After bitcoin’s record high in November 2024 (almost R1.8m on Luno), the crypto market’s growth in 2024 showcases new trends in digital asset investment.
In the past, bitcoin price movements have been driven by retail investors, with only a handful of institutions holding the digital asset. Trading volumes and retail demand have potentially become decoupled from price, partly due to inflows to bitcoin exchange traded funds (ETFs) driven by institutional investors. This is the first market cycle showing institutional money driving price activity more than retail.
One indicator is the negative correlation between Google search trends for bitcoin and the bitcoin price. Since March, shortly after the launch of the first bitcoin spot ETF, we have seen a decoupling of search demand and the bitcoin price for the first time.
Another indication of increased institutional participation is the uptick in liquidity and increased price volatility when stock markets reopen on Mondays. Unlike stock markets such as the New York Stock Exchange and Nasdaq, where the bitcoin spot ETFs are traded, global crypto spot exchanges operate 24/7, 365.
Another clue is the market capitalisation of bitcoin ETFs. The first bitcoin spot ETF in the US was launched in January. Already, bitcoin ETFs have assets under management of more than $104bn and are on track to surpass gold ETFs in net assets. Traditional financial institutions, such as family offices, hedge funds and asset managers, are behind the interest. Bitcoin ETFs offer a familiar investment vehicle without requiring direct ownership and management of the underlying bitcoin.
At a $1.7-trillion market cap, bitcoin surpassed silver’s total market value on November 12 2024 to be the eighth-most valuable asset in the world at the time. This is remarkable for an asset that was only introduced in 2009.
In addition, public companies such as MicroStrategy and Tesla are holding bitcoin as their primary treasury reserve asset. MicroStrategy’s $37bn reserve and Tesla’s more than $1bn seem to make a strong case for bitcoin on corporate balance sheets. Bitcoin is held on balance sheets for diversification, inflation hedging and long-term growth.
Since January, the Financial Sector Conduct Authority has granted more than 150 licences for crypto asset service providers in South Africa. Luno has seen a more than 200% increase in corporate account openings, and interest from the traditional asset management fraternity is picking up.
Could we see the listing of a local crypto-backed exchange traded product in the near future? The institutional crypto wave will be apparent in South Africa soon.
Reitz is GM at Luno Africa
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