VanEck Crypto Monthly Recap for November 2024

Please note that VanEck may have a position(s) in the digital asset(s) described below.

November 2024 will be remembered as a pivotal month in digital asset history after the re-election of Donald Trump and his proposed appointment of a half dozen pro-crypto cabinet members. Memecoins led the rally, surging +95% in November, while the MV Equal Weighted 100 Index (+71%) saw rare outperformance. Previous cycle favorites such as Cardano (+201%), Ripple (+225%), Polkadot (+121%), and Stellar (+477%) posted extraordinary gains as retail investors returned to their Coinbase accounts. Ethereum (+43%) and Bitcoin (+37%) continued to climb on the back of increased on-chain activity and evolving technical roadmaps.

• Ethereum Update and New Roadmap
• Solana Update
• Notable Performers – Cardano, Polkadot

The favorable post-election regulatory environment in the U.S. has sparked several notable pivots: Binance revealed plans for a high-yield stablecoin, while Consensys, a major Ethereum contributor, announced a token launch for its L2 blockchain in Q2 2025. Ethena announced it will implement a fee switch to provide its ENA token holders with direct distributions of revenues from its application. This move has prompted speculation that other DeFI protocols will follow Ethena’s lead, given the improved regulatory environment. For example, L2 projects such as Arbitrum and Starknet proposed enabling native token staking to reward holders.

After years of regulatory uncertainty discouraging value-accrual mechanisms, many projects clearly feel emboldened by the U.S. government’s expectations of reduced enforcement actions.

Price Returns

Source: Bloomberg as of 11/29/2024. Past performance is no guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

Ethereum Update and New Roadmap

Ethereum Blob Space Shows Life

Source: Dune @Hilldobby as of 11/26/2024. Past performance is no guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

ETH (+43%) had a solid month of performance and retraced some of its relative underperformance against BTC (+38%). This performance was catalyzed by a pick-up in on-chain activity and the release of a refined technical roadmap. While Ethereum’s revenues from its execution layer were up (+43%) month to month, reaching $6.4M per day, usage of Ethereum’s “Blobspace” showed even more dramatic progress.

Blobspace, Ethereum’s data availability layer, is finally receiving the consistent demand necessary to make it a viable “business” for Ethereum. In November, Ethereum recorded the highest Blobspace monthly fees at around $2.7M. While the number is miniscule next to Ethereum’s execution layer revenue, which was $170M, we think the growth is encouraging.

As a reminder, Ethereum created a special “layer” on its blockchain, allowing Ethereum L2 blockchains to post proofs of each chain’s activity. This is necessary because Ethereum L2s are run on a “sequencer” that does not have many of the safety properties of Ethereum. Because L2s do not have a series of validators checking to make sure each is being honest, but instead a sole sequencer, they need to post proofs of transactions to Ethereum. To encourage scaling, Ethereum decided to make a separate layer that allows L2s to post data to prove honest activity on each L2 cheaply. While this decision scales Ethereum by allowing for cheaper L2 transactions, it has been controversial with some investors because it lowers the demand for ETH to utilize Ethereum.

Ethereum prices Blobspace similarly to how it prices Blockspace, with the cost of using Ethereum related to “target” demand. Just like Blockspace, if utilization of Ethereum’s Blobspace exceeds the target, the cost to L2s goes up exponentially, with each block increasing by 12.5% per consecutive period of usage exceeding the target. In that sense, the costs to L2s to use Blobspace can increase very quickly.

Blobs Posted Have Increased the Limit of 3 Per Block

Source: Dune @Hilldobby as of 11/27/2024.

However, L2s have been utilizing mechanisms to increase their Blobspace efficiency. L2s now use the entirety of each blob’s data before posting, which decreases the total number of blobs they must post. L2s are also working on methods to further compress their transactions' size, in bytes. For example, the “optimistic” L2s Arbitrum, Base, and Optimism have reduced the data they post per transaction by (-5%), (-37%), and (-67%), respectively, since June 2024. In November, Starknet announced its compression techniques could reduce the amount of data posted by 5x. These choices will result in lower fees paid to Ethereum (revenue from the standpoint of Ethereum and fees from the standpoint of L2s). One class of L2s, called “optimistic” roll-ups, could further increase data-saving by becoming “zero-knowledge” roll-ups.

Because L2s are constantly reducing the data they post to Ethereum to counteract the increase in L2 activity, Ethereum Blobspace usage is hovering right around its target. However, with more than 58 L2 roll-ups posting data to Ethereum and that number growing, any meaningful increase in activity may cause Blobspace demand to surpass the target usage. Already, the number of transactions created by major Ethereum L2s has grown (+263%) over the past year alone. If this trend continues, we could see even data posting pressures that will offset L2 countermeasures and lead to much higher prices for Ethereum Blobspace.

