From Peak to Trough: A Year of Extremes

Looking back to the spring of 2024, the Bitcoin ecosystem was like a dazzling supernova. The rise of the BRC-20 token standard, coupled with the inscription frenzy based on the Ordinals protocol, ignited market frenzy. Inscriptions—the innovation of embedding unique data directly into the smallest unit of Bitcoin, the satoshi—propelled on-chain activities like a rocket. The prices of tokens such as ORDI soared, with some assets doubling or even multiplying in value within just a few weeks. Projects like SATS and RATS also joined the revelry, delivering eye-popping returns. The volume of Bitcoin on-chain transactions surged, gas fees skyrocketed, and miners' incomes rose accordingly. It was a golden moment, with 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 fervor in the crypto world often fades as quickly as it arises. By mid-2024, the narrative of the Bitcoin ecosystem had plummeted from heaven to hell. Those tokens that had once soared—ORDI, SATS, and others—suffered a price collapse, with declines exceeding 95% from their peaks. On-chain activity shrank dramatically, inscription transaction volumes continued to decline, and the pace of new project launches slowed to a near standstill. Community sentiment shifted from euphoria to gloom, with the long-awaited airdrops proving disappointing. The Runes protocol, which was expected to be an evolution of BRC-20, quickly cooled down after a brief period of excitement. By early 2025, the Bitcoin ecosystem was no longer the darling of the market but had become a "contrarian indicator" in sector rotation, symbolizing unfulfilled potential and investor fatigue.

Amidst the Doldrums, a Sudden Rebirth

Just as the ecosystem seemed mired in depression, the Bitcoin ecosystem experienced a sudden revival over the past week. ORDI surged nearly 97% in just six days, with PUPS leading the rebound with a 127% increase. SATS nearly doubled from its year-to-date low, rising by 87%. Tokens such as NALS, BANK, and BounceBit (BB) saw weekly gains ranging from 40% to 80%, with mainstream assets of BRC-20 and Runes collectively experiencing a recovery. There was a significant increase in on-chain capital inflows, and market attention once again focused on this long-quiet sector. Is this a fleeting rally or the beginning of a larger recovery? To answer this question, we need to analyze the drivers of the rebound, the structural challenges of the ecosystem, and the conditions required for a lasting revival.

The Logic of the Rebound: Sentiment Repair and Capital Rotation

The Switch in Market Style: The Counterattack of the Forgotten

The crypto market has always been known for its cyclical nature, and the recent rebound of the Bitcoin ecosystem perfectly fits the classic logic of "low expectation reversal." After a year of continuous selling, the valuations of most tokens within the ecosystem had been compressed to the extreme. Top assets like ORDI and SATS had fallen by over 90% from their peaks and were regarded by the market as orphans with "no trading logic." However, it is often in such moments of despair that the sparks of a rebound quietly ignite.

The trigger for this market movement largely came from a switch in market style. Ethereum's 50% rebound amid significant community skepticism validated the explosive power of low-valued assets during a sentiment reversal. This phenomenon inspired capital to flow into sectors with lower valuations and more substantial pullbacks, and the Bitcoin ecosystem—long neglected by the market—became a natural target for rotation. Given the low liquidity and historically low valuations of these tokens, a small amount of buying pressure could trigger dramatic price fluctuations, creating impressive short-term elasticity.

The Speculative Frenzy: The Allure 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 such as PUPS and BSSB attract short-term capital with their high volatility. These projects often rely on obscure protocols or meme narratives, lacking solid fundamentals but offering high-risk, high-reward characteristics that make them a paradise for speculators. The recent 127% increase in PUPS is a case in point: an obscure token that, fueled by market sentiment, quickly became the focus of capital pursuit. This phenomenon is not new in the crypto market, but it explains why the Bitcoin ecosystem—rich in low-market-cap tokens—can become a speculative hotbed in a short period.

Warming On-Chain Data

On-chain data also provided evidence for the rebound. After months of decline, the trading volumes of BRC-20 and Runes tokens showed signs of stabilization, with an increase in the scale of capital inflows into related protocols. Although far from the peak levels of 2024, this trend indicates that some investors are dipping their toes back into the water, possibly attracted by the potential of undervalued assets. The leading performance of ORDI and SATS, as barometers of the ecosystem, further strengthened market confidence and spurred broader capital inflows.

