Banana Capital: Web3 Market Report for Q4 2024
Contents
- Key Events in the Crypto Market: 4–14
- DeFi Ecosystem Analysis: 15–20
- Venture Market Analysis: 21–24
- Latest Company News: 25–29
- Information About Banana Capital: 30–34
Disclaimer
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Banana Capital: Key Events in the Crypto Market
Results of the U.S. Elections
Donald Trump’s victory in the November 2024 presidential elections led to a rapid market surge: BTC rose by 48%, ETH by 63%, and the overall market capitalization increased by 60%.
Key Reasons:
- Changes in cryptocurrency industry regulations.
- Increased inflow of funds into ETFs.
- Discussions about the possibility of recognizing Bitcoin as a U.S. reserve asset.
A detailed analysis of each reason is provided in the following sections.
Advancements in Crypto Market Regulation
Gary Gensler, the SEC Chairman and a proponent of strict cryptocurrency regulation, announced his resignation effective January 20, 2025. He will be succeeded by Paul Atkins, known for his connections to the blockchain industry and involvement with The Digital Chamber. Under his leadership, the SEC is expected to adopt a more favorable stance toward cryptocurrencies.
Donald Trump has also appointed David Sacks as the “Czar of AI and Digital Assets.” Sacks, renowned for his investments in crypto startups, will develop the regulatory framework and oversee the Presidential Council on Science and Technology.
These appointments, along with the support for cryptocurrencies from other elected officials, have become a pivotal event for the industry, even more significant than ETF approvals.
Note: “Czar” is an informal title for a position responsible for key policy initiatives.
How Trump’s Presidency Impacts the Industry
Regulatory changes have already led to the announcement of major crypto conferences, such as Solana’s Breakpoint and Token2049, being hosted in the U.S. next year.
Additionally, crypto companies like Circle, ConsenSys, and Chainalysis are expected to go public in 2025, further strengthening the integration of the crypto industry with traditional finance.
However, these IPOs might reduce the value of altcoins overvalued by retail investors, as public companies will be assessed based on strict market metrics. In such conditions, it is crucial to hold assets in your portfolio that generate real cash flows and capture value through tokens. Examples of such projects were highlighted in our Q3 2024 analysis of the best crypto projects on the market.
Bill to Establish a Strategic Bitcoin Reserve
U.S. Senator Cynthia Lummis has introduced the “Bitcoin Act of 2024” to Congress, proposing the creation of a strategic reserve in the world’s first cryptocurrency.
The approval process could take 6 to 12 months and involves committee review, votes in both chambers, reconciliation of differences, and final approval by President Donald Trump.
If passed, the U.S. would begin purchasing 200,000 bitcoins annually over five years, marking an unprecedented step that would solidify Bitcoin’s role in the global financial system.
As the likelihood of this bill’s approval grows, other countries may act preemptively, ramping up their Bitcoin reserves to avoid losing their foothold in this emerging asset class.
Inflows into BTC-ETF
Following the U.S. elections, spot BTC ETFs recorded record net inflows of $6 billion. According to the Q3 2024 13F report, the number of organizations holding BTC ETFs increased by 1%, reaching 25%. It is expected that after the November rally, this figure will exceed 30%.
Why is this important?
- ETF approval requires large institutional players, such as banks, hedge funds, and pension funds, to conduct internal due diligence, which typically takes 8–12 months. As a result, 75% of current inflows come from retail investors rather than institutions.
- Inflows from institutional investors could push Bitcoin’s price to the $125.000–$150.000 range, with trading volumes surpassing 2024 levels.
- The increasing share of institutional investors will reduce Bitcoin’s volatility, making it a more stable and attractive asset for long-term portfolios.
Inflows into ETH-ETF
Since the launch of spot Ethereum ETFs, record inflows of $2.2 billion have been recorded since November, driving ETH returns up by 62%.
This quarter marked a turning point for Ethereum: after the failed summer ETF launch (with outflows of $162 million), attention shifted to whether the asset could attract interest post-elections. As shown in the chart, inflow data confirms growing interest from institutional and retail investors.
Currently, 14% of ETH ETF inflows come from institutional investors. Similar to BTC ETFs, they require 8–12 months for due diligence, after which investment growth is anticipated.
