bring exciting developments across the crypto ecosystem. Here are the top five crypto trends to watch.
Fear of being left behind
The era of bitcoin as a niche investment is over. Institutional adoption is creating a ripple effect, forcing hesitant players to reconsider. Portfolios with bitcoin allocations are consistently outperforming those without, highlighting its growing importance.
Figure 1: Bitcoin in a multi-asset portfolio
| 60/40 Global Portfolio | 1% Bitcoin Portfolio | 3% Bitcoin Portfolio | 5% Bitcoin Portfolio | 10% Bitcoin Portfolio | MSCI AC World | Bloomberg Multiverse | Bitcoin | |
| Annualised Return | 5.77% | 6.46% | 7.83% | 9.20% | 12.57% | 9.07% | 0.56% | 56.24% |
| Volatility | 8.79% | 8.86% | 9.14% | 9.62% | 11.42% | 13.94% | 5.05% | 67.28% |
| Sharpe Ratio | 0.48 | 0.55 | 0.68 | 0.79 | 0.96 | 0.54 | -0.20 | 0.81 |
| Information Ratio | 1.01 | 1.01 | 1.01 | 1.00 | ||||
| Beta | 70% | 71% | 73% | 75% | 81% | 100% | 24% | 181% |
Source: Bloomberg, WisdomTree. From 31 December 2013 to 30 November 2024. In USD. Based on daily returns. The 60/40 Global Portfolio is composed of 60% MSCI All Country World and 40% Bloomberg Multiverse. You cannot invest directly in an index. Historical performance is not an indication of future performance and any investment may go down in value.
With bitcoin’s ability to noticeably improve portfolios’ risk-return profiles, asset managers face a clear choice: integrate bitcoin into multi-asset portfolios or risk falling behind in a rapidly evolving financial landscape. In 2025, expect the competition to heat up as clients demand exposure to this powerhouse cryptocurrency.
Expanding crypto investment options
In 2024, regulatory breakthroughs opened the doors for physical bitcoin and ether ETPs in key developed markets. This marked a critical step towards making cryptocurrencies mainstream, providing seamless access to institutional and retail investors alike.
Figure 2: Global physical crypto ETP assets under management (AUM) and 2024 net flows
Source: Bloomberg, WisdomTree. 02 January 2025. Historical performance is not an indication of future performance and any investment may go down in value.
In 2025, this momentum is expected to accelerate as the crypto regulatory environment becomes more friendly in the United States and as key developed markets follow Europe’s lead and approve ETPs for altcoins such as Solana and XRP. With their clear utility and growing adoption, these altcoins are strong candidates for institutional investment vehicles.
This next wave of altcoin ETPs will expand the diversity of crypto investment opportunities and further integrate cryptocurrencies into the global financial system.
The maturing of Ethereum’s layer-2 ecosystem
Ethereum’s role as the backbone of decentralised finance (DeFi), non-fungible tokens (NFTs), and Web3 is unmatched, but its scalability challenges remain a hurdle. Layer-2 solutions—technologies such as Arbitrum and Optimism—are transforming Ethereum’s scalability and usability by enabling faster, cheaper transactions.
In 2025, Ethereum’s recent upgrades, such as Proto-Danksharding (introduced in the ‘Dencun’ upgrade), will drive layer-2 adoption even further. Innovations like Visa’s layer-2 payment platform leveraging Ethereum for instant cross-border transactions will underscore the platform’s evolution.
Expect Ethereum’s layer-2 ecosystem to power real-world use cases ranging from tokenized assets to decentralised gaming, positioning it as the infrastructure of a truly scalable digital economy.
Stablecoins: bridging finance and blockchain
Stablecoins are becoming indispensable to the global financial system, offering the stability of traditional assets with the efficiency of blockchain. Platforms such as Ethereum dominate the stablecoin landscape, hosting stablecoin giants Tether (USDT) and USD Coin (USDC), which facilitate billions in daily transactions.
Figure 3: Key stablecoin chains
Source: Artemis Terminal, WisdomTree. 05 January 2025. Historical performance is not an indication of future performance and any investment may go down in value.
As we move into 2025, stablecoins will increasingly interact with blockchain ecosystems such as Solana and XRP. Solana’s high-speed, low-cost infrastructure makes it ideal for stablecoin payments and remittances, while XRP Ledger’s focus on cross-border efficiency positions it as a leader in global settlements. With institutional adoption rising and DeFi applications booming, stablecoins will serve as the backbone of a seamless, interconnected financial ecosystem.
Tokenization: redefining ownership and revolutionising finance
Tokenization is set to redefine how we think about ownership and value. By converting tangible assets like real estate, commodities, stocks, and art into digital tokens, tokenization breaks down barriers to entry and creates unprecedented liquidity.
