• Team Sygnum

Crypto Primer: History of the crypto market



Cryptocurrencies have emerged over the last decade as a new asset class, a new technology platform (“the internet of money”), and a potential alternative to fiat currencies as well as to precious metals.


With the technology still in its early stages, a lot of opportunity for growth lies ahead. Meanwhile, use cases for the technology and for the assets are being tested, with many new projects launching and long-established platforms innovating. The crypto asset market is a dynamic growth market, having generated exceptional returns for early adopters, with a lot of its potential yet to be realised.





2008 and earlier: Precursor research to cryptocurrencies


The innovation of cryptocurrencies came after several attempts at creating digital payment systems, electronic currencies, and digital systems for settling financial transactions that eliminated the middlemen. Hashcash, Bit Gold, and B-Money were some of the important early attempts, which have provided important insights that informed the creation of the first successful cryptocurrency.


At the same time, advances in data science, cryptography, and the invention of the distributed ledger technology were the building blocks of the first cryptocurrency protocol. Some of the breakthrough research came from academia and renowned computer science experts. Some were the result of the work of government agencies such as the NSA, who designed and wrote the hashing algorithm used by Bitcoin.


2009 to 2011: Breakthrough – the birth of cryptocurrencies


The publication of the Bitcoin whitepaper was the pivotal event that launched the first cryptocurrency. In the first two years, only a small group of cryptographers were aware of Bitcoin’s existence and started to mine Bitcoin, which did not require special hardware at the time. Bitcoin became tradeable in 2010 with the first recorded price of $0.008.


The launch of Bitcoin spawned new projects that either attempted to broaden the set of use cases (such as Namecoin, a currency as well as a decentralised domain registration platform) or sought to improve on Bitcoin in some way (such as Litecoin, bringing faster transaction processing and lower energy use). The early alternatives to Bitcoin were modified versions of the Bitcoin protocol.


Some early adopters saw Bitcoin’s potential as an independent store of value due to its limited supply and corruption-resistant ledger. Bitcoin was also adopted as a means of payment on the dark web due to its perceived anonymity. The resulting demand spurred a rally in the price, which attracted further interest from both users and developers.


2012 to 2015: Radical innovation – 2nd generation blockchains


As more developers discovered the great potential of Bitcoin’s technology as well as its limitations, many attempted to build new types of decentralised protocols. A lot of innovative designs for cryptocurrencies were proposed in this period. Many of the now leading “altcoins” (alternatives to Bitcoin) were founded at this time.


The most prominent of these was Ethereum, which became the second largest cryptocurrency after Bitcoin. The smart contract execution capability that Ethereum introduced has played a crucial role in the further development of the crypto market since.


2016 to 2018: Irrational exuberance – ICO boom


New crypto projects have been increasingly funded through token sales, referred to as ICOs (initial coin offering). In 2016, ICOs took over from venture capital as the primary means of funding crypto projects. ICO volumes skyrocketed in 2017, with the funds raised doubling every quarter until the first quarter of 2018. Around $7 billion USD was raised by projects in 2017, and this doubled again in 2018.


Some of the ICOs were for new blockchain protocols, but many were for applications built on top of other protocols, primarily Ethereum. The Ethereum platform made it very easy to create applications and to create tokens for use in the application ecosystem.


The ICO boom coincided with a sharp rally, eventually taking bitcoin to $20,000 USD by the end of 2017, and this led to a frenzy of crypto investors buying new token issues indiscriminately. To feed this investor appetite, projects were launching, often without a well-thought-through proposition or strategy, and many were initiated by people and teams with little or no relevant experience. Some of the projects were outright scams, but the majority were simply ill conceived and poorly executed. There were high quality projects also that launched in this period, and these have survived and thrived since; however, a very high proportion of the ICOs of this era left investors holding near-worthless tokens as the ICO bubble burst.


2018 to 2019: Cold realism – crypto winter


As the market corrected from the highs, and there was a growing realisation of the lack of value in the majority of the projects of the ICO boom, a severe and lasting bear market set in, referred to as “crypto winter”. The price of Bitcoin drifted down to $3,000 USD, and altcoins lost even more value – often as much as 95% or more.


Mainstream interest in the crypto market decreased dramatically, and many predicted that the crypto market would never recover. However, “crypto winter” ended up being fertile ground for quality projects to develop. Without the frenzied interest, only projects of genuine merit could raise funds.


Many developers used this period to build new applications, especially in the decentralised finance (DeFi) sector, that would play an important role in reigniting the interest in the market and the technology. As investors filtered out good projects with sound value propositions, the foundations were laid for resuming growth.


2020: Mature growth – institutional adoption


Crypto winter ended with the DeFi summer of 2020, when the awareness and usage of DeFi applications skyrocketed to reach $2 billion USD total value locked in these applications. This DeFi rally continued in the first half of 2021, with the value locked peaking at close to $90 billion USD.


Meanwhile the macroeconomic stresses, the obvious fragility of the global financial system, and the reckless money printing of the central banks increased interest cryptocurrencies as possible safe-haven assets, inflation hedges, and even as alternatives to fiat currencies.

A few prominent companies and high-profile personalities publicised their investment in cryptocurrencies and made strongly supportive public statements, cementing the trend towards the institutionalisation of crypto.


Large financial institutions started offering cryptocurrency services to their clients, companies started accepting cryptocurrencies as payment, corporate treasuries started using cryptocurrencies to mitigate inflation risk. Meanwhile regulators have started creating a framework for crypto-based investments and services. Although this introduces costs and overheads, and infringes on the original principles of privacy and anonymity, it offers the stability and clarity that institutions require to engage with this new type of asset.


Key to remember


The crypto asset class has journeyed through the trials of early stage technologies, and through cycles of heady excitement and bitter disenchantment. The technology withstood the tests and has proven viable and antifragile, bouncing back stronger from every challenge. Cryptocurrencies are now emerging as a maturing asset universe with multiple use cases and increasingly wide adoption.



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