This is particularly crucial for Ethereum, as it faced technical challenges and a loss of market share to competitors (Solana, Sui, TON) this year. If inflows fail to remain stable over the next two quarters, it could signal a need to reduce Ethereum’s allocation in portfolios.
Record Daily Fees on the Solana Blockchain
On November 21, Solana’s price exceeded $250, a level not seen since December 2021. The surge was driven by record network fees, as shown in the chart, which reached $9.3 million, placing Solana first among all cryptocurrencies, surpassing Ethereum.
Applications for spot ETFs based on Solana, including initiatives by Bitwise, have also been submitted. Considering the appointment of David Sacks, an early investor in Solana, to a key regulatory position in cryptocurrency, these applications might be approved in 2025.
In March 2025, liquidators of the bankrupt FTX exchange will begin receiving their SOL tokens for subsequent sale. This could lead to a short-term increase in market supply and add selling pressure on SOL’s price. However, the positive news surrounding Solana and potential ETF approvals may help balance the excess supply.
More precise network data will become available after the wave of popularity around memecoins subsides. A critical moment for reassessing Solana’s portfolio share will be Q1 2025, when a decline in memecoin interest provides a clearer picture.
The Race for the RWA Market: Tether vs Goldman Sachs
The market for tokenized assets (RWA) is becoming a key focus for major players. According to Ark Invest’s projections, it could grow from the current $130 billion to $30 trillion by 2030, attracting more and more companies.
In early December, Tether launched the Hadron platform for the fast tokenization of assets across different blockchains. It provides tools for regulatory compliance and risk management, streamlining the process into four steps.
In response, Goldman Sachs spun off its GS DAP platform into a separate company that will focus on trading and tokenizing financial instruments, as well as functioning as a marketplace for secondary transactions.
Direct participation in the growth of the RWA segment is still challenging, as there are not many large and promising crypto projects open for investment at the moment. An exception is Chainlink, which is actively working in this segment. Additionally, we are indirectly betting on leaders in DeFi, which provides the infrastructure and liquidity for tokenized assets.
Banana Capital’s Vision for 2025: Ethereum’s Prospects
Our outlook for Q1 2025 suggests that Ethereum will reach the $5,000 mark and outperform its main competitor, Solana, in terms of returns. The key growth drivers are:
- Inflows into ETH-ETF: After the failed product launch and outflows of $556 million over the past four months, inflows of $2.8 billion have been recorded for the first time since November.
- Change in the trend regarding Solana and Bitcoin: The dynamics of ETH’s price relative to its key competitor, Solana, show a turning point, signaling Ethereum’s strengthened position.
- Increased network activity: Since November, around $20 billion in stablecoins have been issued within the Ethereum ecosystem, and the number of active users has grown by 16%.
- Support from Trump’s project: Donald Trump is purchasing Ethereum and related assets (AAVE, LINK, and others), which further attracts investor attention and boosts confidence in ETH’s long-term prospects.
Q4 2024 Recap
This period has been one of the most significant in the history of the crypto industry, surpassing the impact of the approval of spot Bitcoin and Ethereum ETFs earlier in the year. The new regulatory policy opens access to funding for startups from major financial centers and stimulates innovation that was previously constrained by the SEC’s strict frameworks.
The market’s immediate response: Bitcoin reached $100.000, and the altcoin sector grew by 80% in just a few weeks. We expect Bitcoin’s share to continue decreasing to 40–45% in the coming quarters, driving altcoin growth.
Institutional interest in Bitcoin ETFs is also rising. Currently, 25% of inflows come from institutional investors, and this figure could increase to 30–40%, strengthening the integration of cryptocurrencies into traditional portfolios and increasing trust among major players.
Support for local initiatives in the U.S. and a new wave of institutional inflows into ETF products create favorable conditions for further market growth. We forecast a market capitalization of $6–8 trillion by mid-next year.
Banana Capital: DeFi Ecosystem Analysis
TVL in the DeFi Ecosystem Approaching the 2022 Peak
The total value locked (TVL) in the DeFi ecosystem has reached $291 billion, nearing historical highs in 2022. The daily trading volume is also impressive, amounting to $10.89 billion.
Trading Volume and Locked Liquidity on DEX
In November, a record trading volume was recorded on decentralized exchanges (DEX), reaching nearly $200 billion, with around 45% attributed to Uniswap. By the end of the year, the total trading volume on DEXs reached its historical peak, even without accounting for December’s data.
