September 23, 2023

Cryptocurrency industry growth cycles: what awaits digital assets?

Cryptocurrency industry growth cycles: what awaits digital assets?

The tirade of Mark Andrissen from Andreessen Horowitz on the shortcomings of the global financial system was met with stormy The applause of most crypto enthusiasts. His call to “build”, clearly hinting at the prospects and innovativeness of blockchain developments, raised the question of solving many modern problems using distributed registry technology.

This time the venture capital company Andreessen Horowitzpublished a report on cryptocurrency cycles, which are closely related to the value of cryptocurrencies and the process of their mass adaptation. We’ll make a reservation right away that the metrics presented by analysts testify to the stable development of the sector.

What cycles has the cryptocurrency market gone through andwhat to expect in the future? What exactly are statistical metrics talking about? understood the report and forecasts regarding the further development of the crypto industry and the movement of the price of digital assets.

The interconnected cycle of the crypto industry

Industry crypto enthusiastsnot the first year, you probably noticed how the information background around cryptocurrencies alternates with cycles, directly affecting the price. At first, we become witnesses of tremendous activity and “tuzemuns”, and then we observe red graphs during the “cryptozym”, which continue until the start of a new cycle.

Experts at Andreessen Horowitz note that by now, the crypto industry has already survived three cycles:

  • The first peaked in 2011,
  • The second is in 2013,
  • The third is in 2017.

At first glance, these periods may seem unrelated, but if you look closely, they are all united by five identical scenarios that are repeated in each cycle:

  • The value of BTC and other digital assets is growing rapidly.
  • This attracts the attention of the media and society, which is starting to actively engage in cryptocurrency social networks.
  • Activity leads to a high involvement of talented crypto enthusiasts who come up with new ideas and developments, although during this period the price usually starts to go down.
  • These ideas soon translate into the creation of promising projects and the emergence of innovative startups.
  • Startups create products that inspire a new audience. Ultimately, this inspiration translates into a new rise in prices, which leads to the active phase of a new cycle.

Crypto industry cycling:

Cryptocurrency industry growth cycles: what awaits digital assets?

And so - time after time. Given the unusual specifics of the cycles, experts from Andreessen Horowitz called them "price-innovative." They emphasize that during conversations with crypto enthusiasts, in most cases, they told them about the following story:

“I first learned about cryptocurrencies in 2011(2013/2017) the year when there was a price hype and everyone trumpeted about them. Having delved into the topic, I realized that the crypto industry is not about money at all. I began to study official documents, read blogs, and each time I realized the increasing potential of blockchain technology. Ultimately, I fell in love with her. "

Research and Metrics

It is noteworthy that this vision canargue not only with words, but also with numbers. A group of analysts led by Eddie Lazzarin studied in detail various data over the past 10 years that somehow relate to distributed ledger technology. This concerns comments on Reddit, commits on GitHub, and data on investments in blockchain development from the analytic company Pitchbook.

In general, for the analysis and subsequent determination of each cycle, the company investigated three main metrics:

  • Startup activity. All young companies that successfully closed their first round of investments in the cryptocurrency / blockchain direction were taken into account.
  • Developer activity. It was measured by the sum of "stars" on GitHub in various cryptocurrency repositories.
  • Social activity. It was determined by the number of comments in various sections related to cryptocurrencies or blockchain technology.

In this case, only fresh data for a specific month or year was taken into account, without taking into account information for previous periods. Data is not cumulative.

First cycle: 2009–2012

The very first cycle began from its inceptionBitcoin networks. Metaphorically, it can be compared with a genesis block, because unlike other cycles, it has no past. It all started from scratch, and the first activity came from Satoshi Nakamoto himself and the developer community. For two years, the activity of pioneers grew and gradually aroused the interest of the first startups.

Bitcoin (BTC) eventually started trading onexchange at cheap prices, and in the summer of 2011 its price increased several times and reached the first significant peak –– and then the media and social network users started talking about it. Up to this point, even the most ardent crypto enthusiasts considered Bitcoin to be just an interesting experiment and did not even allow themselves to think that the underlying technology has real potential to change not only the financial system, but the whole world. But after the first price peak, everything changed. People realized that Bitcoin is capable of a lot.

Rising prices and media interestan impetus for ambitious entrepreneurs who realized that they can do the crypto business and make good money on it. As a result, the hype in social networks decreased, the bulls began to take profits, and the price of BTC went down. But the most important thing is that at the same time, activity among startups was maintained at the same high level even after price reductions.

