Bitcoin saw in 2024 on a high note, touching a 21-month peak and the approval of spot exchange traded funds (ETFs) for Bitcoin.
“Bitcoin ETFs are significant as they open the way for greater institutional investment and adoption. The first licences for crypto asset service providers are imminent in South Africa, the fifth Bitcoin halving is expected in April, there are elections in the US and in South Africa and tokenisation is growing,” says Christo de Wit, Luno’s South Africa country manager.
De Wit unpacks a few developments anticipated for crypto this year.
Bitcoin halving
While price history is not an indication of future price movements, the Bitcoin halving is one of the events on the crypto calendar that investors follow very closely. The next halving is expected in April 2024.
Roughly every four years, Bitcoin rewards paid to miners are cut in half as a way to avoid flooding the market. These events are known as Bitcoin halvings, and each event has historically had a major impact on the price as they decrease the supply of new Bitcoin into the market.
After the first halving, Bitcoin increased more than 8 000%. After the second halving in 2016, Bitcoin jumped roughly 3 000%. The last halving in 2020 was followed by a bull run that ended in an all-time high price of almost $69 000 (current price is $43 109).
Altcoins potential
The altcoin market cap has surpassed $847-billion and several commentators believe that the altcoin market is poised to potentially surpass $2 trillion in the next 24 months, led by altcoins like Solana (SOL) and Ethereum (ETH).
Ethereum has an upcoming upgrade which could significantly reduce transaction fees and enhance scalability.
In addition, the recent rally in altcoin prices following the approval of Bitcoin ETFs is fueled by rising expectations within the crypto community about the SEC’s potential approval of spot-based ETFs for alternative cryptocurrencies such as Ethereum (ETH), Cardano (ADA) and Avalanche (AVAX).
Crypto licensing in South Africa
Crypto was declared a financial product by the Financial Services Conduct Authority (FSCA) in 2022. Consumer protection was boosted by the inclusion of crypto asset service providers as accountable institutions by the Financial Intelligence Centre and Luno submitted its application to operate as a financial service provider as soon as applications opened in June 2023.
It is groundbreaking that crypto is now part of the mainstream financial services sector in South Africa as a regulated financial product. It should allow financial advisors to formally advise their clients on crypto investments. Until now, financial advisors could not provide advice on unregulated investment opportunities.
Africa uses crypto for utility and investment
In South Africa, the licensing of crypto asset service providers opens the door to heightened institutional interest and access to crypto through licensed financial service providers.
According to blockchain analysis firm Chainalysis, crypto investment in sub-Saharan Africa tends to be more retail-driven than other regions. Nigeria ranks second overall on the Chainalysis Global Crypto Adoption Index and also leads the region in raw transaction volume.
US elections
The outcome of the US election in November 2024 could have profound implications for the crypto industry. A crypto-friendly administration might foster regulatory frameworks, encouraging innovation while providing clarity and legitimacy to the industry.
US regulatory and financial decisions tend to have a marked impact on the global crypto industry and increasingly, government officials are playing into crypto for voter support.
James Ovenden, head of product marketing at Luno, says that crypto began to enter the conversation during the last US elections.
“Several senators and congresspeople, even outsider presidential candidates, are avowed crypto supporters, and more crypto talk could herald a more positive approach to crypto.”
AI is coming for everything
AI development has had some of the most significant breakthroughs in human history, according to some commentators. It seems like the technology will leave no industry unturned, including crypto.
From AI-driven chatbots to automated trading bots, the technology seems a natural fit for crypto as programmable money.
Tokenise it all
Last year saw several blockchain use cases play out in the financial space, most notably tokenisation, which turns an asset into a crypto token immortalised on a blockchain. The asset could be a house, a fraction of a house, music royalties, gold, bonds, stocks, and many other applications.
JP Morgan created its own blockchain and started trading tokenised assets on it during 2023. Banks and asset managers are always searching for almost instant transfers and transactions of assets, which bodes well for the growth of tokenisation, says de Wit.
Tokenisation could also open up unique investment opportunities for investors who previously didn’t have access to property investment or investing in music royalties.
“We continue to see signs that crypto is maturing. The crypto industry is still in its early phase and additional use cases will continue to come to the fore. In 2024, we’ll continue to track the innovative ways crypto will continue to shake up the traditional financial system,” concludes de Wit.