Some key highlights include the launch of US-based spot bitcoin exchange-traded funds (ETFs) in January, the rollout of options on these ETFs, and bitcoin's impressive climb past the $100,000 (£78,600) threshold in December.
This excitement is building as people look forward to a potentially crypto-friendly US administration with president-elect Donald Trump taking office early next year.
Yahoo Finance UK caught up with cryptocurrency derivatives trader Gordon Grant to discuss the ups and downs of 2024 and what they could mean for bitcoin's path in 2025.
The introduction of spot bitcoin ETFs on January 10 sparked an early rally, pushing bitcoin from the high $30,000s to nearly $48,000.
“The volumes were fantastic right from the start,” Grant noted. This development opened the door for institutional investors to engage with a regulated spot bitcoin ETF, laying the groundwork for new market activities, such as trading against regulated futures and using bitcoin for portfolio optimization.
Spot bitcoin ETFs work like traditional ETFs but specifically aim to track the current bitcoin price. They invest directly in bitcoin as the underlying asset, unlike derivatives-based ETFs that rely on financial instruments like futures contracts to mimic bitcoin's price. This setup gives investors in spot bitcoin ETFs direct exposure to bitcoin's price fluctuations.
That said, the year wasn’t all smooth sailing. After the initial ETF-driven rally, bitcoin experienced a sell-off before bouncing back in the spring, eventually pushing the digital asset above $73,000. “The optimism around bitcoin being used more widely and the growing liquidity in traditional crypto volatility markets fueled this rise,” Grant explained.
Institutional interest in bitcoin
On March 14, bitcoin soared to an all-time high of $73,580, as reported by CoinGecko. This surge was fueled by increased investments from major fund managers like BlackRock and Franklin Templeton through spot bitcoin ETFs.
However, the summer brought its own set of hurdles, including the German government offloading seized bitcoin and the uncertainty surrounding the upcoming US presidential election.
“Whispers of bitcoin sales by the US government and regulatory concerns led to a summer downturn,” Grant noted.
By year’s end, the election of a pro-crypto administration in the US revitalized the market, pushing bitcoin past the $100,000 mark in December. It didn’t stop there; bitcoin eventually hit a new peak above $108,000.
One of the standout developments in 2024 was the launch of options for spot bitcoin ETFs.
Options are financial instruments that allow investors the choice to buy or sell an asset—like shares in a spot Bitcoin ETF—at a set price before a certain date. They’re great for managing risk and speculating on price changes.
“This has expanded the possibilities for the asset class,” Grant said, pointing out the billions in daily trading volumes that now surpass the rest of the crypto options market. These options represent a stronger integration of bitcoin into institutional capital markets, providing fresh tools for hedging and speculation.
In late November, BlackRock rolled out options trading for its iShares Bitcoin Trust (IBIT), racking up nearly $1.9 billion in notional exposure with 354,000 contracts traded. This record-setting volume marked a major milestone for both the cryptocurrency and ETF sectors.
The road ahead for the bitcoin
The future looks bright for bitcoin as we head into 2025. Grant thinks that its role in institutional finance is going to keep changing. He pointed out that this year, bitcoin moved from being seen as a mysterious novelty, as MicroStrategy's Michael Saylor put it, to becoming a powerful force in the financial world.
With capital markets around bitcoin maturing, we're about to see a wave of new investment opportunities and practical applications.
Bitcoin is proving to be a flexible financial tool, from optimizing prime services to enhancing trade finance. The ability to hold bitcoin in custody accounts, trade derivatives on ETFs, and weave it into global trade systems marks a significant shift in how it's adopted.
Grant mentioned that the ultimate goal for institutional investors—smoothly integrating bitcoin with stocks, derivatives, and cash products—is now closer than ever. This integration could really influence capital market strategies in the near future.
As bitcoin kicks off 2025 with strong momentum, the progress made in 2024 highlights its shift from a speculative asset to a potential key player in institutional finance. The introduction of spot ETFs, new financial products, and its role in global trade are all reshaping bitcoin's path.
"We're not just watching an asset evolve; we're witnessing the birth of a whole new financial landscape," he said.