Popular crypto oriented VC, Andreessen Horowitz (a16z), has released an analysis on the ‘crypto price-innovation cycle'. According to this report, the crypto market moves in cycles alternating between high and low activity. Based on the stats gathered, there have been three cycles since Bitcoin was launched.
The very first market peak was in 2011 followed by 2013 and finally 2017 when BTC rallied to its all-time high. Andreessen Horowitz noted that these cycles are influenced by an underlying order which starts with a surge in Bitcoin's price. Consequently, the activity on social media spikes together with a general interest leading to more contribution in the crypto space. Startups then join the market resulting to new products which in turn inspire new people.
Notably the Compound annual growth rates (CAGR) for all metrics have consistently increased despite the up and down trends within the cycles.
Source; Andreessen Horowitz
The Three Crypto Market Cycles
As highlighted earlier, Andreessen Horowitz found the crypto market to have lived through three cycles given the above analogy. During the first one (2009-2012), stakeholders were still intrigued on Bitcoin's value proposition although it didn't seem to have any practical use. This cycle peaked in 2011 which saw some of the largest wallet providers, miners and exchanges make a debut in the crypto market.
In the second cycle (2012-2016), Bitcoin became known past the tech world. The cycle peaked in 2013 and is characterized by startups joining the crypto industry and the launch of Ethereum blockchain.
As for the final cycle (2016-2019), crypto implications captured the attention of mainstream media. Since BTC rallied in 2017, the space has seen more developers, startups and exciting projects featuring games, finance and payments amongst others.