Every four years, the crypto world gets all hyped up for Bitcoin halving. Past halvings, like the one in May 2020, had seen a massive increase in BTC transactions, which was driven by growing adoption and community involvement. And, the economic implications benefited the crypto landscape across the board and not just Bitcoin.
Historically, with each new cycle following a halving event, the price of Bitcoin would reach a new high. For example, in late 2013, about a year after the first halving, Bitcoin hit US$1,200. The next market cycle peaked at US$20,000 per Bitcoin in late 2017 and reached US$69,000 before collapsing again. But the current situation is unique: Bitcoin, for the first time, exceeded the previous high before halving, recording US$73,000 in March 2024, said Kar Yong Ang, a financial analyst at Octa Broker. He added that demand from the US bitcoin ETFs launched in January was a vital factor in that price rise.
What set the April halving apart from earlier events is the increased institutional engagement since 2020, coupled with the integration of traditional financial products like ETFs. More Bitcoins are also being held by long-term institutional investors. Clearly, there remains a healthy level of interest in the crypto space.
Crypto started with Bitcoin in 2009. As it gained popularity, other cryptocurrencies, such as Namecoin and Litecoin in 2011, came into the market, each with unique features.
A major step forward happened in 2015 with Ethereum and smart contracts, opening the door for decentralised apps (dApps) and asset tokenisation. The ICO frenzy in 2017 also brought concerns about scams and regulations, which caused a downturn often referred to as the crypto winter, in 2018. This period led to a reassessment of blockchain projects and highlighted the need for practical applications.
In 2020, the landscape changed with the growth of decentralised finance (DeFi), which provided new financial services without the traditional intermediaries. This led to the creation of platforms like MakerDAO, Compound, and Uniswap.
In 2021, there was a surge in non-fungible tokens (NFTs), which showcased blockchain’s potential in art, collectibles, gaming, and entertainment. This trend caught mainstream attention. Notably, an NFT by Beeple sold for a record-breaking amount of US$69 million.
With these changes, institutions like PayPal, Visa, and Tesla have increasingly embraced cryptocurrencies, and this was proof of a growing interest in digital assets. More companies started to accept crypto, including Ralph Lauren, Microsoft, and airBaltic through direct online payments; Adidas, DoorDash, and Chevron through gift cards. Bitrefill has gone beyond retail, covering credit cards, utilities, loans, healthcare, mortgages, and more.
Several key forces are shaping this new generation of payments.
1. Cross-border payments modernisation
Traditional cross-border payments tend to be slow and costly. Regulators are paving the way for modernisation, and PayTechs are leveraging digital assets, cryptocurrencies, and distributed ledger technology to improve clearing and settlement processes.
One notable sub-trend within this space is stablecoins. Cryptocurrencies pegged to stable assets like fiat currencies are gaining popularity for cross-border payments. The annualised value transferred in Q1 2024 stands at US$6.8 trillion, which is close to the high seen in 2022 at around US$7 trillion.
New projects are popping up all the time. In January 2024, Mastercard and Swoo partnered to give crypto cash back to boost mobile payments in Eastern Europe. Seventeen thousand users earned crypto rewards for the first time, which resulted in a 56% increase in credit card spending – an approach that could spread worldwide.
2. Improved brokerage services and wallet integration
Brokers are happy to welcome new users who are looking into embracing alternative payment methods. In a survey by Mastercard a few years back, a substantial number of people expressed interest in trying out new payment methods in the next year. Specifically, many were intrigued by the idea of using crypto for their transactions.
The data support the survey results. For example, the number of daily Bitcoin transactions has increased from 276,185 a year ago to 473,328.
Cryptocurrency is becoming a preferred payment option beyond just trading on exchanges. Brokerage services like Octa are increasing the volume of such services. With this shift in focus, more people are using cryptocurrencies like Bitcoin, Ethereum, and Litecoin to make direct payments. As consumers and payment providers show bigger interest, the volume of payments also grows.
3. Central bank digital currencies (CBDCs)
BRICS nations (Brazil, Russia, India, China, and South Africa) are testing CBDCs. The Bahamas, Jamaica, and Nigeria have already launched theirs, and according to the International Monetary Fund, over 100 other countries are looking into CBDCs.
CBDCs are changing how finance works by including more people, improving rules, and making finance faster and better overall. Plus, they will reshape global monetary practices.
Since cryptocurrencies first emerged, there have always been concerns about ongoing risks.
As the masses have become more aware of these challenges, they have become less severe over time. Now, the world is at a stage where it can make the most of the provided opportunities.
In a business context, there are still gaps in product offerings and their ease of use, but it is a matter of time before these gaps are filled.
With institutions and regular users increasingly involved, there is a lot of anticipation for what is ahead. They bring credibility and stability to Bitcoin, attracting more mainstream interest. Halving is a key part of Bitcoin’s growth, but so is the ongoing development of technology and regulatory frameworks. Also, with market dynamics and user behaviour in the mix, a lot of factors will collectively shape the future trajectory of crypto.
It seems that Bitcoin will continue to mature and gain acceptance. As its role in the financial landscape becomes more pronounced, prepare for it to influence not just individual investors but also institutions and governments worldwide.
Adapted from press releases issued by Octa, an international broker that has been providing online trading services worldwide since 2011.
© 2024 Institute of Singapore Chartered Accountants