Daily ETH and Major L2s Transactions Reach New Highs

Source: Dune @Hilldobby as of 11/27/2024. Past performance is no guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

Justin Drake Releases New Ethereum Roadmap

Though it took some time, the Ethereum community finally prodded the “devs to do something” to spur more positive sentiment for ETH. As previously noted, ETH’s price has underperformed in both absolute and relative terms year to date. In November, one of the most important figures in Ethereum, Justin Drake, asserted a concrete vision for Ethereum that includes specific dates for development releases. Called “Beam Chain,” Drake’s vision is a substantial overhaul for Ethereum. Some of the most important features are:

1. 4-Second Block Production and 12-Second Finality
2. An Ethereum zk Virtual Machine
3. Lowered Staking Requirements
4. Quantum-Computing Resistant Cryptography
5. Reduce Centralization Factors

Speeding up block time and finality is important because it enables a quicker feedback loop for Ethereum users. Justin Drake’s new vision is a massive improvement for Ethereum, which currently has block times of 12 seconds and finality of 13 minutes. One of the biggest drawbacks of Ethereum compared to newer blockchains is that performing on-chain activity takes much more time. Ethereum’s new speed will also enable new types of applications and quicker interactions between its L2s and the network.

The second point is perhaps the most ambitious and potentially impactful of Drake’s Beam Chain vision. Installing a zk Ethereum Virtual Machine (EVM) could increase Ethereum’s throughput by 1000x or more. This is possible because an Ethereum zk Virtual Machine would create very large blocks (one block with many transactions). In a zk EVM environment, validators could build very large blocks and only send a fraction of the block’s data for other validators to confirm. This should also lead to even faster block times while enabling validators to differentiate based on their ability to process large blocks.

ETH/BTC Ratio Holds 0.3x

Source: Artemis XYZ as of 11/26/2024. Past performance is no guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

Lowered staking requirements are fascinating because they enable decentralization while creating the potential for larger validators to process many more transactions. This would lead to different tiers of validators, with lower-tier ones simply verifying the authenticity of blocks.

Meanwhile, Drake’s focus on quantum computer-resistant cryptography and centralization reduction will help make Ethereum viable in the long term. Quantum computers promise to break Ethereum’s cryptography, which protects its entire blockchain, and Drake’s plan will navigate this challenge by implementing new protections. On the second point, Drake intends to create a set of incentives and rules to make the Ethereum block-building ecosystem less concentrated in a few powerful entities. At the time of writing, around 88% of all blocks are built on Ethereum by two entities. Over the long run, these producers can be persuaded by legal or financial incentives to censor transactions. So, it is in Ethereum’s best interest to expand its set of blockbuilders.

Perhaps the most important takeaway for ETH investors is that the Ethereum Foundation, Ethereum's research and implementation backbone, is now focused on scaling Ethereum’s execution environment. Previously, Ethereum was more focused on scaling its system through L2s. As we previously mentioned, the flaw with that design is that it siphons blockchain activity away from Ethereum’s Mainnet. Activity on L2 reduces the demand for Ethereum users to consume ETH, and part of ETH’s economics (token go up) is driven by these users.

Mainnet Fees in ETH (100-Day Moving Average)

Source: Artemis XYZ as of 11/26/2024. Past performance is no guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

Besides reducing demand for ETH, activity on L2s remits transaction fees to L2 sequencers. These sequencers are run by L2 teams who must return capital to investors and drive value to their own tokens. Therefore, they are more likely to sell the collected ETH than ETH validators. Most importantly, however, L2 base fees are not burned on L2s as they are on Ethereum. Thus, substantial amounts of value accrual to ETH are lost because there is less buying pressure, more selling pressure, and less burn of ETH supply.

While Ethereum’s focus on bringing more activity to its mainnet is promising, the slow rollout of updates in Justin Drake’s roadmap raises some concerns. Upgrading a $400B blockchain understandably takes time, but a quicker pace is crucial to maintain competitiveness. With the proposed changes spanning until 2029, Ethereum risks losing ground to emerging blockchains with superior technology. Moreover, many planned updates rely on existing technologies, making their delayed implementation particularly frustrating for some in the community. Ethereum’s ultimate goal, or "North Star," is to rival Bitcoin as the world’s most important digital asset. Achieving this requires "ossification"—a finalized state with immutable economics. The sooner Ethereum reaches this state, the better positioned it will be to outcompete BTC (if that is the goal).

