For years, the crypto market has danced to a rhythm. Not completely a clockwork rhythm, but still a definable one, with the halving events of Bitcoin supplying the drumbeat. But the rhythm seems to have been broken, ushering in a new age of institutional adoption for Bitcoin and many other crypto-currencies.
To understand halving, you first need to understand mining. Bitcoin mining is the process of using computers to solve complex algorithms that validate transactions, thus securing the Bitcoin decentralised ledger, with the “miners” paid for their effort with new coins.
Halving is the cornerstone of Bitcoin's monetary policy and it takes place when the reward for mining new Bitcoins is cut in half every four years. This is intended to maintain scarcity and counteract inflationary effects. The most recent halving was in April 2024. It reduced rewards to 3.125 BTC.
The crypto-currency dance used to adhere to the following steps: About six to nine months after the halving, you would see a surge in the Bitcoin price, caused by the supply shock brought about by the halving. (Bitcoin has a near inelastic supply, meaning the supply does not increase with increases in its price.)
The surge is followed by a period of volatility as investors take their Bitcoin profits and move them to other coins. Then there is a surge in the prices of other coins, people make some money, and that continues for about 12 to 18 months. And then, inevitably, something happens that disrupts the market − often based on people over-leveraging − and a correction takes place. Then the build-up starts again.
The line between traditional finance and crypto-currency finance is blurred.
This cycle has largely defined the crypto-currency industry's narrative for over 15 years. Yet, things are changing. The era of retail-driven, boom-and-bust cycles may be ending, replaced by a more mature and institutionally backed performance.
The first all-time high Bitcoin price pre-halving took place in March last year. This was a truly unusual price milestone, directly attributable to the introduction of Bitcoin Exchange-Traded Funds (ETFs). Bitcoin ETFs are pools of Bitcoin-related assets offered on traditional exchanges. These instruments unlocked a floodgate of new capital from some of the world's largest asset managers.
It was a moment of institutional embrace, and since then the anticipated post-halving volatility, particularly in Bitcoin, has largely failed to materialise. While the US election and Trump's pro-crypto stance injected a brief surge in prices, the price has largely remained within tight bands since January.
A significant shift is taking place. Long-time so-called "hodlers" − those who have held Bitcoin through thick and thin − are now quietly cashing out, taking profits as prices cross the $100 000 threshold.
Crucially, this supply is being absorbed not by speculative retail investors, but by a new category of sophisticated buyers: BlackRock, Fidelity, Bitcoin Treasury Companies, corporations building strategic long-term positions, and even government Bitcoin reserves.
These entities are not looking for short-term gains. They are accumulating Bitcoin as a fundamental store of value and a multi-year allocation rather than a speculative trade. They see Bitcoin as a mature asset with its own unique benefits. The large-scale accumulation by institutions is driven by a long-term value proposition.
Of course, this doesn't mean crypto-currencies have become completely humdrum investments. It remains an asset that is tradeable 24/7. It responds differently than traditional assets to world events. It continues to innovate at the same speed.
Regulatory clarity on crypto-currency has not only helped initiate this big shift, it is constantly increasing the wider institutional acceptance of digital assets. Regulation is moving at an unprecedented pace across the globe − from the US to emerging markets like Malaysia.
South Africa, however, is falling behind on the regulatory front. ETFs − the very instruments that have helped turn Bitcoin into a mature asset − are massively inhibited in the local space by the uncertain designation of crypto-currencies within South African regulations.
Digital assets are currently not designated as either "onshore" or "offshore". This impedes institutional investment because nobody knows what exchange controls apply.
Even the High Court recently said in a judgement there needs to be regulatory clarity on this point, also noting that one cannot say the Reserve Bank has been "caught napping" because it has been aware of this issue for many years.
While institutional investors, from pension funds to insurance companies, are using Bitcoin and other crypto-currencies to optimise their portfolios to the considerable benefit of their clients, South Africa risks just looking on and missing out.
The first step towards real institutional adoption in South Africa is to apply the technically correct and widely-accepted definition of crypto-currencies as “onshore” assets when held on locally-licensed platforms. This will start to unlock the local benefits of Bitcoin as a mature asset.
The line between traditional finance and crypto-currency finance is blurred. From payment solutions leveraging stablecoins to sophisticated investment strategies incorporating tokenisation, digital assets are becoming an integral part of the global system.
This integration, driven by institutional adoption and regulatory frameworks, points to a future where the wild, retail-driven cycles of the past are replaced by a more stable and undeniably credible digital economy. The wild dance is giving way to a more predictable climb of long-term value accumulation.
But South African investors will not see their benefits accumulate if our regulators are still struggling at step one: trying to define what a crypto-currency is.
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