Crypto’s breakthrough year

Cryptocurrencies, led by Bitcoin, have had a breakthrough 2024, with increased adoption through exchange-traded fund (ETFs), enhanced legitimacy, and skyrocketing value. 

Much of the attention around crypto has been driven by its surge in value in the past few months. However, there have been several fundamental changes throughout 2024 that have boosted the asset class. 

Chief among these has been the launch of crypto-focussed ETFs and the inclusion of digital assets in traditional portfolios, Luno’s South Africa manager Christo de Wit said. 

Major financial institutions like JPMorgan Chase, Goldman Sachs, and others have been ramping up crypto-related initiatives. 

Traditional asset managers, who were once skeptical, are now actively integrating digital assets into the mainstream financial ecosystem, with the BlackRock even advocating that investors should allocate a portion of their portfolio towards crypto assets. 

Among the key developments in 2024 was the approval of Bitcoin ETFs in January, making it much easier and more attractive for funds to diversify their activities into cryptocurrency. 

Multiple ETFs gained approval from the US Securities and Exchange Commission (SEC), marking the first time such investment products were cleared for launch in the US. Bitcoin ETFs now have assets of approximately $113 billion.

Another major event in the form of the Bitcoin halving of 2024 occurred earlier this year. Historically, the Bitcoin halving has been the catalyst for pushing the asset past previous all-time highs.

However, in 2024, Bitcoin defied this trend by surpassing its prior all-time high in March, fueled by the optimism surrounding ETF approval. 

Traditionally, the halving event – occurring roughly every four years – reduces the mining reward, cutting the supply of Bitcoin and adding an anti-inflationary effect, De Wit said. 

While the halving has often sparked a bullish momentum, leading to significant price increases, 2024 saw Bitcoin take a different path. 

After the initial surge, the largest digital asset by market cap experienced a relatively flat performance for much of the year, only to break out again in November.

Crucially in 2024, regulators began to take a proactive approach to crypto, making significant progress in legitimising the industry and widening access. 

In South Africa, crypto asset service providers (CASPs) like Luno were officially recognised as financial service providers in 2024.

Possibly the event that had the most significant impact on the value of crypto assets, specifically Bitcoin, was the election of Donald Trump to the US Presidency in early November. 

Trump made crypto an important element of his campaign strategy, pledging to create a “strategic bitcoin reserve” and to position the US as the “crypto capital of the planet”.

Since his election, Trump has seemingly kept his pledges by nominating pro-crypto figures to several key federal roles, fueling optimism among crypto supporters. Importantly, Trump has nominated Paul Atkins to chair the SEC. 

Atkins, who was SEC commissioner between 2002 and 2008, is considered supportive of the cryptocurrency industry and has been a member and co-chair of the Chamber of Digital Commerce’s Token Alliance, a blockchain trade association, since 2017. 

These moves by Trump have enhanced the investment view of Bitcoin as an inflation-hedge and safe haven in a similar fashion to gold. 

The US Federal Reserve cut interest rates by 0.5% in September, ending an extended period of aggressively high rate increases aimed at curbing rampant inflation. 

A further 0.25% reduction followed in November, and most investors, expect a sustained softer approach to monetary policy with continued low interest rates into 2025. 

But it all depends on how inflation plays out, which saw a slight spike in the US again towards the latter part of the year.

Historically, monetary easing has buoyed assets considered higher risk but with more attractive returns, such as stocks and crypto.

Interest in crypto has also been driven by memecoins, which have grabbed headlines for their skyrocketing growth. 

Original memecoins, such as Dogecoin have more than tripled in value throughout the year, with support from influential people like Elon Musk. Shiba Inu also saw substantial growth.

The coming year could bring further growth and adoption in this market if interest continues to rise at the same trajectory it did in 2024. 

It is, however, as with any digital asset, important to do your research before investing and only invest what you can afford to lose, De Wit said.