So the first cryptocurrency wallets were born,crypto-exchanges, mining pools and the first altcoins appeared: Litecoin and Namecoin. This is the time when Vitalik Buterin first became interested in blockchain technology and, inspired by Bitcoin, became the co-founder of the Bitcoin Magazine.

The trend led to the completion of the first cycle and the beginning of a new one, which, as it turned out, developing exactly the same scenario, continued to promote the crypto industry to the masses.

Schedule of the first cycle of the crypto industry (2009−2012):

Cryptocurrency industry growth cycles: what awaits digital assets?

Second cycle: 2012–2016

Activity of startup companies andblockchain developers, which grew after the first price peak, led to the emergence of new interesting solutions. This contributed to positive price fluctuations, which resulted in a full-fledged bull trend, which peaked at the end of 2013, when Bitcoin first broke above $ 1000.

The price rally has led to tremendous activity insocial networks. Probably, these were the first cases when not geeks, programmers or financiers began to get acquainted with Bitcoin, but ordinary citizens who are not versed in DLT technologies.

After the boom in social networks featuresAbout ten times more developers and entrepreneurs became interested in distributed registries than in the previous cycle. The decline in prices did not bother anyone. During this period, the most important projects were funded, which today are an integral part of the cryptocurrency ecosystem.

This cycle gave us Ripple, DASH, Monero and Ethereum, which immediately after launch became the leading platform for smart contracts and continues to be considered as such until now.

Schedule of the second cycle of the crypto industry. 2012–2016:

Cryptocurrency industry growth cycles: what awaits digital assets?

Third cycle: 2016–2019

Following Ethereum & Co, a host of otherspromising projects that brought with them many innovations that began to warm up the cryptocurrency market once again. We witnessed a huge number of forks and the largest ICO boom in history. And despite the fact that many projects turned out to be fraudulent, the fact of their appearance still contributed to increasing interest in the sector and increasing the value of digital assets.

Watching the positive price movements,users of social networks around the world wondered “what are cryptocurrencies and how can I make money from them?”. They were not just interested in bitcoins, but actively bought people who did not understand anything in cryptocurrencies at all - simple “hard workers” in the hope of a better life.

Third cycle price boom peaks 17December 2017, when bitcoin for the first (and so far only) time in history rose to the mark of $ 20,000, exceeding the peak of the previous cycle by 20 times. Social networks were filled with posts about digital money from new bloggers, and the activity of developers and startups grew by about 10 times compared to the cycle earlier.

Despite the onset of “cryptozyme” in 2018,The crypto industry has managed to establish itself as a conscientious startup sector. Institutional investors became actively interested in the field, and the leading companies in the world began to seriously think about integrating blockchain technology into business.

Schedule of the third cycle of the crypto industry (2016−2019):

Cryptocurrency industry growth cycles: what awaits digital assets?

What will happen next?

We pass to the most interesting. If you display all three cycles together, we will see unstable, but stable growth in all key indicators. We remind you that the experts from Andreessen Horowitz operated exclusively with new data, so there is no cumulative effect in the statistics. It reflects the real state of affairs at each time interval.

From 2009 to 2019, the activity of developers, startups and users of social networks is growing steadily, albeit with fluctuations:

Cryptocurrency industry growth cycles: what awaits digital assets?

Analysts estimate that on average each year each indicator is growing at an impressive pace:

  • BTC price increases by 196.4%;
  • Social media activity is up 207.5%;
  • Developer activity is growing by 74.4%;
  • Startups activity - by 53.9%.

Cryptocurrency industry growth cycles: what awaits digital assets?

A key feature of cryptocurrency cycles isthe unchanging fact is that during each of them “seeds” are sown, the fruits of which germinate later and set in motion the next cycle. They generate a steady growth of new ideas, code, projects and startups - fundamental drivers of software innovations.

The cycle, which ended last year, spawned hundreds of interesting projects in a variety of areas, including payment systems, decentralized finance, games, infrastructures, and web applications.

We have also seen intense interest withparties of the leading companies of the planet (Facebook, Visa, Microsoft and IBM among others), central banks and entire states that move from words to deeds, creating their own coins or introducing blockchain technology, offering the world a whole new experience.

According to the theory of Andreessen Horowitz, soon wewe will reap the benefits of these decisions, and the crypto industry will continue to grow rapidly. It is equally important that all these developments will result in another price peak in the new cryptocurrency market cycle that has already begun. Welcome to the future.