There has been no lack of key dates and events in the relatively short history of cryptocurrencies. It is easy to forget that until recently there was only one cryptocurrency (Bitcoin) and the first transaction is thought to have occurred in 2010 (10,000 Bitcoin for a $25 pizza order).
From those humble beginnings, we have seen Bitcoin rise to almost $20,000 per coin and subsequently fall back to $4000, while there are now over 1500 cryptocurrencies to select from.
The meteoric rise in all things crypto in 2017 pushed the market capitalization to over $800 billion in late 2017 from less than $20 billion at the start of the year. While the market cap has fallen to just over $100 billion recently, further technological advancements and investor interest will keep the crypto markets volatile, creating opportunities for those able to deal with the price swings. We have compiled a list of the most significant headlines and developments for the crypto asset class and its impact on valuation:
- June 2011: Gawker draws attention to Bitcoin’s role in the Silk Road, ironically providing some credibility to the role of cryptocurrency as a medium of exchange, even if it was for illicit activities. The value rises 80%+ following the article.
- June 2011: Mt. Gox is hacked for the first time, impacting an estimated $8.5 million worth of coins while temporarily crashing the price of BTC to $0.01. Mt. Gox was subsequently offline for over a week and the value of BTC collapsed by 80% during the summer of 2011.
- March 2013: A software update proved incompatible with large sections of the BTC network causing the community to implement a hard fork back to the prior version that was supposed to be upgraded. Several large mining firms agree to forgo some mined coins to facilitate the version downgrade and there was a little immediate impact on prices, although the value of BTC increases by 40% in the weeks following the event.
- March 2013: Cyprus financial crisis is orchestrated between the country, ECB and the European Union. The imminent collapse of the Cypriot banking system requires a bailout that taxes larger valued bank accounts and international accounts held in the country. The ability of Bitcoin to operate virtually outside of the rules established by governments and their central banks is immediately recognised by the financial community as its
value doubles in the week following the bailout.
- October 2013: Silk Road is effectively shut down, with the arrest of Ross Ulbricht, its owner and operator on money laundering, computer hacking and narcotics trafficking charges. As part of the arrest, the FBI seized 144,000 Bitcoins, which was subsequently sold in various blocks in 2014 and 2015, netting $48 million. Following the arrest of Ulbricht in late 2013, the value of Bitcoin shuddered momentarily before surging over 5× in the following month. As an aside, 144,000 Bitcoins was worth almost $2.7 billion at the end of 2017, which while massive, pales in comparison to the $1 trillion U.S. government deficit that is forecasted for 2018.
- November 2013: U.S. Senate and Peoples Bank of China provide cryptocurrencies with some legitimacy by not declaring them an enemy of the state. U.S. Senate hearings acknowledge the innovative nature of the technology, while the then deputy governor (now Governor) of the PBOC stated that people are free to participate in the Bitcoin market. China has become a hotbed of Bitcoin interest in light of the tightly controlled exchange limitations placed on the Country’s currency, the Renminbi. The value of Bitcoin rises from $208 to $1,140 over the course of the month.
- December 2013: As quickly as China provided the market hope, it backpedals as the PBOC declares that Bitcoin is not a currency and forbids financial institutions from doing any business with the cryptocurrency. After topping out at $1,130, the value of Bitcoin falls to $500 in the week following the announcement and does not recover that valuation again for over 3 years.
- February 2014: Early 2014 proved to be a challenging year for Bitcoin exchanges with several struggling from hacks and/or external attacks. Mt. Gox proved to be the most vulnerable, as it was hacked for nearly 1 million coins, forcing it to file for bankruptcy by the end of February. The value of Bitcoin fell by almost 50% to a low of $450 near the end of the month.
- August 2016: Bitfinex, the largest cryptocurrency exchange by volume, is hacked for 120,000 Bitcoin. The price of Bitcoin is fairly stable following the news, although its value had fallen by 15% in the days prior to the announcement, raising the spectre of insider information.
- April 2017: Japan becomes the first country to recognise Bitcoin as a legal payment method. Possibly in response to the collapse of Tokyo based Mt. Gox a few years prior, or an attempt to play a bigger role in the emerging fintech space, Japan has moved to the forefront in the cryptocurrency. It is worth noting that while Bitcoin is recognised as a legal payment method it is not considered legal tender. There are also many unanswered questions for holders of cryptocurrencies in Japan, where they are treated more like an asset than a commodity. Nonetheless, Bitcoin has become resurgent in 2017, rising 30% in April to an all-time high of $2,400 that month.
- September 2017: China sours on the unregulated aspects of cryptocurrencies, first banning all ICOs in the country in early September and then shutting down all cryptocurrency exchanges later that month. This led to concerns amongst the country’s mining community that they would be targeted next, which ultimately occurred at the start of 2018. In terms of market reaction, Bitcoin initially fell 30% during the 1st ½ of the month, before recovering 70% of that decline by month-end.
- October/December 2017: Chicago Mercantile Exchange and the Chicago Board of Options Exchange announce and eventually offer the first Bitcoin futures contracts, with the approval of the U.S. Commodity Futures Trading Commission. There is a surge of new entrants into the market, with Coinbase reporting 100,000 new users after the CME announcement. Prices surge in November and December, with Ethereum rising 5× and Bitcoin up 3× in the final 2 months of the year.
- May/June 2018: Market manipulation comes into focus, with the U.S. Justice Department opening a criminal probe into whether traders used tactics such as spoofing or flooding to influence prices. A University of Texas paper authored by Professor John Griffin and Amin Shams also credibly argues that price manipulation was responsible for at least 1/2 of 2017s rise in cryptocurrency values. Valuations have been weaker all year, with Bitcoin down 30% in May and June and 70% since hitting a peak in mid-December, 2017.
- June 2018: Coinrail, a crypto exchange based in Korea, was hacked for $40 million worth of alt-coins. Neither Bitcoins nor Ethereums were apparently stolen, but both cryptocurrencies fell over 10% on the news as it contributed to the negative tone in the market. This event is notable in that other cryptocurrencies were stolen as part of this hack, but the valuation of all cryptocurrencies was impacted.