Here are 10 things that just weren’t meant to be … but are:

1. Bell-bottomed jeans;
2. Microsoft Office’s “Clippy”;
3. Asbestos;
4. Parachute jackets;
5. Hydrogen blimps;
6. The Bee Gees;
7. Mullets;
8. Baby oil for suntanning;
9. Google Glass; and
10. George Lazenby as James Bond.

There are others. Lots of them.

Over this past year, one occurrence in the financial world was not supposed to happen: bitcoin should not have doubled in value.

The reasons it was not supposed to double (actually it has increased by 143% so far in dollar terms and 163% in rands) were so absolute and multitudinous that the concept was inconceivable.

Let us count the ways. First, this was the year that not one, but two high-profile cases were brought against the two largest bitcoin exchange platforms, FTX and Binance. Both cases were spectacular; both cases were won by the regulators; both cases resulted in publicity hits against the companies concerned, but not their underlying assets.

In FTX’s case, former CEO Sam Bankman-Fried was found guilty of all seven criminal counts against him and faces a maximum sentence of 115 years in prison. For Binance, the exchange was fined $4.3-billion by the US Department of Justice; its CEO, Changpeng Zhao, personally contributed $50-million to the fine and stepped away from his chief executive role as mandated by the settlement stipulations.

And yet, the new interpretation of what would have destroyed most businesses is that bitcoin succeeded not despite but because of the court and regulatory actions. The logic is that the actions have “cleaned up” the previous “wild West” sector and that with regulatory intervention, it’s possible to trust it a bit more.

Is that a credible understanding? Or is it more likely that people in the sector want to be credible since that’s how their incentives are structured?

Anyway, the second reason crypto should not have had a good year is because of macroeconomic explanations that go back decades, at least. In theory, in times of rising interest rates, non-yielding investments ought to decline. Of course, most people buying crypto are not doing so for reasons of yield but for price appreciation. But what about people who might consider selling bitcoin, for example?

You might imagine that someone holding a non-yielding asset like cryptocurrency would consider diversifying into a risk-free asset like US government bonds and earn 5% on the money. But no, it didn’t happen.

And third, the regulatory embrace, particularly in China, would normally have investors running for the hills. But as revealed by the court actions and fines imposed on crypto platforms, the industry actually does want the respectability that is often associated with regulatory action.

This is very curious, but on reflection, understandable. The problem with pseudo currencies is that investors carry a lot of uncertainty because trading and even issuing crypto involve big risks — even higher risks than normal markets, which are pretty vulnerable themselves. In this case, regulation is akin to an insurance policy.

What about the factors in the opposite direction? Well, we have known for some time about the possibility that US regulators could be forced to allow exchange-traded funds (ETFs) to invest in crypto. ETFs are enormously popular with fund managers and the result could be a big boost for at least the main crypto offerings. So that’s something.

Some of what has happened this year is simply a bounce back from a pretty dire 2022. The enduring appeal of crypto is that it avoids the dangers of fiat currency, which often loses value when governments run out of money. And that situation is clear and present now, with almost all governments around the world suffering from the post-Covid borrowing hangover.

But there is something more. If you look at the increases in crypto and the gold price, they really took off in October. That, I assume, is at least partly because of the two large military operations happening at the same time and the prospect of China underperforming economically.

Geopolitical concerns and the new prospect of the Chinese middle class diversifying its wealth are, I would guess, underpinning the price of bitcoin and, to a lesser extent ethereum, and gold for that matter.

Billionaire Warren Buffett memorably described bitcoin as “rat poison squared” during a shareholder meeting in April 2022. Bitcoin was trading near $40,000 at the time. It’s now trading at around $41,333  — a consummate lesson that sometimes things that are not supposed to happen, do. DM