This indicates that interest in decentralized exchanges has remained high throughout the year. However, considering the increased volatility of assets, additional costs for rebalancing and hedging positions have arisen in our flagship DeFi strategy.
At the same time, the total value locked (TVL) on DEXs in Q4 could not surpass the record levels previously set in 2024. Nevertheless, we see sustained interest from market participants providing liquidity on DEX platforms.
Renaissance in the DeFi Market
The sharp rise in tokens linked to DeFi is a testament to the high attractiveness of assets with clear cash flow. While waiting to establish a clear legal framework for this sector, many DeFi assets have shown significant growth: AAVE rose by 169%, and Uniswap (UNI) by 162%.
These results can be explained by the fact that the DeFi sector is one of the few that is genuinely generating substantial cash flow, with the potential for multiple growth over the next five years. Expected regulatory support could eliminate previous obstacles, such as those imposed by entities like the SEC, and provide a transparent legal framework for DeFi projects. This, in turn, will create conditions for capturing the value generated by these projects through their tokens.
Number of Active Loans in the DeFi Ecosystem
One of the key indicators of the DeFi industry’s health is the number of active loans, which reflects the level of trust retail users have in the market.
We are still approaching the peak levels of the previous cycle. Given the growth in the number of new users and the increase in liquidity not only in DeFi but across the entire crypto market, these numbers should be significantly higher. According to forecasts from the segment leader, the AAVE protocol, the volume of active loans could reach $1 trillion by the end of 2025.
AAVE remains the undisputed leader in the sector. This protocol, which we analyzed in detail in our summer analytical report, holds a key position in the DeFi segment.
Liquidity Providing Strategy in DeFi Protocols
At Banana Capital, we employ a strategy of providing liquidity in DeFi protocols. The returns are generated by receiving a portion of the trading fees from transactions executed on decentralized exchanges. This strategy allows us to generate stable returns even in conditions of high volatility – our results are not dependent on the direction of the crypto market.
Unlike traditional methods, we use hedging to protect positions, ensuring stability and consistent returns. As a result, we address the issue of the depreciation of the underlying asset placed in the liquidity pool.
Примечание для дизайнеров: На слайде показываем график роста доходности:
Strategy Yield for Q4 2024
The overall yield of this strategy reached 3.97% for Q4 2024:
- October 2024 – 1.21%.
- November 2024 – 1.86%.
- December 2024 – 0.9%.
Currently, the strategy actively involves increasing the base asset in ETH. For more detailed information about the strategy, please get in touch with our manager: https://t.me/bananacap_bot
Banana Capital: Venture Market Analysis
Key Trends Among Venture Funds in Web3
In the current bull market, there has been a decrease in venture capital activity compared to previous cycles. The main issue is the lack of innovation in business models and the shortage of new promising projects.
However, since the beginning of the year, venture investors have invested over $11 billion in crypto projects. The largest investments occurred in October, totaling $2.46 billion. Analyzing the latest venture investments, we can predict which directions will attract investor interest in the near future and which projects to watch.
Our analytics team reviewed investments from the 10 largest funds over the past summer and analyzed which Web3 sectors they are investing in the most. The top funds have shown the most interest in infrastructure projects, blockchain services, DeFi, and Web3 games, indicating strong prospects for these sectors. For more detailed statistics, check out our article.
Largest Venture Deals in Q4 2024
- Praxis Society – Raised $525 million. Investors: GEM Digital, Manifold, Arch, and angel investors.
This is a community for future residents of a virtual city whose creators aim to bring together active participants, ranging from company founders and investors to creative individuals.
- 0G Labs – Raised $290 million. Investors: Delphi Ventures, Animoca Brands, OKX Ventures, SamsungNext, Alchemy, and others.
This platform is developing an AI-powered modular blockchain that enhances the capabilities of decentralized applications (dApps). Their technology allows seamless integration of AI functionality into blockchains, simplifying the development of complex dApps.
- Blockstream – Raised $210 million. Investor: Fulgur Ventures (Lead).
The company develops cryptocurrency products, including new infrastructure for the financial system, specifically Bitcoin sidechains and related applications. Key developments include the implementation of the Lightning Network protocol.
