The past year has been a transformative period for bitcoin (BTC-USD) and the broader cryptocurrency market. The shift towards institutional adoption is becoming increasingly evident, with several notable milestones marking this transition.
The Launch of Spot Bitcoin ETFs
One of the most significant developments in 2024 was the launch of US-based spot bitcoin exchange-traded funds (ETFs) on January 10th. This milestone gave institutional investors access to a regulated spot bitcoin ETF, creating a foundation for new market activities, including trading against regulated futures products and incorporating bitcoin as a portfolio optimization tool.
Spot bitcoin ETFs function similarly to traditional ETFs but with a distinct focus on tracking the current price of bitcoin. These financial products directly invest in bitcoin as the underlying asset, unlike derivatives-based bitcoin ETFs that use financial instruments like futures contracts to replicate bitcoin’s prices. This distinction allows investors in spot bitcoin ETFs to have direct exposure to the price movements of bitcoin itself.
The Rise and Fall of Bitcoin
After the initial ETF-fuelled rally, bitcoin saw a sell-off before surging into a spring rally that propelled the digital asset above $73,000. "Optimism about greater incorporation of bitcoin as a tool and burgeoning liquidity in traditional crypto volatility markets drove this surge," said Gordon Grant, a cryptocurrency derivatives trader.
On March 14th, bitcoin hit a record high of $73,580, according to CoinGecko data, its price bolstered by increased inflows from fund managers such as BlackRock (BLK) and Franklin Templeton (BEN), via spot bitcoin ETFs.
Challenges and Uncertainty
The summer brought challenges, including the German government selling seized bitcoin and uncertainty surrounding the US presidential election. "Rumblings of bitcoin sales by the US government and a regulatory overhang caused a summer slump," Grant said.
A New Era for Bitcoin
Yet, by the end of the year, the election of a crypto-friendly administration in the US reinvigorated the market, pushing bitcoin beyond $100,000 in December. Since then, bitcoin has reached an all-time high above $108,000.
Institutional Interest in Bitcoin
2024 was transformative for bitcoin and the broader cryptocurrency market. Among its biggest developments was the introduction of options on spot bitcoin ETFs.
What are Options?
Options are financial derivatives that give investors the right, but not the obligation, to buy or sell an underlying asset — such as shares in a spot Bitcoin ETF — at a predetermined price before a specific expiration date. They are powerful tools for managing risk and speculating on price movements.
"This has broadened the horizon for the asset class," Grant said, highlighting the billions of dollars in daily trading volumes that now eclipse the rest of the crypto options market. These options signify a deeper integration of bitcoin into institutional capital markets, offering new tools for hedging and speculation.
A Record-Breaking Milestone
In late November, BlackRock introduced options trading for its iShares Bitcoin Trust (IBIT), generating nearly $1.9bn in notional exposure with 354,000 contracts traded. This record-breaking volume marked a significant milestone in the cryptocurrency and ETF markets.
A Shift in How Bitcoin is Utilised
Beyond being held as a store of value, bitcoin is enabling new forms of financial activity. Convertible bond issuances by digital asset companies are becoming increasingly popular, with several notable names including Nvidia and Apple.
The Future of Institutional Finance
Looking ahead to 2025, Grant believes bitcoin’s role in institutional finance will continue to evolve. "This year, bitcoin transitioned from what MicroStrategy executive chairman Michael Saylor described as ‘Promethean fire’ — a novelty that mystifies — to a combustible catalyst," he said.
The maturation of capital markets around bitcoin is set to unlock new investment opportunities and use cases. From prime services optimization to trade finance, bitcoin is becoming an increasingly versatile financial instrument. The ability to hold bitcoin in custody accounts, trade derivatives on ETFs, and integrate bitcoin into global trade frameworks heralds a new phase of adoption.
A New Financial Paradigm
"The holy grail for institutional players — seamlessly integrating bitcoin with equities, derivatives, and cash products — is now within reach," Grant said. This harmonisation could catalyse capital market decisions in the coming year.
As bitcoin begins 2025 with momentum, the groundwork laid in 2024 underscores its transition from a speculative asset to a prospective cornerstone of institutional finance. The launch of spot ETFs, the development of new financial instruments, and its integration into global trade frameworks have redefined bitcoin’s trajectory.
"We’re no longer just witnessing the evolution of an asset; we’re seeing the emergence of an entirely new financial paradigm," he said.
