Key Points
- Bitcoin outperformed major assets in September 2024, rallying 7.7% in response to the Federal Reserve’s rate cut and China’s economic stimulus measures.
- Ethereum continued to lag behind, reflecting market share loss and lower fee generation, while memecoins led gains at 31% and DeFi followed at 19%.
Bitcoin Surges as US ETFs Drive Demand
VanEck recap report for September 2024 indicates that Bitcoin reacted strongly to positive macroeconomic developments, outpacing traditional assets like Gold (+5%) and the S&P 500 (+1.7%). The cryptocurrency’s performance was bolstered by significant inflows into US-based Bitcoin ETFs, which attracted $1.2 billion in net investments. This marked a substantial rebound from August’s negative figures and approached the monthly average of $2 billion. Notably, these ETFs have now purchased more Bitcoin than has been mined since their launch, solidifying their importance in price formation.
The crypto market’s correlation with traditional finance remained strong, with Bitcoin’s 30-day average correlation to the Nasdaq rising above 0.62, reminiscent of late 2023 levels. This connection suggests that allocators may wait for a decrease in correlation before making more aggressive moves in the crypto space.
Ethereum Struggles as Layer-2 Solutions Gain Traction
While Bitcoin thrived, Ethereum continued to face challenges, with its native token ETH gaining only 3% in September. This underperformance reflects Ethereum’s declining market share and significantly reduced fee generation. The implementation of EIP-4844 in March 2024 fundamentally altered Ethereum’s economic model, creating a separate transaction layer for Layer-2 (L2) blockchains to post data cheaply. This shift has led to a collapse in Ethereum’s transaction prices, with annual revenues plummeting from $7.2 billion in March to just $1.2 billion in September.
The change in Ethereum’s strategy aims to expand its blockspace capacity for mass adoption, following a model similar to Solana’s low-cost approach. However, this pivot has challenged the narrative of ETH as a deflationary, dividend-like asset, potentially contributing to its underperformance compared to Bitcoin and other Layer-1 protocols.
Gaming and Layer-1 Protocols Show Promise
Amidst the broader market movements, gaming-oriented blockchain tokens and certain Layer-1 protocols demonstrated notable growth. Immutable (IMX), a gaming-focused crypto project, gained 36% market share against competitors like APE, BEAM, and FLOW. The platform’s zkEVM blockchain reached 3 million monthly active users, a milestone achieved faster than many other Layer-2 solutions.
Meanwhile, NEAR Protocol (NEAR) saw a 30.9% increase over the last 30 days of September, driven by technical improvements and strategic user growth initiatives. The implementation of Nightshade 2.0, a key scalability upgrade, and partnerships in the AI sector contributed to NEAR’s strong performance.
As the crypto market continues to evolve, the interplay between established players like Bitcoin and Ethereum and emerging protocols focused on gaming, AI, and scalability solutions will likely shape the industry’s trajectory in the coming months.
