From: thepipeline_xyz
In the nascent stages of cryptocurrency, particularly in late 2012 and early 2013, the landscape of Bitcoin trading was significantly different from today. At this time, Bitcoin was known within the trading community, though it wasn’t yet given substantial attention by the mainstream [00:09:40].
Initially, Bitcoin was largely pitched as a payment system [00:09:56], with companies like BitPay emerging as key players [00:10:03]. While the “store of value” narrative existed, it wasn’t as prominent [00:10:07].
Early Trading Environment
Dan Metvi, co-founder of CMS Holdings, recalled that the early market was characterized by volatility, presenting opportunities for bid-offer capture [00:10:15]. He personally engaged in automated trading on exchanges, leveraging his background in algorithmic trading from his day job at a hedge fund [00:10:20].
The markets were notably inefficient, and the overall trading volume was very low, making the “money small” [00:10:41].
Dominance and Downfall of Early Exchanges
The early Bitcoin trading scene was heavily dominated by Mt. Gox, which accounted for approximately 80% of the trading volume [00:10:49]. Other exchanges, described as “rag tag venues,” included Kraken (which launched around 2013 but wasn’t initially big or liquid) and Coinbase (which operated primarily as a brokerage and wouldn’t launch its exchange model until years later) [00:10:54].
A significant challenge of this period was the short lifespan of many exchanges. Dan noted that they often had a “six-month half-life,” either falling victim to hacks or being cut off from banking services [00:11:24]. Notable failures included Bitfloor and several Canadian exchanges [00:11:13]. The collapse of Mt. Gox in 2014 was a pivotal event that effectively “shut the party out for a while,” leading to a quiet and dark period for crypto in 2015 [00:11:31].
The Lull of 2014-2015
During 2014 and 2015, the crypto market experienced a significant lull. Dan recalls that Bitfinex was the dominant liquidity venue, but the total aggregate trading volume across the entire industry on its top exchange was less than a million dollars, with only about 1,100 Bitcoin trading at around $200 each [00:12:37]. This period made it seem like the industry might be “over” [00:12:51].
It was during this time that Circle, where Dan worked, decided to pivot away from crypto. [00:12:12] [00:12:54] Many individuals, including Julian, temporarily left the industry during this uncertain phase [00:13:16]. The revival of the market was largely driven by the rise of Ethereum (Eth) and the ICO boom [00:13:00].
Market Evolution
In the early days (e.g., 2015), it was possible to conceptualize everything happening in crypto in about 20 minutes, as there wasn’t much depth of information or a broad range of assets [00:14:17]. Altcoins existed but were largely immaterial, often just carbon copies of the Bitcoin codebase with little real value [00:15:10]. This led to a “Bitcoin Maxi” mindset among early participants who had seen a lot of “garbage” in the altcoin space [00:15:34].
The market fundamentally changed when Ethereum gained popularity and value, especially with the ICO boom [00:15:46]. This led to an explosion of information, making it impossible to keep up with everything, and requiring traders to care about new assets [00:15:53]. For example, Circle only started trading Eth in 2016, as it became essential to retain clients who were increasingly interested in trading Eth [00:16:04]. The success of Eth opened the door for other chains to gain value, leading to the growth of the broader crypto market [00:16:34].