Author: Luke, Mars Finance
From peak to trough: a year of extremes
Looking back at the spring of 2024, the Bitcoin ecosystem was like a dazzling supernova. The rise of the BRC-20 token standard, fueled by the inscription craze of the Ordinals protocol, ignited market fervor. Inscriptions—an innovation embedding unique data directly into the smallest unit of Bitcoin, 'Satoshi'—caused on-chain activity to soar like a rocket. Tokens like ORDI skyrocketed in price, with some assets doubling or even tripling in market value within weeks. Projects like SATS and RATS also joined the celebration, yielding astonishing returns. On-chain transaction volumes for Bitcoin surged, gas fees soared, and miner revenues rose steeply. It was a golden moment, where innovation, speculation, and enthusiasm intertwined, seemingly heralding a new era for Bitcoin—not just as digital gold, but as a vibrant decentralized finance (DeFi) platform.
However, the excitement in the crypto world often proves to be fleeting. By mid-2024, the narrative of the Bitcoin ecosystem had plummeted from heaven to hell. Tokens that once soared—such as ORDI and SATS—saw prices plummet, retracting over 95% from their highs. On-chain activity sharply declined, inscription trading volume continued to drop, and the pace of new project releases slowed to a near halt. Community sentiment shifted from exuberance to gloom, with the long-awaited airdrops proving disappointing, and the Runes protocol—an eagerly anticipated BRC-20 evolution—cooled rapidly after a brief surge. By early 2025, the Bitcoin ecosystem was no longer the darling of the market, but rather became a 'contrarian indicator' symbolizing unfulfilled potential and investor fatigue.
At this low ebb, the Bitcoin ecosystem suddenly came to life over the past week. ORDI surged nearly 97% in six days, PUPS became the vanguard of the rebound with a 127% increase, and SATS nearly doubled from its year-low with an increase of 87%. Tokens like NALS, BANK, and BounceBit (BB) saw weekly gains between 40% and 80%, while mainstream assets BRC-20 and Runes collectively welcomed a recovery. On-chain capital inflow has significantly increased, and market attention is once again focused on this long-dormant field. Is this a brief flash of light, or the starting point of a larger revival? To answer this question, we need to analyze the driving forces of the rebound, the structural dilemmas of the ecosystem, and the conditions necessary for a lasting resurgence.
The logic of the rebound: emotional repair and capital rotation
Market style shift: the comeback of the forgotten
The crypto market is known for its cyclicality, and this rebound within the Bitcoin ecosystem perfectly aligns with the classic logic of 'low expectation reversal'. After a year of continuous selling, the valuations of most tokens within the ecosystem have been compressed to extremes. Leading assets like ORDI and SATS have fallen over 90% from their peaks and are viewed by the market as 'orphaned assets with no trading logic'. However, it is often in such desperate emotions that the spark of a rebound quietly ignites.
The catalyst for this wave of market activity largely stems from a shift in market style. Ethereum previously rebounded 50% amidst tremendous skepticism in the community, validating the explosive power of undervalued assets during emotional reversals. This phenomenon has encouraged funds to flow into more undervalued sectors that have undergone more thorough corrections, with the long-neglected Bitcoin ecosystem becoming a natural target for rotation. Due to the lower liquidity of these tokens and their historically low valuations, even a small purchase can trigger significant price fluctuations, resulting in remarkable short-term elasticity.
Speculative frenzy: the charm of fringe assets
Another driving force behind the rebound is the inherent speculative nature of the crypto market. Compared to the stable performance of blue-chip assets like Bitcoin and Ethereum, niche tokens like PUPS and BSSB attract short-term capital with high volatility. These projects often rely on niche protocols or meme narratives, lacking solid fundamentals, yet due to their high-risk, high-reward characteristics, they become a haven for speculators. The recent 127% surge of PUPS is a testament: an obscure token, ignited by market sentiment, quickly became the focal point of capital pursuit. This phenomenon is not new in the crypto market, but it explains why the Bitcoin ecosystem—home to numerous low-market-cap tokens—can quickly become a hotbed of speculation.
The warming of on-chain data
On-chain data also adds evidence for the rebound. After months of decline, trading volumes of BRC-20 and Runes tokens have shown signs of stabilization, and the scale of capital inflow into related protocols has increased. Although it is far from recovering to the peak levels of 2024, this trend indicates that some investors are tentatively re-entering the market, possibly attracted by the potential of undervalued assets. ORDI and SATS, as barometers of the ecosystem, further strengthened market confidence with their leading performances, stimulating a broader capital influx.
The lingering shadow: the structural dilemmas of the ecosystem
Despite the recent surge being exciting, a calm observation reveals it is more of an emotion-driven repair rather than a signal of fundamental reversal. The deep-seated issues within the Bitcoin ecosystem remain, limiting its potential for sustained performance.
