Is it too late to dive into crypto, or should you wait for the dust to settle? Giulietta Talevi from Currency breaks down the 2024 crypto rally and what it means for investors.
If you’re like most members of the Currency team, you have missed the Crypto bus to the land of riches and outlandish returns in 2024. Do we still pile in, or wait for the froth to clear?
Team Currency – barring editor Rob Rose – has no exposure to crypto. Personally, I don’t own it, and I don’t really understand it. I do, however, understand that I am, relatively speaking, a lot poorer this year for not being an active believer and buyer of anything crypto related.
That’s because the gains in cryptocurrencies – like the original, bitcoin – have been positively astounding in 2024. Bitcoin started the year at $44,204; on December 5 it hit $103,242 – a surge of 133% – with much of the action taking place after Donald Trump’s election as US president on November 5 (51% between that date and December 5).
Ethereum, too, had gained 70% in value by December 7. While both bitcoin and ethereum have slipped in the past few days, ethereum’s gains in the year to date are still a cool 57%, and bitcoin 122%.
Compare that to the S&P 500’s 27% rally this year (still a remarkable return), or the JSE all share’s far more pedestrian 8% increase – in rand. So if you’re feeling poor compared to the crypto-bros, it’s because you really are.
Crypto’s run means that, as of yesterday, the global cryptocurrency market cap was valued at $3.66-trillion, according to CoinGecko. Total cryptocurrency trading volume on Tuesday came to about $385bn, with bitcoin dominating at 53% of trades, followed by ethereum at 12.2%.
(And then I had to read this sentence again: “CoinGecko is now tracking 16,044 cryptocurrencies.”)
Memecoin mania
Whether this means you scramble in now is up to you, says Vestact portfolio manager Bright Khumalo. “Crypto’s 2024 rally has been wild, but jumping in now on pure fomo is like buying a lottery ticket after the jackpot’s been won.”
That’s especially the case for the so-called memecoins – cryptocurrencies named after cute animals, say, like Dogecoin, or Moo Deng (named after the Thai pygmy hippo that has become a viral internet sensation), or Pnut (an orphaned squirrel called Peanut, euthanised by New York authorities).
A Financial Times piece on the memecoin mania quotes Ilan Solot, the co-head of digital assets at Marex Solutions, as saying: “99% per cent of them [memecoins] are pump and dumps. The game is to get in and get out before others get out.”
Anyone can create a memecoin using blockchain technology. The tokens, says Investopedia, “are hexadecimal numbers that are stored on a blockchain, with private keys associated with them for ownership purposes. The images of coins with fun logos are used to help attract users.”
But, crucially, “they have no value, they never will have value,” says Charles Hoskinson, co-founder of the Cardano blockchain. “There’s no utility behind them, nobody wants them – when they lose their lustre they go to zero,” he told the FT.
“I am not against memes. But memecoins are getting ‘a little’ weird now,” said Changpeng Zhao, founder of crypto exchange Binance, last week.
Yet there’s still serious money attached to these curiosities: in the case of Pnut the total market size is a somewhat incredible $1.2bn – or R21.6bn – almost the same market cap as Pick n Pay.
The four-year cycle
Much of the rally in the past five weeks has been driven by expectations that Trump will take a friendly approach to the regulation of cryptocurrencies, not least because he has appointed crypto advocate Paul Atkins to head the powerful US Securities and Exchange Commission. Atkins has since 2017 co-chaired the US’s digital chamber of commerce, which “actively advocates for the adoption of digital assets”.
Yet, says Binance’s local operations manager Yande Nomvete, “it’s not all related to Trump’s election”.
Generally crypto cycles last for about four years; retail investors come in at the market’s peak and then get shaken out. “There was a lot of regulatory scrutiny at the end of 2022 that contributed to the super negative sentiment then and you only had hardcore believers holding onto their tokens throughout that period,” she says.
Then, sentiment started improving earlier this year. And “when prices rally, the retail market reignites”.
Earle Loxton, who heads up the crypto business at EasyEquities, has also monitored these cycles for years. He says in the past three cycles (2013, 2017, 2021), “everyone I suppose must have thought: ‘I’m not going to get in because it’s overheated and I’m not going to get my money back,’ and they all sat on the sides, and then in the fourth year of the rally they all missed out on another two times [gain] in the last leg of the rally, and I think that’s where we are now.”
Loxton keeps a close eye on something called the “stock-to-flow” model, which tracks bitcoin scarcity; supply (how many bitcoins) versus how much new bitcoin is being mined. “This is the model that’s been the most accurate over the past 13 years and, basically, every four years you have this thing called ‘the halving’,” he says.
