December 2024: Crypto Takes a Breather After Roaring Year
Research Team
Last Updated: 1/6/2025 | 14 min. read
Crypto valuations declined in December after stronger returns earlier in the year. The pullback may have reflected more hawkish signals from the Federal Reserve. The last two Bitcoin bull markets featured many drawdowns of a similar magnitude.
In early January, the Senate will consider President-elect Trump’s nominees for Treasury Secretary, Commerce Secretary, SEC Chair, and CFTC Chair.
Traditional markets had mixed results to close the year (Exhibit 1). The U.S. Dollar increased in December, and interest rates increased across the yield curve. Guidance from the Federal Reserve that it would slow the pace of rate cuts in 2025 likely contributed to the moves in both currency and bond markets. Broad equity indexes declined, led by cyclical market segments. Large-cap tech stocks — represented by the Bloomberg Magnificent 7 Index — were an exception, posting gains in December and strong returns for the year as a whole. Bitcoin declined moderately, and returns were in the middle of the pack on a risk-adjusted basis (i.e., accounting for each asset’s volatility). The FTSE/Grayscale Crypto Sectors Market Index (CSMI) declined by 6% in December, giving back about 15% of its gain from November 2024.
Exhibit 1: Crypto returns were in middle of the pack on risk-adjusted basis
Exhibit 3: Surge in demand for U.S.-listed spot crypto ETPs
Exhibit 4: Ether underperformed Bitcoin in December and 2024 as a whole
Ultimately, 2024 was a monumental year for digital asset markets: the new spot Bitcoin and Ether ETPs brought more investors into the crypto ecosystem, the Bitcoin network experienced its fourth halving event, researchers made breakthroughs in new blockchain applications technologies, and crypto featured prominently in the U.S. election. Although some of the specific themes will change, we expect no shortage of excitement for crypto investors in 2025.
Beyond politics, crypto markets seem likely to be driven by their usual fundamentals: adoption of Bitcoin as an alternative money medium around the world, demand for next-generation decentralized web applications, and the macro market factors, like changes in central bank monetary policy that affect the valuations of all assets. Although the outlook is uncertain, in our view, many industry trends look favorable at the start of the new year.
Index Definitions:
The Bloomberg Magnificent 7 Total Return Index (BM7T) is an equal-dollar weighted index that tracks seven of the most widely-traded companies in the United States. The S&P 500 Industrials comprises those companies included in the S&P 500 that are classified as members of the GICS industrials sector. The Bloomberg-Barclays 25y+ Treasury index measures the total return of nominal US Treasury bonds with a remaining maturity greater than 25 years. The U.S. Dollar Index (DXY) tracks the strength of the dollar against a basket of major currencies. The Russell 2000 Index is composed of the smallest 2000 companies in the Russell 3000 Index, representing approximately 8% of the Russell 3000 total market capitalization. The S&P Goldman Sachs Commodity Index (S&P/GSCI) is a composite index of commodity sector returns representing an unleveraged, long-only investment in commodity futures that is broadly diversified across the spectrum of commodities. The FTSE/Grayscale Crypto Sectors family of indexes measure the price return of digital assets listed on major global exchanges. The Nasdaq 100 Index is a stock index of the 100 largest companies by modified market capitalization trading on Nasdaq exchanges.
[1] Source: Bloomberg, Grayscale Investments. Data as of December 31, 2024.
[2] Source: Artemis. Data as of December 31, 2024.
[3] Source: Coin Metrics. Data as of December 31, 2024.
[4] Source: Coin Metrics. Grayscale Investments. Data as of 12/31/2024. Past performance not indicative of future results.
[5] Source: Bloomberg, Grayscale Investments. Data as of December 31, 2024.
[6] Investopedia, data as of December 23, 2024. Michael Saylor “called MicroStrategy a bitcoin treasury operations company.”
[8] Source: Bitcointreasuries.net, Bloomberg, Grayscale Investments. Data as of December 31, 2024.
[9] The spot Bitcoin ETPs had a net inflow of $16.5bn during Q4, valued at the time of the inflow. The increase in the ETPs’ Bitcoin holdings during Q4 valued at year-end prices was $18.6bn. Source: Bloomberg, Grayscale Investments. Data as of December 31, 2024.
[11] Artemis, FTSE, Grayscale. As of January 6, 2025.
[12] Artemis, FTSE, Grayscale. As of January 6, 2025.
[13] Artemis, FTSE, Grayscale. As of January 6, 2025.
[14] Dexscreener. As of 1/2/2025