Stagnation of development progress
The core dilemma of the Bitcoin ecosystem lies in its slow progress. Since the Ordinals protocol sparked the inscription craze in 2023, the vision of 'Bitcoin native DeFi' has been enticing, but actual delivery has been lacking. Although the BRC-20 standard triggered excitement, its rough design and low trading efficiency resulted in network congestion without delivering genuine functional breakthroughs. The Runes protocol, launched in April 2024, was once highly anticipated, capturing over 60% of Bitcoin's on-chain transactions, but its complex distribution mechanism and poor user experience caused its enthusiasm to fade rapidly, with its current transaction share reduced to single digits.
Developer activity— a key indicator of ecosystem health—is also on the decline. The update frequency of several core projects on GitHub has significantly decreased, and the vitality of the technical community is far from that of Ethereum or Solana. Bitcoin's architecture, centered on security and simplicity, limits its programmability, making it daunting for developers accustomed to Ethereum's flexibility. Without a strong developer base, the ecosystem struggles to transition from a speculative playground to a functional platform.
Fragmentation of protocols and the dissipation of heat
The Bitcoin ecosystem also faces the challenge of protocol fragmentation. BRC-20, Runes, Ordinals, and emerging standards like BRC-2.0 and Alkanes compete with one another, dispersing liquidity and user attention. This division weakens the ecosystem's network effects and hinders long-term growth. The launch of Runes briefly ignited the market, but its complexity and inefficiency led to user attrition. The upcoming launch of BRC-2.0 on the testnet in Q1 2025 promises to bring smart contract capabilities, but its actual effectiveness remains to be verified.
Community sentiment is also low. Poor airdrop performance and slow project progress have caused many investors to shift from excitement to disappointment. Discussions on social media regarding ORDI and SATS have turned from bullish to cautious or even indifferent. The difference in token preferences between Eastern and Western markets—ORDI is more popular in Asia, while DOG and others hold more appeal in the West—has further exacerbated community division and weakened cohesion.
The unresolved mystery of Layer 2
Bitcoin's Layer 2 (L2) solutions are seen as crucial for expanding DeFi functionalities, but they have underperformed so far. Over the past year, more than 25 L2 and sidechain projects have emerged, but most remain idle, lacking mature products and user bases. Projects like BitcoinOS and B² Network have locked $110 million in DeFi assets in 2024 through zero-knowledge proof technology, but they still lack competitiveness compared to Ethereum's Rollup ecosystem. If L2 cannot provide compelling use cases, they may become shells, further undermining market confidence.
The road ahead: hopes and challenges of revival
Whether the Bitcoin ecosystem's rebound can evolve into a long-term trend depends on its ability to address structural issues and fulfill long-term commitments. The following are key elements for achieving revitalization.
Product landing: from vision to reality
The biggest shortcoming of the ecosystem is the lack of practical products. To achieve the goal of 'Bitcoin native DeFi', developers need to build functional applications such as decentralized exchanges, yield farming protocols, or stablecoin systems, comparable to the Ethereum ecosystem. The exploration of smart contracts on BitcoinOS and the simplification of token creation with BRC-2.0 are all potential breakthrough points. However, these projects must move from concept to practical implementation to attract users and capital.
Revitalizing developers
Reigniting developer enthusiasm is crucial. The simplicity of Bitcoin is both its strength and limitation. Advances in zero-knowledge proofs and Rollup technology indicate that scalability and programmability are not mutually exclusive. Funding programs for projects like Lightchain Protocol AI may encourage developers to return, but they need to be paired with better tools and documentation to lower development barriers. An active developer community can not only drive innovation but also convey the ecosystem's long-term potential to the market.
Community cohesion and narrative reshaping
The Bitcoin ecosystem needs a unified narrative to rally the community. The current competition between BRC-20 and Runes, along with the division between Eastern and Western markets, undermines its appeal. A narrative focused on Bitcoin as a secure foundation for DeFi and real-world assets (RWA) may reignite enthusiasm. Community-driven meme activities—like the revival of Dogecoin—can also help, but they need to be backed by substantial progress to avoid becoming hollow hype.
Grasping market cycles
The crypto market is driven by emotions, and the undervaluation of the Bitcoin ecosystem gives it explosive potential in a bull market. The recent rebound indicates that capital is willing to bet on high-risk assets. If Bitcoin's price continues to rise due to institutional adoption and ETF inflows, ecosystem tokens may benefit from the 'halo effect'. The continuation of the upward trend in the coming weeks will be key; whether skeptics can be turned into believers depends on the persistence of market momentum.