- Public – Raised $135 million. Investor: Accel (Lead).
This investment platform helps participants create portfolios from fractional assets, ranging from stocks, ETFs, and cryptocurrencies to NFTs, art, and collectibles.
Portfolio Overview: Ditto Network
In Q4 2024, we invested in the Ditto Network project during its seed round. The investment amount and participants in the round have not yet been disclosed.
Ditto Network is a platform for automating blockchain transactions, allowing users to set conditions for their activation. Transactions are executed automatically when specific parameters, such as asset price, time, or other indicators, are met.
The project simplifies the task of safely and reliably executing deferred transactions. Using ZK–proof technology, a single computer can verify that multiple computers have correctly executed a program. Ditto addresses many existing issues, enabling connections to any application and automating any workflow within the blockchain sector.
Banana Capital: Latest Company News
Arbitrage Strategy in the Stock Market
In this strategy, we leverage the inefficiencies in the stock market. The strategy allows us to generate returns on dollar-denominated capital while remaining market-neutral. Thus, arbitrage is a trading strategy that enables risk-free profit by simultaneously buying and selling assets on different markets, where price discrepancies create profit opportunities.
The advantage of this strategy lies in our neutral position, meaning we are not dependent on price fluctuations of assets in the market. Essentially, we act as “market makers,” eliminating inefficiencies and bringing assets to a unified price.
Strategy Yield for Q4 2024
The overall yield of this strategy reached 5.79% for Q4 2024:
- October 2024 – 3.67%.
- November 2024 – 1.92%.
- December 2024 – 0.2%.
For more detailed information about the strategy, please get in touch with our manager: https://t.me/bananacap_bot
Launch of Our YouTube Channel and Podcast Series
We are excited to announce the launch of our YouTube channel and a new podcast series covering the latest topics in economics, Web3, investment, and financial markets.
Our first guest was Irina Akhmadullina, an experienced investor with over 10 years of expertise, a PhD in economics, and the host of the popular Russian investment show “Money Never Sleeps.”
In the second episode, our guest was Alexander Kubyshkin, founder of the investment company Enfilade Capital, investor, business angel, holder of a Master’s degree in finance from the Stockholm School of Economics (Sweden), and a Chartered Financial Analyst (CFA).
Together with our CEO, Vlad Alexandrov, they discussed the key trends and most pressing topics in the world of finance and investment. Subscribe to our YouTube channel and turn on notifications so you don’t miss new episodes!
Articles About Us in Major Media
An article has been published in the renowned Russian business publication RBC Crypto, where the founder of the fund, Dinar Faskhutdinov, shared insights on how decentralized finance (DeFi) has rewritten the rules of the market and the untapped potential of the DeFi sector. You can read more detailed market analysis on RBC Crypto.
Additionally, Dinar Faskhutdinov announced that Banana Capital plans to increase its fund size to $100 million with an updated DeFi strategy incorporating AI. More information about the strategy and the company’s plans can be found in major international media outlets such as Investing.com, Business Insider, APNews, MarketWatch, Morningstar, Benzinga, ADVFN, Binance, TradingView, Street Insider, as well as on our website.
Comment from Dinar Faskhutdinov: “To succeed in DeFi, a deep understanding of the market’s specifics, risk management, and effective liquidity handling are essential. With our years of experience and successful results, Banana Capital is the perfect partner for navigating this new financial world.“
Fund’s Participation in Cryptocurrency Conferences
The fourth quarter of 2024 was a busy and productive period for our fund. Our CEO, Vlad Alexandrov, spoke at several cryptocurrency conferences:
- October 5–6: Coincraft 2024 Conference in Moscow.
- October 14: BTC Talk 4 Forum in Kazan.
- October 15–16: Kazan Cryptoforum in Kazan.
Additionally, our founder, Dinar Faskhutdinov, attended the world’s largest cryptocurrency events, providing exclusive reports straight from the venues:
- October 22–23: Blockchain Life 2024 in Dubai.
- October 30–31: Binance Blockchain Week 2024 in Dubai.
These conferences allowed us to strengthen relationships with key partners and discuss the industry’s future with market experts. We are grateful to everyone who joined us at these events and look forward to future meetings!
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For more detailed information, please get in touch with our manager: https://t.me/bananacap_bot
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