Marc Andreessen– the co-founder of the Andreessen Horowitz venture fund, has published a study on the shortcomings of the existing financial system. The Crypto community reacted positively to this material, as it spoke about the prospects of the blockchain in everyday life, which can solve many of the problems that are present in the financial system. After the article was published, a report on the so-called crypto market cycles was published on behalf of the Andreessen Horowitz Foundation itself. It contained information of the following nature: at a time when cryptocurrencies are becoming more expensive, the industry, in general, is developing. This is due to the fact that the media and those who previously didn’t know what cryptocurrencies and blockchain are paying attention to the segment due to its rising prices. The increased capitalisation of the crypto market thus attracts the attention of new individuals, who often bring with them new ideas for development.
Any new direction, whatever it is, needs publicity. The more information about it in news publications and the more people talk about it, the more attention is paid to this direction. That’s what happened to the crypto industry. Crypto community members have long noticed that the discussion of cryptocurrencies online has a direct proportional effect on its value. In other words, the more people talk about them, the more expensive they are, and the backward. Andreessen Horowitz analysts highlight three major cycles in the crypto market that have already passed:
- 2009–2012 years.
- 2012–2016 years.
- 2016–2019 years.
At these moments, we were able to see the Tuzemun market, the brightest of which happened in 2017. There are usually five factors that determine all three cycles:
- The price of all digital assets is beginning to rise.
- Because of the rise in the price of the crypto market in general, it’s beginning to attract the attention of the media and network members who were not previously involved in the crypto industry. Information about cryptocurrencies is beginning to be discussed in social networks and forums.
- Those who bring new ideas for the crypto industry also appear among the arrivals. At the same time, the price of digital assets begins to correct.
- Later, ideas turn into projects and startups.
- After these projects and startups have been established, a new cycle begins, which leads to an increase in the price of digital assets and the attraction of new audiences to the industry, thus provoking a new cycle.
It turns out that as soon as one cycle finishes, the next one begins to take place immediately. This has been confirmed more than once, and Andreessen Horowitz analysts have called this phenomenon “valuable innovation.” Also, after talking to many well-known personalities in the crypto industry, the conversation usually followed the same scenario:
“I learned about cryptocurrencies and blockchains in 2011/2013/2018 (just at the moment of price corrections for each cycle). At that moment, every media report about the outlook for the new sector, and the prices of digital assets were updating to a maximum. I took a serious interest in cryptocurrencies and blockchain. After careful research, I understood that cryptocurrencies — are not about money, but about technology. As a result, I decided to devote myself completely to the Blockchain.”
A team of analysts led by Eddie Lazzarin studied data on crypto companies over the last 10 years. The data from Reddit, GitHub and Pitchbook were taken into account. Due to the data collected, the cyclicality of the crypto market was confirmed not only by words but also by figures. Three main indicators were studied in each company:
- Activity of the new company. We analysed the data on the ICO and how successfully it was closed.
- Activity of the company’s developers. The data were taken from GitHub and evaluated with the sum of “ stars.”
- Social networks of companies. How active was the community within them, how often were there conversations about blockchain and cryptocurrencies.
The first cycle begins with the release of Bitcoin. It’s compared to a genesis block, as there were no blocks before Bitcoin appeared. The work was carried out from zero, founded by Satoshi Nakamoto, and a couple of years after the appearance of Bitcoin, the first startups started to appear. At the beginning of 2011, Bitcoin began trading for the first time on the Mt.Gox cryptocurrency exchange. It was then that the value of BTC rose from $1 to $31. It was mentioned in the media, and for the first time conversations on the subject of cryptocurrency and blockchain began to take place on social networks. It’s interesting that until its price went up, even the most loyal crypto enthusiasts considered Bitcoin only an experiment, but not a technology that could change the existing financial system and the world in general.
A year later, Bitcoin became cheaper, it was mentioned less and less frequently in the media, and polemics about it practically stopped on social networks. However, the process was already underway: many startups were developed that were not stopped by the decline in the price of the main cryptocurrency. They didn’t care about the cost of Bitcoin; they wanted to launch their own product, which the crypto community would welcome because they had no choice.
In the same year, 2011, the altcoins Litecoin and Namecoin appeared. Crypto wallets, mining pools, and exchanges began to appear. It was this year that Vitaly Buterin co-founded the Bitcoin Magazine. In general, the development of the crypto industry began, and the prerequisites for a new cycle appeared.
