Seven Years Ago Today - What Can We Learn From The Crypto Market on 17 May 2014?

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Avatar for AbsoluteUnit
2 years ago

"Those who do not learn from history are doomed to repeat it" - Winston Churchill. It's become a cliché but the original wisdom of the statement still rings true, from Hitler and Napoleon disastrously invading Russia to the market trends of BTC and ETH. The lessons we can learn from history are both profitable and potentially life saving. Today we'll be taking a look back in time, seven years ago today, at the top 100 coins by market cap and try to figure out why some projects failed, why others have stagnated and why the top are still going strong today in an attempt to learn from our mistakes and figure out what really makes a top project succeed. Let's get into it!

The Top 10 

The first notable thing about the top 10 is that DOGE was hitting it's stride even seven years ago. All ten projects remain active, however only half remain in the top 50, those being Bitcoin, Doge, XRP, Litecoin and Dash. The other half fall anywhere from 215-1300 in market cap size. 

While researching the first big fail for this list, Peercoin (current rank #554 by market cap), it seems the #1 reason it fell off was lack of development and activity within the community. It's a great idea, the first cryptocurrency to really implement the Proof-of-Stake model, but seemed to fail the same way I see many technology-rich coins fail today. They relied too much on their technological achievements and not quite enough on the marketing, promotion and community building aspects that come with any new crypto. While building a great cryptocurrency technologically speaking is fantastic, if you can't get people to understand why or the value behind it the project will ultimately fail. There simply aren't enough techno-literate people out there to sustain it going to the moon. As I took a look at the rest of the top 10 that have fallen off to below rank 215 in market cap, it was a similar story. Great technology, inability to build community and popularity. 

The Complete Failures

Next are the complete failures, these are the projects that went either completely inactive or have less than $1,000 trading volume in the last 24h. There were 70 projects in this category. I took the time to look into each one of these projects, because I guess I have to much time on my hands. The reasons for their failures can be summed up into four categories - 

  • Another cryptocurrency came along and could do the same thing, but easier to use and cheaper

  • Major project that failed, something that was driving the project that didn't work out

  • Lead developer/s leaving, inability to keep up the project

  • A scam/rug pull project

Pretty straight forward here. A lot of crypto projects from this time were not serious or were scams, so they don't quite have the same level of commitment as projects today. Others had only one major technological achievement to warrant them being a coin so when something came along that was easier to use or cheaper people jumped on that bandwagon. 

The Winners

These are the cryptocurrencies that didn't just stand the test of time, but came out still in the top 100 seven years later. There were honestly less than what I expected in this category. There are six total projects, with five being in the top 10 from 2014 and only one, DigiByte, coming from outside the top 10. There were three things I could glean when trying to figure out how they stood the test of time, while so many other projects failed, and they were - 

  • Community of developers and users that care about the project

  • Evolution of use case and how it works

  • Solid marketing, adoption

The other interesting thing to this is four of the five in the top 10 from 2014 are still there today, those being BTC, LTC, XRP and DOGE. Dash and DigiByte however both holding on in the top 81. 

Final Thoughts

I came into this with the hypothesis that at least 25% of the top 100 would still be there today and the leading causes of failure would be due to lack of marketing and community. I came away with that hypothesis only partially true. Only 6 of the top 100 from 2014 remain in the top 100 today and a major project failing or scam/rug pull incidents were also major factors in projects going inactive.

If you were to pick a project to succeed in 2014, unless it was in the top 10 you had only a 1.11% chance of it being a hit and a 78% chance of it being an inactive project in seven years time. Pretty insane odds. Now I think the incorrect judgement to make from this would be to not invest in anything but BTC/LTC/XRP or DOGE. Seven years ago was a very different time for crypto, it was still a young community rife with shitcoins and half baked ideas. The crypto market we live in today is a very different beast. With institutional money at play now and professionally run projects half of the stuff that mooned then would not fly in today's market.

But I think the lessons that can be taken from this research are still valid. Don't invest in a potential moonshot unless your dang sure it will be a hit. As even though today we live in a much different crypto market, most projects will likely be a fail in seven years time. I like to think of each new project like a potential business I'm looking at investing in. What are some of the things you'd like to see if you were going to put your hard earned money into a new business? Certainly a quality team, maybe a good marketing strategy and probably a good use for it's product. So I just say all that to say, do your own research. Don't ever invest in something unless you've really vetted the whole thing out. The way we grow this whole crypto thing is by investing in things that actually matter. Thanks for reading, if you enjoyed slap the like button and don't forget to follow. Happy earnings!

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Avatar for AbsoluteUnit
2 years ago