Solana Update

Solana Memecoin Mania Continues

Source: Artemis XYZ as of 11/27/2024. Past performance is no guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

In November, Solana produced another stellar month with returns of (+42%), with the SOL token reaching an all-time high of $262. The positive price action was partly driven by the exceptional on-chain trading activity of memecoins. Thus, Solana's revenues and DEX volumes hit monthly all-time highs in November. In fact, Solana’s $177M in revenues generated in November is double the previous high recorded in October 2024 of $74M. The flurry of on-chain activity also translated into record revenue levels for the important Solana MEV project Jito and memecoin application Pump.fun. In November, Jito made $185M in revenues while Pump.fun earned over $92M in revenues. While Pump.fun takes revenue directly from memecoin trading on its application, Jito earns fees when MEV occurs on validators who run Jito’s software.

As a reminder, MEV, or “maximal extracted value,” is the total value generated by arbitrage opportunities resulting from on-chain DEX trading. MEV is similar to high-frequency trading profits as both profits from speculators giving up the “edge” to make trades. Because crypto trading is more inefficient than trading in traditional finance, MEV can take significant shares of a transaction’s value. In many cases, MEV can be 0.1% of a trade’s value and as high as 10%, depending upon the volatility of the asset traded. Jito is an on-chain application that creates a market for entities to bid on MEV rights and remits 95% of market revenues to validators (and their stakers) who run Jito’s software.

Due to Solana activity, popular Solana crypto wallet Phantom claimed the #1 spot in the Apple app store category for “free utility apps.” The positive news accelerated for Solana with Robinhood reinstating trading of SOL on Robinhood’s popular trading application. Adding a catalyst for future on-chain trading activity, the popular NFT project Magic Eden announced that its token would be airdropped in December 2024. Meanwhile, many investors are anticipating the official announcement of a U.S. spot ETP for SOL including VanEck who has sponsored an ETP filing.

Notable Performers – Cardano’s ADA (+201%), Polkadot’s DOT (+121%)

Cardano Policy and Governance Spark a Major Rally

Source: Artemis XYZ as of 11/29/2024. Past performance is no guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

Cardano’s ADA was one of the month's biggest winners (+201%). We attribute Cardano’s rally to off-chain developments and speculation on Cardano’s founder’s role in determining future crypto policy. Initially, ADA’s rally in the wake of Trump’s presidential victory was relatively tepid as it moved (+8%) from November 5th to November 6th. However, Cardano’s ADA took off with gusto following Cardano founder Charles Hoskinson’s announcement on November 9 that he would be working with the US government to formulate crypto policy. As part of his initiative to drive engagement, Charles Hoskinson announced he will open a crypto policy office in Washington, DC. The result was a (+40%) rally on the news in a day. The momentum, led by retail traders, continued when Robinhood decided to relist ADA on November 13. Finally, on November 21, Cardano released an update to its constitution that addressed lingering issues in the community. Some key takeaways include:

1. Cardano’s governance will be conducted on-chain by ADA holders who can propose and vote on governance actions.
2. Cardano’s treasury will have a spending limit to ensure its long-term sustainability.
3. Cardano will continue important upgrades like post-quantum computing security while remaining decentralized.

From the standpoint of on-chain usage statistics, Cardano’s price seems to have been the catalyst of on-chain activity rather than the reverse. Cardano’s TVL surged (+180%) in November as many Cardano project tokens rallied, which fed back to Cardano’s DeFI TVL. The amount of stablecoins hosted on Cardano and daily average DEX volumes also increased significantly in November (+28%) and (+300%) respectively. However, the absolute amount of stablecoins and daily DEX volumes on Cardano remain small, with only $23M and $12.5M, respectively. These figures compare to Ethereum’s, which averages around $100B in stablecoins and $3B in daily DEX turnover. Curiously, despite Cardano’s long tenue, live since 2017, it does not host major stablecoins like Tether’s USDT and Circle’s USDC on its chain. In fact, each of Cardano’s stablecoins are projects that only deploy to Cardano. While this presents a current pain point for Cardano users, it also represents a catalyst engine for future Cardano growth.

