Bitcoin, Ethereum, and the Stable Coin Cycle

A Look at How Bitcoin and Ethereum Dominated Crypto From 2015 – 2018

The current crypto market is dominated by BTC and ETH bearishness and stable coin bullishness. When you consider that almost all stables are Bitcoin-based and Ethereum-based, the story gets interesting.

TIP: USDT is Bitcoin-based, USDT, PAX, USDC, USDG, DAI, and more are Ethereum-based. I’m not aware of a popular stable that didn’t use Bitcoin or Ethereum’s network and/or has essentially copied their code.

Consider:

Ethereum came out in 2015, and excitement over it helped to reignite the excitement in crypto after the 2014 bear market.

From 2015 – 2017 Bitcoin and Ethereum started to show signs of life and Tether began becoming popular.

Tether USDT is notably a stable coin built on a layer of the Bitcoin blockchain. It is, in that sense, effectively a Bitcoin with a some code tweaks and a different economic model.

In the summer of 2017 altcoins went flying up faster than Bitcoin, at the time it felt as if Bitcoin was losing value against alts. If you were in Bitcoin, it was like losing money in the altcoin form. If you look at the chart above and think of ETH as representing all alts, you can see this visually.

In 2017 the excitement over ICO eventually drove the crypto markets up to new heights. First Bitcoin ran to $20k, but then alts soon followed.

Then, at the height of the market in early 2018 Ethereum, Ethereum competitors (TRON and EOS for example), and Ethereum-based tokens (like half the tokens in existence including most ICO tokens) dominated a good portion of the entire crypto market cap. At the time it felt as if Bitcoin was losing value against alts (many of which were Ethereum-based assets). If you were in Bitcoin, it was like losing money in the altcoin form.

As 2018 went on and ICO drama occurred all coins dropped in price including Ethereum, its competitors, and the Ethereum-based tokens. This created what we might call “the bear market.”

In the bear market many started fleeing to Tether, the Bitcoin-based stable coin.

As 2018 progressed many Tether competitors came out. Most of these new coins were built on the Ethereum network.

In other words, Bitcoin and Ethereum were pretty much at the heart of the rise and fall of crypto from 2015 – 2018, and even though crypto prices collapsed in 2018… Bitcoin and Ethereum’s central position in the cryptoverse were never really jeopardized.

The reality is most people just flipped their speculative cryptos for stable ones, often without ever switching networks…

IT FELT LIKE LOSING MONEY IN THE STABLE FORM (AND IT WAS). However, the only thing that changed is the part of the crypto market cycle we are in. Just like at times it was better to be in ETH than BTC, in 2018 it was better to be in TUSD and USDT than ETH or BTC. Always on the same technology, essentially the same network, but in a different form of value (a stable form vs. a speculative form).

Bottomline: just like it felt like you lost BTC value against alts in the summer of 2017, it felt like you lost crypto value against stables in 2018… and indeed, you did. However, at no point in this crypto market cycle did actual dollars dominate over crypto… At every point in this cycle Bitcoin and Ethereum were the technologies that supported each market phase. This hints that neither Bitcoin nor Ethereum is dead. Instead, one should take a look at what exactly that TUSD, USDT, PAX, USDC, USDG, DAI, is doing. If it isn’t going to dollars, then what is the next step?