Bitcoin Ecology: The Dawn of Fanaticism, Frustration and Recovery

Author: Luke, Mars Finance

From peak to trough: a year of ice and fire

Looking back on the spring of 2024, the Bitcoin ecosystem is like a dazzling supernova. The rise of the BRC-20 token standard has ignited the market's fanaticism by relying on the inscription craze of the Ordinals protocol. The inscription—an innovation that embeds unique data directly into Bitcoin’s smallest unit, “satoshi”—has brought on-chain activity to take off like a rocket. The price of tokens such as ORDI soared, and some assets doubled or even doubled in just a few weeks. Projects such as SATS, RATS, etc. have also joined the carnival, bringing eye-catching rewards. Bitcoin’s on-chain transaction volume surged, Gas fees soared, and miners’ incomes surged. This is a golden moment, with innovation, speculation and enthusiasm intertwined, as if it heralds a new era of Bitcoin – not only as digital gold, but also as a vibrant decentralized finance (DeFi) platform.

However, the craze in the crypto world is often like a flash in the pan. By mid-2024, the narrative of the Bitcoin ecosystem has fallen from heaven to the bottom. The prices of tokens that once soared into the sky - ORDI, SATS, etc.

• plummeted, pulling back more than 95% from their highs. On-chain activity shrank sharply, inscription trading volume continued to decline, and the pace of new project releases slowed to almost stagnation. Community sentiment went from high to low, long-awaited airdrops were disappointing, and the Runes protocol—the highly anticipated BRC-20 evolution—cooled quickly after a brief craze. By the beginning of 2025, the Bitcoin ecosystem is no longer the darling of the market, but has become a "reverse indicator" of sector rotation, symbolizing the unfulfilled potential and the fatigue of investors.

At this slump, the Bitcoin ecosystem has suddenly reborn in the past week. ORDI soared nearly 97% in six days, PUPS became the pioneer of rebound with a 127% increase, and SATS almost doubled from its year-on-year low, up 87%. Tokens such as NALS, BANK, BounceBit (BB) have increased by between 40% and 80%, and mainstream assets of BRC-20 and Runes have collectively recovered. The inflow of funds on-chain has increased significantly, and the market's attention has once again focused on this long-silent field. Is this a brief rebirth, or the starting point for a greater recovery? To answer this question, we need to analyze the driving forces of the rebound, the structural dilemma of the ecosystem, and the conditions required to achieve a lasting rejuvenation.

The logic of rebound: emotional repair and capital rotation

Market style switch: The Forgotten Counterattack

The crypto market has always been known for its cyclicality, and the rebound of the Bitcoin ecosystem perfectly conforms to the classic logic of "low expectations reversal". After a year of continuous selling, the valuation of most tokens in the ecosystem has been compressed to the extreme. Leading assets such as ORDI and SATS fell by more than 90% from their highs, and were regarded by the market as an abandoned child with "no trading logic". However, it is in this desperate mood that the spark of rebound is often quietly ignited.

The fuse of this wave of market trends largely comes from the switching of market styles. Ethereum previously rebounded 50% amid huge community doubts, verifying the explosive power of undervalued assets when emotions are reversed. This phenomenon encourages funds to flow to sectors with lower valuations and more full pullbacks, and the Bitcoin ecosystem - which has been neglected by the market for a long time - has become a natural rotation target. Because these tokens are low in liquidity and valuations are at historical lows, a small amount of buying can trigger severe price fluctuations, creating amazing short-term elasticity.

Speculation Carnival: The Charm of Fringe Assets

Another driving force behind the rebound is the inherent speculative attributes of the crypto market. Compared with the steady trend of blue-chip assets such as Bitcoin and Ethereum, niche tokens such as PUPS and BSSB attract short-term funds with high volatility. These projects often rely on niche agreements or meme narratives, lack solid fundamentals, but become a paradise for speculators due to their high risk and high returns. PUPS's recent 127% increase is an example: a little-known token has quickly become the focus of capital pursuit with the igniting of market sentiment. This phenomenon is not new in the crypto market, but it explains why the Bitcoin ecosystem — with a large number of low-cap tokens — can become a hot spot for speculation in a short period of time.

Recovery of data on the chain

On-chain data also adds evidence to the rebound. The transaction volume of BRC-20 and Runes tokens showed signs of stabilization after months of decline, and the scale of capital inflows in related agreements rebounded. Although far from returning to its 2024 peak, this trend suggests that some investors are retesting the waters, possibly attracted by the potential of undervalued assets. As the ecology’s weather vane, ORDI and SATS have further enhanced market confidence and driven a wider return of funds.