In 2025, tokenization will expand dramatically, empowering investors to own fractions of high-value assets. Platforms such as Paxos Gold and AspenCoin are already showcasing how tokenization can revolutionize markets for gold and luxury real estate. The integration of tokenized assets into DeFi will unlock new financial opportunities, such as using tokenized real estate as collateral for loans. As tokenization matures, it will transform industries ranging from private equity to venture capital, creating a more inclusive and efficient financial system.
For the avoidance of any doubt, tokenization complements crypto by expanding the use cases of blockchain to include real-world applications.
Looking ahead
2025 is set to be a defining year for crypto, as innovation, regulation, and adoption converge. Whether it is bitcoin cementing its position as a portfolio staple, Ethereum scaling for mainstream use, or tokenization unlocking liquidity in untapped markets, the crypto ecosystem is poised for explosive growth. For investors and institutions alike, the opportunities have never been clearer or more compelling.
This material is prepared by WisdomTree and its affiliates and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date of production and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by WisdomTree, nor any affiliate, nor any of their officers, employees or agents. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of future performance.
On January 20, 2025, bitcoin (BTC) reached a new all-time high, surpassing $109,000, and this milestone coincided with Donald Trump’s inauguration for his second term as U.S. President.
Historical trends show that BTC has performed exceptionally well in the 12 months following the past three U.S. elections. If history repeats, this could signal another bullish phase. With Trump’s pro-BTC stance and a U.S. Congress aligned on favorable digital regulation, the outlook for the coming months appears highly promising.
Source: Hashdex Research with data from Messari (from November 6, 2012 to January 19, 2025).
MARKET HIGHLIGHTS | Jan 13 2025 – Jan 19 2025
Bitcoin-backed loans enabled on Coinbase’s L2
• Now customers can borrow USDC in the new base’s lending protocol by using bitcoin as collateral.
• This underscores the importance of onchain innovations as the pillar for future adoption of blockchain technology, in this case enhancing personal finance to be more decentralized and intuitive in a permissionless etho..
ETF filings reiterate bullish regulatory tailwinds
• As Donald Trump’s inauguration approaches, several asset managers have filed applications for new crypto ETF products, including those focused on assets like LTC and XRP.
• This reflects optimism for 2025’s crypto regulations and their potential to transform the regulated products landscape.
Trump to make crypto top priority in US agenda
• U.S. President-elect Donald Trump allegedly plans to issue an executive order making crypto a national policy priority and establishing an advisory council.
• The announcement signals that crypto has gained political importance. Even if not all promises are met, crypto has already crossed the chasm.
MARKET METRICS
The Nasdaq Crypto Index™
This week saw a significant rise in digital assets as the market awaits Trump’s inauguration, with the NCI™ (+15.3%) outperforming all traditional asset classes. The NCI™ (+13.2%) also outperformed BTC (+12.1%), highlighting the value of diversification in a volatile market. The performance was positively impacted by SOL’s strong 46.3% gain, while ETH’s underwhelming 3.0% growth had a dampening effect.
Source: Hashdex Research with data from CF Benchmarks and Bloomberg (from December 31, 2024 to January 19, 2025).
It was a strong week for the NCI™ , with SOL leading the pack (among others, like XRP and LINK), surging 46.3%, while BTC (12.1%) and ETH (3.0%) lagged behind. This price action seems driven by excitement around Trump’s inauguration and the crypto-friendly environment his promises suggest.
Source: Hashdex Research with data from Messari (from January 12, 2025 to January 19, 2025).
Indices tracked by Hashdex
Source: Hashdex Research with data from CF Benchmarks and Vinter (from January 19, 2024 to January 19, 2025).
5 crypto trends to watch in 2025
FGLR ETF gör hållbara investeringar i hela världen
Trump’s inauguration day, BTC all-time high and the US election bullish effect
AXA IM antar SDR-märkningar för tre aktiefonder i Storbritannien
HSDD ETF köper aktier i hållbara företag från den utvecklade världen
De mest eftersökta ETFerna i december 2024
De bästa ETFerna för värdeaktier
Post-election rally cools at year end
BlackRock slår rekord med lanseringen av bitcoin ETF
Hector McNeil kommenterar Trumps krav på Natos försvarsutgifter
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Nyheter3 veckor sedanDe mest eftersökta ETFerna i december 2024
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Nyheter2 veckor sedanPost-election rally cools at year end
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Nyheter3 veckor sedanDe bästa ETFerna för värdeaktier
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Nyheter3 veckor sedanBlackRock slår rekord med lanseringen av bitcoin ETF
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Nyheter3 veckor sedanHector McNeil kommenterar Trumps krav på Natos försvarsutgifter
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Nyheter3 veckor sedanBuffertstrategin på Nasdaq-100 med december 2024/2025 som ny målperiod
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Nyheter4 veckor sedanValour PYTH SEK spårar priset på kryptovalutan PYTH
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Nyheter1 vecka sedanHANetfs Tom Bailey om utsikterna för koppar och uran
