Blockchain-based digital assets were once traded primarily by a small group of technology enthusiasts but have since evolved into a multibillion-dollar asset class, now embraced by both institutional and retail investors. According to the Bitcoin white paper released in 2008, the original form of cryptocurrency was designed to facilitate peer-to-peer payments over the Internet without central intermediaries, such as commercial banks or central banks.
This innovation leveraged several technological advancements, including the internet, digital signatures, cryptography, and consensus mechanisms. Although initially designed for peer-to-peer transactions, Bitcoin has since evolved into a speculative asset class and a store of value, primarily due to its decentralised nature, limited supply, and deflationary characteristics.
While there are still sceptics regarding Bitcoin’s role as a store of value, its adoption continues to grow. One notable example is MicroStrategy Inc. (MSTR), a publicly traded business intelligence, software, and cloud services company listed on the Nasdaq.
The company made its first Bitcoin purchase of 21,454 coins in August 2020. Michael Saylor, the CEO of MicroStrategy and the longest-standing CEO of a Nasdaq-listed company, invested in Bitcoin as a hedge against inflation, viewing it as a superior store of value compared to cash.
He was concerned about the devaluation of fiat currencies, and identified Bitcoin’s potential as “digital gold,” viewing it as a strategic asset to preserve the company’s long-term value and capitalise on its increasing institutional adoption.
Over the past five years, MicroStrategy’s share price has experienced remarkable growth, increasing 1,250%, far outpacing the S&P 500’s five-year return of 96%. As of 20 September 2024, MicroStrategy owned 252,220 bitcoins with an average purchase price of $39,292 per Bitcoin, representing a US$9.91-billion investment.
With the price currently above $67,000 per Bitcoin, the company’s holdings are now valued at approximately US$16.9 billion, underscoring the substantial appreciation in value.
Globally, digital assets are reshaping the financial landscape. Larry Fink, the CEO of BlackRock, once a Bitcoin sceptic, is a prime example of this shift. Initially cautious about cryptocurrencies, Fink has since recognised Bitcoin as a legitimate asset class, even comparing it to gold as a store of value, particularly during periods of geopolitical risk and inflation.
His change of heart reflects a broader trend among institutional investors, who increasingly acknowledge the potential of digital assets. As the head of BlackRock, the world’s largest asset manager with roughly $11 trillion in assets under management, Fink’s endorsement has been pivotal in legitimising Bitcoin in mainstream finance. BlackRock’s application for a Bitcoin ETF further underscores the growing acceptance of Bitcoin as a viable investment vehicle.
In early 2024, the Securities and Exchange Commission (SEC) approved several Bitcoin spot ETFs in the U.S., sparking a wave of interest. These ETFs quickly gained traction, surpassing $17 billion in net inflows within just eight months—a testament to Bitcoin’s rapid adoption.
In contrast, gold ETFs, introduced in 2003, took nearly three years to reach the same level of investment. This swift rise in Bitcoin ETFs highlights the accelerating interest in digital assets, far exceeding the early adoption curve of gold ETFs and reinforcing Bitcoin’s appeal as a modern store of value.
Although Bitcoin has evolved as a store of value, it has remained in its original intent as a medium of exchange. Beyond its role as an investment, Bitcoin’s use as a payment method is gaining significant momentum.
Leading global companies such as Microsoft, AT&T, and PayPal have integrated Bitcoin into their payment systems, enabling consumers to use cryptocurrency for everyday transactions. This shift reflects a broader acceptance of digital assets as a legitimate means of exchange.
In South Africa, Bitcoin adoption is also rising. Recently, Pick n Pay, one of the country’s largest supermarket chains, began accepting Bitcoin payments at over 1,600 stores nationwide, enabling customers to pay for daily essentials with cryptocurrency.
Additionally, the integration of a prominent South African cryptocurrency exchange and Zapper allows users to make seamless Bitcoin payments at a growing number of retailers. This development marks a significant step in South Africa’s embrace of digital assets, further bridging the gap between cryptocurrency and everyday commerce.
Moreover, we are seeing instances where South African businesses have started holding Bitcoin on their balance sheets as a store of value, using it as a hedge against inflation. While the asset class experiences daily volatility, its long-term performance has increasingly demonstrated its potential as a reliable store of value.
As Bitcoin continues to reshape traditional financial systems, its dual role as a store of value and a medium of exchange is becoming increasingly clear. While the U.S. has witnessed rapid institutional and retail adoption through ETFs and corporate acceptance, the question remains: When will South Africa see more widespread adoption of Bitcoin?
As infrastructure and regulatory frameworks evolve, the potential for a similar local transformation is becoming more likely, sparking discussions about Bitcoin’s role in the future of commerce in South Africa.
- Wiehann Olivier, Partner and fintech & digital assets lead for Forvis Mazars in South Africa