The lingering shadow: The structural dilemma of the ecology

Although the recent uptrend is exciting, it is not difficult to see calmly that this is more like an emotionally driven repair than a signal of fundamental reversal. The deep problems of the Bitcoin ecosystem still exist, limiting its potential for continued performance.

The stagnation of development progress

The core dilemma of the Bitcoin ecosystem lies in its slow progress. Since the Ordinals protocol set off an inscription boom in 2023, the vision of "Bitcoin Native DeFi" has been heart-warming, but the actual delivery has been lackluster. Although the BRC-20 standard has triggered a craze, its design is rough and transaction efficiency is inefficient, resulting in network congestion but has not brought about a real functional breakthrough. The Runes protocol was highly expected when it was launched in April 2024, and once occupied more than 60% of Bitcoin’s on-chain transactions, but its complex distribution mechanism and poor user experience have quickly subsided, and the transaction proportion is currently only single digits.

Developer activity—a key indicator of ecological health—is also declining. GitHub updates are significantly reduced in multiple core projects, and the technology community is far less dynamic than Ethereum or Solana. Bitcoin’s architecture is centered on security and simplicity, limiting its programmability, which discourages developers who are accustomed to Ethereum’s flexibility. Without a strong developer base, it will be difficult for the ecosystem to transform from a speculative paradise to a functional platform.

The division of the agreement and the dissipation of heat

The Bitcoin ecosystem also faces the problem of protocol decentralization. BRC-20, Runes, Ordinals, and emerging BRC-2.0, Alkanes and other standards compete with each other, distracting liquidity and user attention. This division weakens the network effect of the ecosystem and hinders long-term growth. Runes' launch briefly ignited the market, but its complexity and inefficiency led to user churn. BRC-2.0, which will be launched on the test network in the first quarter of 2025, promises to bring smart contract functions, but its actual results are still to be verified.

The community is also sluggish. The poor airdrop effect and slow project progress have led many investors to go from excitement to disappointment. On social media, discussions about ORDI, SATS have changed from bullish to cautious and even indifferent. The difference in token preferences in the East and West markets—ORDI is more popular in Asia, and DOGs and others are more appealing in the West—further aggravate the division of the community and weaken cohesion.

Layer 2 's Unsolved Mystery

Bitcoin’s Layer 2 (L2) solution is seen as key to extending DeFi capabilities, but it currently performs underperforming. In the past year, more than 25 L2 and side chain projects have emerged, but most are idle and lack mature products and user base. Projects such as BitcoinOS, B² Network locked in $110 million in DeFi assets in 2024 through zero-knowledge proof technology, but they still lack competitiveness compared with Ethereum's Rollup ecosystem. If L2 fails to provide engaging use cases, they may become empty shells, further shaking market confidence.

The road to the future: Hope and challenge of revival

Can the rebound of the Bitcoin ecosystem evolve into a long-term trend? The answer depends on whether it can solve structural problems and deliver on long-term commitments. Here are the key elements to achieve revival.

Product implementation: 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, income farming protocols or stablecoin systems, which are comparable to the Ethereum ecosystem. BitcoinOS's smart contract exploration and BRC-2.0's token creation simplified are all potential breakthrough points. But these projects must move from concept to actual implementation, attracting users and funds.

Developers revitalize

Reigniting the developer enthusiasm is crucial. Bitcoin’s simplicity is its advantage and limitation. The advancement of zero-knowledge proof and Rollup technology show that scalability and programmability are not impossible to achieve. Funding programs for projects such as Lightchain Protocol AI may inspire developers to return, but they need to be matched with better tools and documents to lower the development threshold. An active developer community can not only promote innovation, but also convey the long-term potential of the ecosystem to the market.

Community cohesion and narrative reshaping

The Bitcoin ecosystem needs a unified narrative to unite the community. The current competition between BRC-20 and Runes, the division of the East and West markets, weakens its appeal. A narrative focusing on Bitcoin as the security foundation of DeFi and Reality Assets (RWA) may rekindle enthusiasm. Community-driven meme activities—such as Dogecoin’s revival—can also help, but need to be backed by substantial progress to avoid becoming hollow hype.

Grasp the market cycle

The crypto market is driven by sentiment, and the low valuation of the Bitcoin ecosystem makes it explosive in the bull market. The recent rebound shows that funds are willing to bet on high-risk assets. If the price of Bitcoin continues to rise due to institutional adoption and ETF inflows, the ecological token may benefit from the "halo effect". The continued rise in the coming weeks will be key, and whether the skeptics can be transformed into believers depends on the continuation of market momentum.