Words on wealth: 2025 a crazy year for crypto

A year or so ago I suggested in this column that cryptocurrencies, particularly Bitcoin, may be stabilising and becoming more respectable in investment circles. There were a couple of reasons for this: large institutional asset managers such as Blackrock had been unable to resist the tantalising profits that could be made and had climbed aboard the crypto rollercoaster; and regulators, including the Financial Sector Conduct Authority (FSCA) in South Africa, were tightening regulation.

I couldn’t have been more wrong. Bitcoin is as tumultuous as ever, and 2025 proved another crazy ride for the crypto industry in general. Newly installed US President Donald Trump and his circle unashamedly embraced the razzle-dazzle crypto culture (or should that be cult?), with Trump launching a meme coin in his name. $Trump launched at US$1.2 on January 17 and spiked at $73 two days later. It dropped almost as abruptly to around $45 before falling further and levelling out – it is now worth less than $6.

Let’s look at Bitcoin, which may have more respectability but not a great deal more stability. Almost three years ago, at the start of 2023, Bitcoin was trading at around $17 000. It enjoyed a steady rise (one of the most stable periods in its history), ending 2023 at roughly $43 000. It traded at between $60 000 and $70 000 for most of 2024, until the US election in November. Trump’s win gave Bitcoin a welcome boost, as it did for the whole crypto industry – it ended 2024 at about $95 000.

So where are we today and how did we get there? At the time of writing, Bitcoin is trading at around $90 000, down about 5% since January 1. But it behaved wildly during the year – you could say it was suffering from bipolar disorder, with alternating mood swings. It rose to $105 000 in January and fell to $80 000 by April. Then came Trump’s tariff pronouncements, which boosted its price back up to $106 000 in June. From July to the beginning of October the price fluctuated around the $117 000 mark, and Bitcoin reached a record $124 310 on October 7. From there it began falling, reaching a low of $84 209 on November 22 (a loss of 32% from its high), but it has since rallied slightly, with the US Federal Reserve’s rate-cut decision on December 10 having less of an impact than expected. By the time you read this, it could be anywhere…

Sentimental journey

Analysts are quick to give reasons for rises and falls and to make predictions – something anyone with a modicum of common sense would shy away from. One crypto expert, according to a recent Reuters report, predicted $150 000 by the end of the year. I suppose he could still be right, given the unpredictability of the crypto market.

The Reuters report, “Bitcoin’s wild 2025”, which you can read on the TechCentral website, highlights a possible correlation between Bitcoin and the US stock market. It says that, historically, Bitcoin and and the equity markets were uncorrelated because crypto was seen as an alternative investment. But with broader crypto adoption by traditional retail investors and some institutions, the correlation looks to be strengthening, it quoted analysts as saying. The analysts say crypto has grown especially sensitive to AI stock moves partly because they have been drivers of broader equity markets and partly because, like crypto, AI stocks are currently seen as somewhat speculative investments, largely dependent on investor sentiment and risk appetite..

And this gets us to the crux of the crypto conundrum: speculation based on sentiment. Is there any other investment whose price is based as much on sentiment as crypto? I can’t think of one, except perhaps gold. The difference is that gold is real and has intrinsic value, even if, in the view of Warren Buffett, it is an unproductive asset.

Since the price of crypto is almost purely based on investor sentiment, I cannot see it becoming any less volatile and unpredictable in the future.

Regulation and litigation

According to the latest Financial Stability Review released by the South African Reserve Bank (SARB), our regulators have decided to assign a financial-stability risk category for crypto assets. The report shows that the total value of crypto assets held on South Africa’s largest crypto platforms jumped from under R10 billion at the beginning of 2023 to R25.3 billion at the end of last year, with nearly 7.8 million investors in July.

The regulators are increasingly worried about capital outflows from South Africa through the use of crypto assets. The SARB noted that nearly R63 billion had flowed out of the nation’s top 10 Bitcoin wallets since January 2019. 

In other words, crypto has become too big to ignore, and the government is unlikely to continue letting users sidestep exchange-control and tax regulations.

An interesting case to watch is Standard Bank v SARB, which will come before the Supreme Court of Appeal next year. The court will need to decide whether our exchange control regulations, which date back to 1961, apply to crypto assets. Earlier this year, the Gauteng High Court decided that they didn’t and that a new legislative framework was needed to regulate cross-border flows of crypto assets. The decision has been suspended pending the outcome of the appeal.

Which does raise the question of why our legislators have been so ineffective at keeping up with the times.

* Hesse is the former editor of Personal Finance.

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