Numerous reports indicate increasing adoption of cryptocurrencies. Even the mainstream asset management industry has launched related ETFs. However, acceptance remains slow and limited in the traditional financial system.
Cryptocurrencies are making a comeback in 2024 and have reached around $2 trillion in market value, according to data from CoinMarketCap. Bitcoin is up 18 percent year-to-date to over $52,000 and its market capitalization has exceeded $1 trillion. As a reference, the all-time high for the blue chip token’s market cap was $1.28 trillion in November 2021.
The price surge is backed by users and revenue, according to data from Statista. Over 700 million people worldwide used some form of a digital asset in 2023. Related revenues also grew 127 percent year-on-year to $60.1 billion and is expected to rise another 33 percent in 2024 to $80 billion. By 2028, this is estimated to reach $112b billion.
Traditional Finance
Despite the growth, adoption by institutions within the traditional financial system – contemporarily nicknamed «TradFi» – remains slow. According to a UBS report, «the case for cryptos remains weak» with challenges like restrictive investor requirements, price volatility and security concerns. It also described initial flows into the recently approved Bitcoin ETFs as «underwhelming».
«[W]e remain unconvinced of the structural case for crypto assets,» the Swiss bank’s chief investment office said.
J.P. Morgan CEO and renowned crypto bear Jamie Dimon also called Bitcoin a «pet rock» that «does nothing» in a «CNBC» interview at Davos last month, though he noted that he nonetheless defended the right to engage in related activity.
Trading Demand
More than just outlooks, there is also relatively limited institutional demand. According to a J.P. Morgan survey of 4,000 institutional traders, 78 percent are not planning to trade cryptocurrencies in the next five years, compared to 72 percent in 2023. Only 9 percent claim to be currently trading digital coins, up from 8 percent last year.
On technologies that will have the most impact on the future of trading, just 7 percent chose blockchain, down from 12 percent in 2023 and 25 percent in 2022. Artificial intelligence and machine learning were cited as the leader in 2024 at 61 percent.
Real Wealth
Regardless of the pace of TradFi adoption, there is real demand underpinning developments in the crypto market. And this is not just at the grassroots level. According to a Henley & Partners report in September 2023, there are 88,200 millionaires based on wealth held in cryptocurrencies, including 22 billionaires.
«Whether we like it or not, digital assets are going to be a significant source of wealth creation,» Julius Baer Asia CIO Bhaskar Laxminarayan previously told finews.asia. «Some believe that pure fintech companies will beat traditional banks in this space. I haven’t seen any proof of this yet but time will tell.»
