Perhaps the greatest year in the history of any single asset class has officially come to a close. At the end of 2016, the aggregate market cap of all cryptocurrencies combined was a mere $17.7 billion. But by year's end, this combined market value had skyrocketed to $613 billion, representing a better than 3,300% increase. That essentially leaves all traditional equities, including the stock market, eating the dust of cryptocurrencies.
Bitcoin, the virtual currency with the highest market cap in the world, is the cryptocurrency that really started it all, and is often credited with being the backbone of the 2017 rally. After all, it rallied from $967 per coin at the beginning of the year to finish at $14,156 per coin. Considering that it traded for just $0.003 per coin at the beginning of the decade, it's truly a remarkable run.
These cryptocurrencies ran circles around bitcoin in 2017
As good as 2017 was to bitcoin investors, it was really all about cryptocurrencies not named "bitcoin" last year. Excluding bitcoin, the aggregate market cap of every other cryptocurrency in the world grew from $2.24 billion at the beginning of the year to $374 billion by year's end. In other words, it would appear that investors were so motivated to "buy the next bitcoin" that they chose not to buy the actual bitcoin.
The result is that there were plenty of cryptocurrencies that simply ran circles around bitcoin in 2017. Here are 20 of them that absolutely left bitcoin eating their dust, according to data from CoinMarketCap.com:
- Verge: up 1,171,479%
- PIVX: up 141,880%
- Einsteinium: up 71,082%
- Reddcoin: up 67,818%
- NEO: up 52,372%
- Ripple: up 35,564%
- NEM: up 27,920%
- DigiByte: up 27,713%
- ZCoin: up 23,395%
- Stratis: up 19,270%
- Ardor: up 16,847%
- BitShares: up 16,382%
- Stellar: up 14,511%
- Lisk: up 14,033%
- Bytecoin: up 11,945%
- Nxt: up 11,783%
- Ethereum: up 9,383%
- Dash: up 9,282%
- Litecoin: up 5,260%
- Waves: up 4,922%
These were truly monumental moves. For example, $1 invested in Verge at the beginning of 2017 was worth nearly $12,000 by the end of the year.
What trends really stood out?
You might be under the impression that you could simply have thrown a dart and made a fortune in cryptocurrencies, but it wasn't exactly that easy. Certain trends definitely stood out.
Privacy coins were a huge winner
Among the 20 outperformers listed above, three (Verge, PIVX, and Dash) are players in the privacy-coin space. Privacy coins take the anonymity and privacy that's perceived to be in place with cryptocurrencies and beefs it up.
Why the sudden focus on privacy? To be honest, privacy has always been a goal of cryptocurrency developers. However, recent events have shown that anonymity on virtual currency networks isn't as rock-solid as once imagined.
A good example is the recent court case won by the Internal Revenue Service against Coinbase that allowed the tax authority access to 14,355 users' info. These users had all exchanged more than $20,000 worth of bitcoin between 2013 and 2015, yet the IRS claims that only 800 to 900 taxpayers in each of those years declared capital gains. While its purpose is to potentially find tax evaders, the bigger thesis here is that data stored in the digital ledger known as blockchain isn't as anonymous as expected.
Cryptocurrencies like Verge, Dash, PIVX, and even Monero -- which also outperformed bitcoin on a percentage basis last year -- are all working to add unique protocols to their blockchain networks that obscure the sender of funds, and in some cases, also make it impossible to determine the receiver of those funds. Privacy coins were a big win for digital currency investors in 2017.
Blockchain partnerships with brand-name companies equaled a major lift
Additionally, cryptocurrencies that were able to use their proprietary blockchain technology to snag brand-name partners were handsomely rewarded.
For instance, Ripple announced in November that it had teamed up with American Express (NYSE:AXP) and Banco Santander (NYSE:SAN) to handle select cross-border processing transactions. The partnership ties into non-card payments made by American Express users through the FX International Payment network to U.K. Santander accounts. Ripple notes that these cross-border transactions can process instantly, which would be a nice improvement over the days it can sometimes take for payments to settle when moving from one country to another. As you can see, Ripple's XRP coin rose by more than 35,500% in 2017.
Stellar (formerly Stellar Lumens) also had a pretty amazing year. In October, Stellar announced a partnership with IBM (NYSE:IBM) and KlickEx that will have a dozen large financial institutions in the South Pacific developing and deploying Stellar's blockchain technology. Considering how much business IBM does in foreign markets, and how those currencies can often be different from one country to the next, this partnership is the perfect opportunity for Stellar to demonstrate that its blockchain can not only succeed in settling transactions quickly and cheaply, but that it's also scalable to other parts of the world.
What remains to be seen is if these lofty cryptocurrency gains will hold in the year that lies ahead. But what's pretty evident is that we've moved beyond the cryptocurrency revolution being all about bitcoin, and toward it being about dozens of other promising virtual coins and proprietary blockchains.