As we enter February 2025, the crypto industry finds itself at a pivotal moment. The past year has been marked by significant shifts in digital asset exchange dominance, evolving security threats, and the growing role of stablecoins in global payments. At the same time, Bitcoin Layer 2 (L2) solutions are unlocking new opportunities that remain largely undervalued.

This industry review highlights the key developments of 2024 and offers insight into what to expect in the year ahead.

Key Takeaways from 2024

• The dominance of centralized exchanges (CEXs) is declining as mid-sized exchanges and DEXs gain ground. Binance's market share fell from 42.7% at the start of 2024 to 36.6% in September 2024, signaling a shift away from traditional scale advantages. In 2025, we expect a three-way battle between top centralized exchanges, innovative mid-sized platforms, and decentralized exchanges.

• Crypto security threats have become more sophisticated. While the number of victims from wallet drainer attacks only increased by 3.7%, total financial losses surged 67%. Attackers are moving from broad phishing attacks to highly targeted, sophisticated exploits, making defensive strategies more complex.

• Bitcoin Layer 2 remains an undervalued market with trillion-dollar potential. Unlike Ethereum's development, which spans both Layer 1 (L1) and Layer 2 (L2), Bitcoin's L1 lacks programmability, forcing all innovations to happen on L2. This makes BTC L2 essential for unlocking Bitcoin's full potential.

• Stablecoins are transitioning from crypto-native assets to mainstream payment infrastructure. Stripe's $1.1 billion acquisition of Bridge was a defining moment, proving that fintech giants are integrating stablecoins to reduce transaction costs and expand market reach.

• AI and crypto integration is moving beyond hype, with real utility emerging. AI Agents, capable of autonomous financial transactions and decision-making, will become increasingly important. The highest adoption potential lies in DeFi and gaming, where decentralized payment rails will play a crucial role.

Stablecoin Payments: Reshaping Global Transactions

Demand-Side Growth: Stablecoins as Everyday Payment Tools

Stablecoins are rapidly gaining traction as essential financial tools, particularly in emerging markets like Brazil. In 2023, stablecoins, especially USDT, dominated cryptocurrency transactions in Brazil, accounting for 80% of all crypto activity. By mid-October 2023, USDT transactions in Brazil reached approximately $55 billion, nearly doubling the volume of Bitcoin transactions.

This trend continued into 2024, with Brazil recording nearly $90.3 billion in cryptocurrency transactions between July 2023 and June 2024, growing over 42% year-over-year. Notably, stablecoin transactions constituted 70% of exchange outflows, highlighting their increasing use for everyday financial activities.

Infrastructure Shift: The Role of Stripe's Acquisition of Bridge

Stripe's purchase of Bridge marked a fundamental shift in the payments industry. By integrating stablecoin settlements, Stripe is bypassing traditional banking intermediaries and significantly lowering transaction costs.

• Sending USDC on Base, Coinbase's L2 network, now costs under $0.01, compared to a traditional wire transfer cost of approximately $44 per transaction.

• Stablecoin payments now operate with near-instant settlement speeds.

The Emerging Competitive Stablecoin Landscape

The stablecoin payments market is evolving across three main segments:

• Full-service infrastructure providers (e.g., Bridge) are scaling through M&A

• Regional API providers are differentiating based on compliance, pricing, and service range

• Enterprise-grade stablecoin solutions led by Cobo, specializing in secure wallet infrastructure

The Decline of Large CEX Dominance

The centralized exchange landscape is undergoing a fundamental transformation. Binance's market share dropped from 42.7% to 36.6% in 2024, while agile mid-sized exchanges and DEXs are capturing market share by listing tokens more quickly and enabling deeper liquidity for emerging tokens.

Speed and Efficiency: The New Competitive Edge

The biggest shift in trading dynamics is the emphasis on speed rather than sheer volume. Exchanges that list new meme coins or trend-based assets are attracting massive trading volume.

Security-Driven Competition

Institutional traders are prioritizing security-first exchanges following the FTX collapse. While large, regulated CEXs once held the edge, newer trading security models such as Superloop asset mirroring are leveling the playing field. DEXs are rapidly closing the liquidity and UX gap with Hybrid Order Book-AMM models such as HyperLiquid.

The $TRUMP Token Phenomenon

The $TRUMP token launch in January 2025 demonstrates the growing power of decentralized exchanges and meme coins:

• The token reached a market cap of nearly $13 billion within two days of its launch, becoming the 19th most valuable cryptocurrency globally

• By January 19, 2025, the token's value reached $74 per unit, with a total market cap exceeding $27 billion

• The token's success was primarily fueled by trading on decentralized platforms, particularly on the Solana blockchain

• Price volatility remained high, with the token dropping to $38 by January 21, 2025

This case study illustrates several key market trends:

• Solana-based DEXs now command 48% of total DEX volume, driven largely by retail trader activity

• The decentralized derivatives market is projected to reach $3.48 trillion by 2025, doubling its 2024 levels

• While Solana dominates retail trading, Ethereum remains the preferred network for institutional trades exceeding $50,000

Bitcoin Layer 2: A Trillion-Dollar Undervalued Market

Unlike Ethereum, where both L1 and L2 drive innovation, Bitcoin's lack of programmability forces all new development onto L2 solutions. This dynamic is unlocking a multi-trillion-dollar market.

Why Bitcoin Layer 2 Matters More Than Ever

• All Bitcoin innovation must happen on L2, as Bitcoin's L1 cannot directly support DeFi, privacy tools, or smart contracts

• BTC L2 networks demand higher security due to high-value transactions and institutional capital involvement

• Bitcoin Financialization (BTCFi) is set to explode, with some analysts predicting that BTCFi could surpass Ethereum's peak ecosystem valuation

The Role of Security in BTC Layer 2

Key security solutions for Bitcoin Layer 2 include:

• MPC custody to eliminate single points of failure

• Staking infrastructure for BTCFi applications

AI and Crypto Integration: Moving From Hype to Real Use Cases

The AI and crypto sector is shifting from speculative tokens to functional AI Agents capable of:

• Trading assets autonomously

• Managing DeFi strategies

• Executing decentralized transactions

Infrastructure Requirements

• AI Agents require crypto-native payment systems, similar to how traditional businesses need banks

• DeFi and gaming represent the most promising sectors for AI-driven financial automation

Looking Ahead to 2025 and Beyond

As the crypto market matures, these key trends will shape the year ahead:

• Bitcoin Layer 2 and BTCFi will gain mainstream adoption

• Stablecoins will continue to redefine global payments

• CEXs will face increasing competition from DEXs

• AI and crypto integration will move from speculation to practical applications

The industry is undergoing its most transformative shift yet, and the winners will be those who prioritize security, scalability, and efficiency.

For more information about how Cobo’s digital asset custody solutions are designed for the next evolution of crypto infrastructure, book a demo today.