The total bitcoin supply will be 21-million coins. Says Loxton: “You can think of it as a bath that takes 21-million bitcoin and you have a tap filling the bath. The bath is already pretty full – there are just over 19-million [bitcoin] in it – and every four years someone comes and closes that tap and halves the flow into the bath. So it will become a trickle, and then a drip, and then a drip once an hour etc.”
What that does to the market is awaken punters to bitcoin’s potential scarcity. “It has done this every four years – 2013, 2017, 2021 – and if this model holds, in 2025 bitcoin will run up, and then overheat and collapse,” he says.
This time around, however, Loxton says “it’s anyone’s guess as to how much it will collapse because there’s a lot more institutional money in it and that money is a bit stickier”.
It’s one reason that he favours an index of cryptocurrencies. EasyEquities offers the EC10 bundle that tracks the 10 largest cryptocurrencies by market cap.
“We’ve had so many of these coins in the top 20 that have flourished, and disappeared, and come up and flashed. Time and again we’ve seen the index do better than the individual coins because it has that nice spread.”
While a recent statement from local exchange Luno found Google searches for crypto to be lower than in previous rallies, EasyEquities’ data shows that November inflows “completely overshadow” the past year. “November is almost double March and March was a massive awakening. We might not see the same in December because people switch off, but we may still see the same activity as in March. Activity follows price and price follows activity in this case,” says Loxton.
Binance’s Nomvete says institutional adoption has opened a larger flow of money, but she believes “the level of institutional adoption is increasing at the exact same rate as retail adoption”.
Binance registers this by its total number of global registrations; it started the year at just under 200-million users, and now has more than 240-million.
The utility factor
Of course, a great year for prices can beget a great year, but, reminds Nomvete, “as much as people use crypto as an investment class we are also really seeing it emerge as payment method”.
No more so than in Africa. It makes perfect sense: if your home currency is the Zimbabwe dollar, say, and you’re working abroad, you’d have previously sent back hard currency via money movers like Western Union. But that’s expensive and you’re still at the mercy of fluctuating exchange rates.
Now, people are signing up to platforms like Binance Pay, which charge nothing to shift stablecoins – crypto tokens that are linked to hard currencies like the dollar or euro – to family or friends back home.
“If you think about how much it costs via your traditional remittance services, on Binance Pay you can transfer funds between Binance accounts at a zero fee,” says Nomvete. “In that scenario it doesn’t matter in which jurisdiction someone sits. If you’re sitting in Italy you can transfer 50 USDT – which is about R1,000 – at zero cost as opposed to using the traditional banking system.”
That product now has more than 11-million users across 70 countries. “Active users grew almost 70% over the year, while transaction volumes grew by a similar rate, surpassing $77bn in 2023,” she tells Currency.
That means a “consistent, sticky cohort” of users.
“Access to finance is not as easy for a lot of people across the globe but particularly on the continent,” she adds.
For countries where local currencies are “volatile and mercurial”, using crypto is a way to hedge against inflation. “Dollar shortages in the traditional banking system impact people in those countries, so being able to access the dollar by being on the platform is something that we’re seeing significant adoption of,” says Nomvete.
The utility factor of crypto is a powerful argument for continued demand; but perhaps the last word should belong to legendary investor Warren Buffett.
“Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities … will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: they are dancing in a room in which the clocks have no hands.”
Discover more insights in our blogs
Any opinions, news, research, reports, analyses, prices, or other information contained within this research is provided by an external contributor as general market commentary and does not constitute investment advice for the purposes of the Financial Advisory and Intermediary Services Act, 2002. First World Trader (Pty) Ltd t/a EasyEquities (“EasyEquities”) does not warrant the correctness, accuracy, timeliness, reliability or completeness of any information (i) contained within this research and (ii) received from third party data providers. You must rely solely upon your own judgment in all aspects of your investment and/or trading decisions and all investments and/or trades are made at your own risk. EasyEquities (including any of their employees) will not accept any liability for any direct or indirect loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from use of or reliance on the market commentary. The content contained within is subject to change at any time without notice.
Search all articles
Posts by topic
- Market News & Events
- Easy Community
- Education
- Exchange Traded Funds (ETFs)
- Dividends Update
- Managed Bundles
- Property Investing
- USD Wallet
- Tax Free Savings Account (TFSA)
- Cryptocurrency
- Retirement Annuity (RA)
- Unit Trusts
- New to Investing
- International Investing
- Artificial Intelligence
- Shares
- EasyProtect
- Government Bonds
- EasyCredit
- Bundles and Baskets