From the end of 2012, the price of Bitcoin started to rise actively. The price was rising throughout 2013 and by 2 December 2013, it had reached a historical high of $972. This was the beginning of a new cycle, Bitcoin began to be talked about again in the media, and social networks resumed talks on the subject of Blockchain and cryptography. But compared to the first cycle, there was a significant difference: the first time Bitcoin was only noticed by those who roughly understood what it was all about (programmers, financiers, technologists). Now Bitcoin has also attracted the attention of “ordinary mortals” who didn’t understand anything about cryptography, but the prospect that the coin might rise in price and at the same time increase their investment has done its job. As a result, in the second cycle, the influx of new faces into the industry was 10 times greater than in the first.
This cycle can rightly be called fundamental because over the past few years projects such as Ethereum, Monero, Ripple, and Dash have been launched. Ripple and Ethereum are the leaders on the crypto list, while Monero and Dash, although slightly behind the leaders, are still in demand. To the present day, Ethereum remains the best decentralised smart contract platform on which many startup block-chains have been built. Projects such as Tron, Waves, Cardano, and NEO have not been able to move it from a leading position.
In 2016, the price of Bitcoin also rose, but without such wild bounces, correction began. Many block-chains of startups appeared, which tried to develop and raise funds. This was the start of a new crypto market cycle.
The most significant of all the cycles that the crypto market has experienced. This cycle gave us an ICO — the initial public offering of tokens. It is true that the first ICO was conducted by the Mastercoin project, back in 2013, at the end of which we managed to raise $5 million. But the public offering of tokens became very popular in 2016. At that time, many projects rushed to a still young market, with the help of which it was possible to raise funds for development. The only problem was that in addition to those projects that really needed development funds, ICOs were also conducted by those who simply wanted money. In simple terms, there were many scam projects that only appropriated other people’s money, but were not involved in product development.
In any case, the cryptocurrencies and ICOs were heard, which contributed to the emergence of new faces in the crypto community. Bitcoin began to be purchased on a huge scale: this was the business of Wall Street collectors and ordinary factory workers, the only difference being the number of coins purchased. The so-called “Bounty Programs” played a big role in popularising cryptography and the Blockchain — the startup hires users of social networks and pays with its internal tokens, and the user, in return, promotes projects through their own pages.
Thus, by the end of 2017, Bitcoin had updated its historical maximum, which it was unable to beat even today — $20,000. But “crypto-winter” began soon: digital assets began to get cheaper, and some companies and exchanges closed. With all of this, the crypto market was able to establish itself as a young and developing sector.
In 2018, many crypto enthusiasts were very disappointed — the market was hit by a crisis that knocked down Bitcoin by more than 80%, literally destroyed thousands of ICO projects, and caused a real media resonance. The collapse of the cryptocurrency and ICO market in 2018 can only be compared with its monumental surge in 2017. Combines all the ups and downs of the 2016–2019 cycle into one important historical event, such as hype and bubble bloat. Beginning 2016, the bubble didn’t finally blow until 2019, when the ICO market finally died and cryptocurrencies began to occupy other places in the global financial system. However, as the title itself says, everything is cyclical and the new cycle did not take long.
According to the information provided to us by the Andreessen Horowitz Foundation research group, we are now at the beginning of a new cycle. This was preceded by the collapse of financial markets on 12 March 2020. Nearly half a year after that, the crypto market grew from a capitalization of $147 billion on March 13th to $364 billion. This fact shows that the crypto market is gaining momentum, not in small steps, which corresponds to the first point in cycles. Next comes Bitcoin Halving, which has been actively discussed in the media and social networks, the interest in creating national cryptocurrencies in some countries, and the legitimisation of digital assets in different countries — the second point of the cryptographic market cycle. We are now facing the third point when the price of digital assets has not yet begun to decline and has not brought new historical highs. Again, based on previous cycles, price peaks should be updated between late 2020 and mid-2021. Of course, it is possible to stick to the third point and the fact that the DeFi sector has started to actively develop as a new idea. However, many companies in the segment raised their first funds for development during the ICO, so the idea is far from new. Along with the price peaks in the crypto industry, new people should also come to be involved in creating and implementing new ideas. But how this will actually happen will not be known until six months from now.
Market crypto cycles are arranged in such a way that each of them prepares the ground for the next. Andreessen Horowitz specialists are confident that a new cycle is now being born. Between 2019 and 2020, many new block projects have appeared: games, applications, DeFi, infrastructure. Corporations such as Microsoft, IBM, Facebook, Visa, and PayPal are involved in the introduction of blockchain technologies and cryptocurrencies into their work processes. China is testing its own cryptocurrency and the EU is also interested in a state digital asset. All this cannot go away without a trace, so we will see a new price peak in the coming years.
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