From: thepipeline_xyz
The cryptocurrency market has undergone significant transformation and growth since its early days, evolving from a niche interest to a major financial sector. This evolution has been marked by periods of quiet development, rapid expansion, and significant market shifts.
Early Beginnings (2012-2013)
In late 2012 and early 2013, Bitcoin was primarily perceived as a payment system [00:09:56]. Major companies like BitPay were prominent in this narrative [00:10:01]. While the “store of value” narrative existed, it was not as dominant [00:10:07]. Early participants engaged in automated trading, leveraging market inefficiencies on nascent exchanges [00:10:21].
The market was characterized by low aggregate daily trading volumes, typically less than a million dollars on the top exchange [00:10:44]. Mt. Gox dominated, accounting for approximately 80% of the volume [00:10:49]. Other exchanges, such as Kraken (launched around 2013) and Coinbase (initially a brokerage, its exchange launched years later), were either in early stages or not yet established as major liquidity venues [00:10:57].
A significant challenge of this period was the rapid collapse of exchanges, many having a “six-month half-life” due to hacks or banking shutdowns [00:11:24]. The eventual blow-up of Mt. Gox effectively “shut the party out for a while” [00:11:31].
The Lull (2014-2015)
Following the Mt. Gox collapse, the market entered a “real lull” through 2014 and 2015 [00:12:29]. Trading volumes plummeted, with an example given of Bitfinex, then the dominant liquidity venue, seeing only 1,100 Bitcoin traded in total, at around $200 per coin [00:12:37]. This period was so quiet that many thought the industry was “over” [00:12:51], leading some companies, like Circle, to pivot away from crypto [00:12:54].
Resurgence and Diversification (2016 Onwards)
The market began to pick up with the rise of Ethereum (ETH) and the ICO boom [00:13:00]. This period marked a significant shift; previously, businesses like Circle focused exclusively on Bitcoin, not feeling they were missing opportunities [00:16:04]. However, ETH’s growth and demand from Bitcoin traders necessitated its inclusion, highlighting a major market shift [00:16:15].
Once ETH gained significant value, it opened the door for other “alt coins” and new blockchains to emerge and gain value [00:16:34]. This led to a “hockey stick” growth in information and asset classes, making it “impossible to keep up with what was going on everywhere” [00:15:54]. The market has since grown “massively horizontal,” with a vast and often overwhelming amount of information [00:16:59].
Market Dynamics: Then vs. Now
Past (2015)
In 2015, it was possible to conceptualize everything happening in crypto [00:14:17]. Information was limited, and one could understand the entire Bitcoin market in about 20 minutes [00:15:03]. Altcoins existed but were largely immaterial, often being carbon copies of the Bitcoin codebase [00:15:10]. This period fostered a “Bitcoin Maxi” mindset among early participants who had witnessed repeated “garbage” altcoin projects [00:15:34]. Ethereum initially faced skepticism for similar reasons [00:15:40].
Present (2024)
Today, the market is vastly different. While some information asymmetry persists, particularly regarding Asian markets [00:14:57], the sheer volume and diversity of projects make it impossible to track everything [00:17:03].
A common “hot take” is that narratives like “X-chain fixes X problem” are largely “nonsense,” and that assets are generally trading based on their beta [00:20:03]. Projects that suffered more in the bear market tend to rebound faster in percentage terms, making Bitcoin appear “boring and flat” by comparison [00:20:17]. This is seen as a typical bull market function rather than a new regime [00:21:13].
Institutional Adoption and the Bitcoin ETF
The pursuit of a Bitcoin ETF has been a significant long-term catalyst, with the first filing by the Winklevoss twins in 2013 [00:22:17].
The approval of a Bitcoin ETF is considered “very important” because it provides access to traditional finance (TradFi) product pipelines, particularly passive flows into equities [00:23:14]. This opens up a new pool of potential buyers who were previously unable or slow to own the asset directly [00:23:38].
