Author: Grayscale Source: Grayscale Research Translation: Shan Oppa, Golden Finance

• In the fourth quarter of 2024, the crypto market skyrocketed significantly, a trend that can be confirmed by the FTSE/Grayscale Crypto Industry Index family. The market's rise mainly reflects the positive reaction to the results of the USA elections.

• The competition among smart contract platforms is fierce; while Ethereum remains the leader in this field, its performance is inferior to that of the second-largest Market Cap, Solana. At the same time, investors are increasingly paying attention to other alternative Layer 1 networks, such as Sui and The Open Network (TON).

• The Grayscale research team updated the list of Top 20 Assets, which covers a diverse range of assets in various sectors of the crypto industry. We believe these assets have high potential for the upcoming quarter. New assets added this quarter include HYPE, ENA, VIRTUAL, JUP, JTO, and GRASS. It should be noted that the prices of these assets are highly volatile and the investment risk is relatively high.

• The Grayscale Crypto Industry Index system provides a comprehensive framework that helps to understand the investable digital assets and the underlying technological principles. Based on this framework, Grayscale collaborated with FTSE Russell to develop the FTSE Grayscale Crypto Industry Index series to measure and monitor the categories of crypto assets. Grayscale Research incorporates these indices into ongoing analysis of the digital asset market.

In the fourth quarter of 2024, the valuation of the crypto market surged, primarily due to the positive market reaction to the USA election results. According to the Comprehensive Crypto Market Index (CSMI), the total Market Cap of the crypto industry grew from 1 trillion dollars to 3 trillion dollars in that quarter.

Comparing the Market Cap of the crypto market with traditional public and private market asset classes, the current market size of the digital asset industry is equivalent to the bond market linked to global inflation, more than twice that of the USA High Yield Bond market, but still significantly smaller than the global hedge fund industry or the Japan stock market.

As market valuations increase, many new tokens meet the inclusion criteria of the crypto industry framework (most assets have a minimum market cap requirement of $0.1 billion). In this quarter's rebalancing, we have added 63 new assets to the index series, which now covers 283 tokens.

Consumers and cultural crypto industry have the most new tokens, reflecting the continued strong returns of memecoins and the appreciation of assets related to gaming and Social Media. The largest asset added this quarter by market cap is the Ethereum Layer 2 protocol Mantle, which has now met our minimum liquidity requirements.

Competition Landscape of Smart Contract Platforms

Smart contract platforms may be the most competitive market sector in the digital asset industry. Although 2024 is an important year for Ethereum—having received approval for spot Exchange Traded Products (ETPs) in the USA and completed major upgrades, Ethereum (ETH) has underperformed compared to competitors like Solana.

Investors are also looking at other Layer 1 networks, including the high-performance blockchain Sui and the TON blockchain integrated with Telegram.

In building infrastructure for application developers, designers of smart contract blockchains face various design choices that affect the 'blockchain trilemma': network scalability, security, and decentralization. For example, blockchains that prioritize scalability typically exhibit high throughput and low transaction fees (like Solana), while those that prioritize decentralization and security may have lower throughput and higher fees (like Ethereum).

Regardless of the design, the value of a Smart Contract platform primarily comes from its ability to generate network fee income. Fee income is often seen as the main driving force behind the appreciation of blockchain tokens in the market, although total locked value (TVL) and other indicators are also important. Data shows a significant statistical relationship between fee income and platform Market Cap.

This quarter's Grayscale Research Top 20 includes the following Smart Contract platforms:

• Ethereum (ETH)

• Solana (SOL)

• Sui (SUI)

• Optimism (OP)

Grayscale Research Top 20 Asset List

Every quarter, the Grayscale research team analyzes hundreds of digital Assets to guide the rebalancing process of the FTSE/Grayscale Crypto Industry Index family. Subsequently, we will publish a list of the Top 20 Assets in the crypto industry that have high potential for the next quarter.

This quarter, we are particularly focused on the following three major market themes:

1. The USA elections and their potential impact on regulation in areas such as DeFi and staking;

2. The ongoing breakthroughs in decentralized AI technology and the trend of AI agents using blockchain;

3. The continued growth of the Solana ecosystem.

In this context, the six new Assets added this quarter include:

• Hyperliquid (HYPE): A Layer 1 blockchain focused on supporting on-chain financial applications, primarily serving as a fully on-chain perpetual contract decentralized Exchange (DEX).

• Ethena (ENA): Ethena has launched a new type of stablecoin called USDe, primarily backed by hedged positions in Bitcoin and Ethereum.

• Virtual Protocol (VIRTUAL): A protocol built on the Ethereum Layer 2 network Base that allows for the creation and co-ownership of tokenized AI agents.

• Jupiter (JUP): The largest DEX aggregator on Solana, with the highest TVL among all applications on Solana.

• Jito (JTO): A liquidity staking protocol on Solana that generated over $0.55 billion in fee income in 2024.

• Grass (GRASS): A decentralized data network that allows users to share idle bandwidth via a Chrome extension, with the bandwidth being sold to AI companies for training machine learning models.

These assets represent the sectors with the greatest growth potential and innovation in the crypto industry, providing investors with diversified choices.

Note: Shadows indicate new assets coming in the upcoming quarter (Q1 2025). *Asterisks denote industries of assets not included in the cryptocurrency industry index. Source: Artemis, Grayscale Investments. Data is as of December 20, 2024. For illustrative purposes only. Assets may change. Grayscale, its affiliates, and clients may hold positions in the digital assets discussed here. All assets in our top 20 list exhibit high price volatility and should be considered high risk.

In addition to the new themes mentioned above, confidence remains high in areas previously focused on in earlier quarters, such as Ethereum scaling solutions, asset tokenization, and decentralized physical infrastructure (DePIN). These themes are also reflected in this quarter's Top 20, including ongoing selections of protocols like Optimism, Chainlink, and Helium, representing leading positions in these tracks.

This quarter, we removed projects like Celo from the Top 20. Although the Grayscale research team still recognizes these projects' value and considers them important components of the crypto ecosystem, we believe the adjusted Top 20 asset portfolio may offer more attractive opportunities in the coming quarter.risk-return ratio.。

Investing in crypto asset classes involves risks, some of which are unique to crypto assets, including smart contract vulnerabilities and regulatory uncertainties. Additionally, all assets in our Top 20 list have high volatility and high risk and may not be suitable for all investors. Therefore, when considering investing in digital assets, investors should comprehensively assess potential risks in conjunction with their own portfolios and financial goals.

Index definition:

The FTSE/Grayscale Crypto Industry Index (CSMI) measures the price returns of digital assets listed on major global exchanges.

Notes:

[1] As of December 20, 2024, the total market index of Crypto Sectors increased by 58% this quarter. Data source: FTSE, Grayscale Investments.

[2] Data source: FTSE, Grayscale Investments, as of December 20, 2024.

[3] Data source: FTSE Russell, as of December 20, 2024.

[4] Data as of December 20, 2024.

[5] USDe collateral may include other liquidity strong stablecoins.

[6] Bitget.