The Lingering Shadows: Structural Challenges of the Ecosystem

Despite the recent gains, a closer look reveals that this is more of an emotion-driven repair rather than a signal of a fundamental turnaround. The deep-seated issues of the Bitcoin ecosystem still exist, limiting its potential for sustained performance.

Stagnation in Development Progress

The core dilemma of the Bitcoin ecosystem is its slow progress. Since the inscription craze sparked by the Ordinals protocol in 2023, the vision of "Bitcoin-native DeFi" has been tantalizing, but actual delivery has been lackluster. Although the BRC-20 standard triggered a frenzy, its design is crude, and transaction efficiency is low, causing network congestion without bringing any real functional breakthroughs. The Runes protocol, launched in April 2024 with high expectations and once accounting for over 60% of Bitcoin on-chain transactions, saw its popularity fade quickly due to a complex distribution mechanism and poor user experience. Its current transaction share is now only in the single digits.

Developer activity—a key indicator of ecosystem health—is also declining. The update frequency of multiple core projects on GitHub has significantly decreased, and the vitality of the technical community is far behind that of Ethereum or Solana. Bitcoin's architecture, centered on security and simplicity, limits its programmability, which deters developers accustomed to the flexibility of Ethereum. Without a strong developer base, it is difficult for the ecosystem to transform from a speculative playground into a functional platform.

Protocol Fragmentation and Dissipation of Heat

The Bitcoin ecosystem also faces the challenge of protocol fragmentation. Standards such as BRC-20, Runes, Ordinals, and emerging ones like BRC-2.0 and Alkanes are competing with each other, dispersing liquidity and user attention. This fragmentation weakens the ecosystem's network effect and hinders long-term growth. The launch of Runes once briefly ignited the market, but its complexity and inefficiency led to user attrition. BRC-2.0, which is set to launch on the testnet in the first quarter of 2025 and promises to bring smart contract functionality, still needs to prove its effectiveness.

Community sentiment is also low. Poor airdrop results and slow project progress have shifted many investors from excitement to disappointment. On social media, discussions about ORDI and SATS have shifted from bullish to cautious or even indifferent. The difference in token preferences between the Eastern and Western markets—ORDI is more popular in Asia, while DOG and others are more influential in the West—further exacerbates community fragmentation and weakens cohesion.

The Unsolved Mystery of Layer 2

Bitcoin's Layer 2 (L2) solutions are seen as key to expanding DeFi functionality, but they have so far underperformed. Over the past year, more than 25 L2 and sidechain projects have emerged, but most are dormant, lacking mature products and a user base. Projects like BitcoinOS and B² Network locked $110 million in DeFi assets through zero-knowledge proof technology in 2024, but compared to Ethereum's Rollup ecosystem, they still lack competitiveness. If L2 cannot provide compelling use cases, they may become empty shells, further shaking market confidence.

The Road Ahead: Hopes and Challenges for Revival

Can the Bitcoin ecosystem's rebound evolve into a long-term trend? The answer depends on whether it can resolve structural issues and fulfill long-term promises. Here are the key elements for revival.

Product Implementation: From Vision to Reality

The ecosystem's biggest weakness 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 to rival the Ethereum ecosystem. The smart contract exploration of BitcoinOS and the token creation simplification of BRC-2.0 are potential breakthrough points. However, these projects must move from concept to actual implementation to attract users and capital.

Reviving Developer Enthusiasm

Rekindling developer enthusiasm is crucial. Bitcoin's simplicity is both its strength and its limitation. Advances in zero-knowledge proof and Rollup technologies have shown that scalability and programmability are not mutually exclusive. Funding programs like those of Lightchain Protocol AI may encourage developers to return, but they need to be accompanied by better tools and documentation to lower the barriers to development. 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 unite the community. The current competition between BRC-20 and Runes, as well as the division between Eastern and Western markets, weakens its appeal. A narrative focused on Bitcoin as a secure foundation for DeFi and real-world assets (RWA) may rekindle enthusiasm. Community-driven meme activities, such as the revival of Dogecoin, can also help, but they must be backed by substantial progress to avoid becoming empty hype.

Capturing Market Cycles

The crypto market is driven by sentiment, and the low valuation of the Bitcoin ecosystem gives it explosive power in a bull market. The recent rebound shows that capital is willing to bet on high-risk assets. If the price of Bitcoin continues to rise due to institutional adoption and ETF inflows, ecosystem tokens may benefit from the "halo effect." The sustained gains over the next few weeks will be crucial, and the ability to turn skeptics into believers will depend on the continuation of market momentum.