Polkadot Announces JAM, DOT (+121%) in November

Source: Artemis XYZ as of 11/29/2024. Past performance is no guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

Polkadot has been one of the most frustrating ecosystems in crypto over the past 5 years. Polkadot was launched, with much acclaim, in 2020 and promised to be a technological leap over other smart contract platforms. This is because its sharded design would scale through “para-blockchains,” similar to the concept of Ethereum L2s. One advantage of Polkadot’s system was that these connecting blockchains would be interoperable through Polkadot’s “Relay Chain.” However, technical hick-ups and a snail-like onboarding pace for parachains caused Polkadot’s ecosystem to implode. As Polkadot could not seize many users during the bull market of 2020-2021, projects deployed to Polkadot withered into irrelevance. While “alt-chain” Ethereum competitors such as Avalanche and Solana reached 90K and 600k daily active addresses by November 2021, Polkadot averaged 9k daily active addresses in that same month. Polkadot’s lethargic go-to-market strategy persisted through the bear markets of 2022 and 2023. At the time of writing, Polkadot averaged only 8k daily active addresses in the month of November 2024.

Against this unencouraging backdrop, Polkadot’s rally in November surprised many market participants. However, Polkadot and projects on its chain have progressed towards a more vibrant ecosystem. Currently, one of the most popular chains hosted on Polkadot is the Mythos Chain, a gaming and entertainment blockchain. Mythos hosts the popular game NFL Rivals, a trading card game similar to NFL Fantasy Football. In mid-November, Mythos announced that it would be launching a similar game in partnership with FIFA.

One of Polkadot's most interesting developments came from the recent Sub0 conference, where Gavin Wood gave an update to his vision for Polkadot’s blockchain. Called JAM, Wood intends for a more agile Polkadot architecture that allows off-chain applications and blockchains to utilize Polkadot. Essentially, this will allow Polkadot to offer cloud-like services for projects that want to use permissionless blockchains for data security, resiliency, and decentralization. From investors' standpoint, this will allow Polkadot to compete with projects like Ethereum, Celestia, and other modular stack projects for applications. With JAM, a crypto project can offload its transaction to Polkadot’s execution and data storage layers. So, for example, an application that utilizes another Chain’s infrastructure could off-board components of its processing to Polkadot for cheaper pricing. Polkadot intends to launch this feature, called CoreVM, in 1Q2025.

DeFi Blue-Chips Keep Pace: Aave (+42%), Uniswap (+64%), and MakerDAO (+42%)

Source: Token Terminal as of 12/02/2024. Past performance is no guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

Large-cap DeFi protocols showed strength in November, as Aave, Uniswap, and Sky (formerly MakerDAO) delivered significant price gains through fundamental activity and broader market catalysts. Compared to average monthly fees from Q1 2023, Uniswap’s, Aave’s, and Sky’s (formerly MakerDAO) November fees are up 120%, 544%, and 736%, respectively.

Increases in these protocols’ fees signal healthy growth in DeFi activity. Lending and borrowing activity on Aave surged amid heightened market volatility. Aave’s fees are primarily driven by interest paid by borrowers, a portion of which is collected as protocol revenue (the Reserve Factor). Higher market activity and leverage demand translate directly into increased fee generation for the protocol. Uniswap, on the other hand, generates fees from trading activity on its decentralized exchange, where liquidity providers collect a small percentage of each trade. As Uniswap remains the dominant decentralized exchange in the Ethereum ecosystem, its fee growth reflects a resurgence in Ethereum-based trading volumes. Meanwhile, Sky primarily derives its fees from interest charged on its overcollateralized DAI stablecoin loans, as well as liquidation penalties during periods of market volatility.

In other fundamental developments, Aave crossed $30 billion in deposits in November—an achievement noted by Bitwise CEO Hunter Horsley, would rank it as the 64th largest U.S. bank by deposits if it were a traditional institution. Aave governance also proposed a partnership with Bitcoin-based Spiderchain this month, setting the stage to tap into Bitcoin liquidity through its nascent L2 ecosystem. Sentiment for DeFi more broadly was buoyed by positive market reactions to Trump’s presidential election win, which is perceived as favorable for crypto-friendly policy. On November 6^th, the day after Trump’s election, AAVE and UNI gained 28% and 29%, respectively.

Uniswap’s November performance was further bolstered by a landmark U.S. Fifth Circuit Appeals Court decision. The ruling, which declared immutable smart contracts like Tornado Cash’s to be beyond the scope of traditional sanctions, overturned OFAC’s sanctions. Arguably, this strengthens Uniswap’s market position by setting a promising precedent on the legality of autonomous DeFi protocols. The market responded favorably, with Uniswap gaining 25% in market capitalization ($2.68 billion) the day after the announcement. For context, TORN, the native token of Tornado Cash, rose 1000% that day, from a $19M market cap to $187M. The Fifth Circuit’s ruling underscores the importance of credibly immutable infrastructure, vindicating good-faith DeFi builders systematically intimidated for years through regulation by enforcement and debanking.

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