Expectations for the ETF Launch
There is an expectation of initial “noise” following the launch, with inflows potentially under or overselling expectations [00:23:50]. It’s advised not to extrapolate long-term trends from the first few weeks, as institutional adoption takes time [00:24:23]. While the ETF is a “long-tail boom” for the asset class and industry [00:24:32], active trading based on short-term initial flows is discouraged [00:24:43].
Competition among ETF providers will be fierce, leading to “massive fighting and advertising” to attract assets [00:26:37]. This increased advertising, coming from “non-sketchy sources” like BlackRock (e.g., ads on “Boomer Golf Channels”), is seen as beneficial for broader exposure and legitimacy [00:26:45].
Future of Crypto ETFs
An Ethereum ETF is considered highly probable within about a year if the Bitcoin ETF is successful [00:29:01]. However, complications exist, particularly concerning staking [00:29:21]. The general expectation is that future crypto ETFs will follow a cadence of CME futures trading for a year or two before an ETF is approved [00:28:40]. It is highly skeptical that ETFs for other altcoins like Solana will be approved for a while, if ever, without prior CME futures [00:29:06].
Institutional Perspective on Crypto
From an institutional perspective, crypto is viewed as an “uncorrelated asset which has Alpha” [00:30:17]. For large asset managers, crypto offers a way to generate returns and add uncorrelated sources of alpha that don’t simply involve adding more equities [00:30:44]. Bitcoin’s uncorrelated nature and upward trend make it attractive to “weave into a basket” as a minority position alongside fixed income and equities [00:30:58].
Trading Experiences and Market Wisdom
Craziest Trading Periods
The COVID crash was described as the “craziest period of trading” [00:32:05]. Exchanges like Bitfinex and FTX experienced significant issues, with ETH basis moving “20% plus or minus in a half hour” [00:32:38]. The counterparty risk was extreme, with uncertainty about who was solvent, compounded by the concurrent TradFi market turmoil (commodities going negative, equities limit down) [00:32:53].
Another “weirdest period” was the 48 hours after FTX’s collapse, where traders attempted to “lose money” in their FTX accounts to gain it elsewhere as a method of extracting funds from the failing exchange [00:33:53].
Trading Philosophies
Two common trading philosophies highlighted are:
- The “Hot Ball of Money” Phenomenon: This concept describes how capital rapidly moves between different asset classes, initially gaining traction in discussions about the Chinese market [00:34:58]. In crypto, this means money often flows from Bitcoin and Ethereum into various altcoins once the larger assets stabilize [00:37:49].
- “Do you want to make money or do you want to be right?”: This adage emphasizes not fighting the market [00:35:24]. If the market is moving irrationally, attempting to short it based on fundamental beliefs can lead to significant losses [00:35:38].
Advice for Traders
- Cut the Leverage: Excessive leverage is highly risky, as seen during market collapses when lenders failed and positions were forced to unwind at disadvantageous levels [00:48:26]. Second and third-order effects of leverage in the market are often unpredictable [00:48:58].
- Trade Less: Many individuals, particularly in crypto, trade too frequently, often undoing their own correct decisions [00:49:15]. For long-term theses, it’s often more beneficial to “just like sit on that and not got the brain damage” [00:49:42].
Current Trends and Future Outlook
The market is currently seeing a focus on the “parallel EVM” narrative [00:38:41], with projects like Monad garnering significant interest [00:39:11]. While there’s excitement, skepticism exists, particularly from highly technical individuals who often question new advancements [00:40:07]. This mirrors historical patterns where Bitcoin developers doubted Ethereum, and Ethereum developers doubted Solana [00:40:30]. The true test for these projects will be when they are “actually live and running” and “the rubber actually hits the road” [00:43:42].
There’s also a trend of projects “slapping” terms like “parallel EVM” onto their marketing, even if their core strategy isn’t working, leveraging current narratives for attention [00:43:04]. The community and mimetic nature of crypto are highlighted by discussions around naming conventions (e.g., “Monad” vs. “Monad”) [00:43:54].