Cryptopia: Watch this space, cryptocurrency is just getting started
December's wave of cryptocurrency hype laid the infrastructure for more rapid sustained growth in 2018.
The tail end of 2017 caught most people by complete surprise. Exchanges were suddenly being inundated with a flood of interest in cryptocurrency, like a wave that emerged at the start of the year and crested at the end.
Most couldn't keep up. Crashes were common, and most shut their doors to new customers while they consolidated and scaled up their systems.
Some of the numbers are quite remarkable. Coinbase made $1 billion in revenue that year, and almost half of it was from December alone. Binance might be even more impressive. In its first three months on the planet, it made $7.5 million in revenue. Then in the first quarter of 2018, it made $200 million. The cryptocurrency exchange became more profitable than Deutsche Bank before its first birthday.
Cryptopia, one of New Zealand's very few cryptocurrency exchanges, experienced a similar journey from even humbler origins.
At the start of 2017 it was a two-person team. The exchange was characterised by a slightly shady counter-culture vibe, an eclectic mix of obscure digital currencies and a somewhat dodgy marketplace that looked, felt and smelt like a distilled Craigslist with a cryptocurrency twist.
Then late 2017 happened. In the last few months of the year its userbase abruptly grew by almost 1,000%, and the small team was drowning. A new CEO, Alan Booth, was brought on board in February 2018. By the time finder spoke to him in early May the Cryptopia team had grown to almost 100 people, he said.
"There was a huge wall of water coming at us that none of us anticipated," he recalled. "Everyone's been under pressure."
The hard part is mostly done though, he says. The technical groundwork, such as major coin and wallet integrations and essential security measures, was the tricky part. With that critical infrastructure laid, the road to expansion is cleared. The same pattern was seen across other exchanges. Almost all of them closed their doors against the wave of new customers, then reopened with better-laid plans, much more staff and the scaled-up capacity for the future.
The hard lessons of the wild December bull run ended up clearing some critical obstacles to cryptocurrency growth, by forcing exchanges to expand their technical footprints, invest heavily in hiring and customer service, and in some cases morph from scrappy websites to enormous businesses.
The Darwinian tough love of December raised the bar across the industry, similar to the way local regulatory crackdowns were responsible for driving cryptocurrency to global expansion.
This is likely to be significant for the future of the industry.
Watch this space
Delays, outages and a generally lacking customer experience was fairly normal for all exchanges under the hammer in late 2017. Most of this was probably the result of technical and staffing limitations of the time. With the markets frothing, the best thing any new customer could hope for was an exchange that actually worked, wasn't a scam and stood a chance of signing up a new customer in under two weeks.
Just a few months later, the bar is already much higher and exchanges are ready to compete with each other in new arenas.
"No one who deals with coins really understands what happens in the backroom [of exchanges]," Booth says. They just want good service, an easy UX, diversity, low prices and all the other more traditional metrics that separate the nice and not nice businesses from each other.
"The market is already telling us you must do these," he noted. Now the competition has moved from simply being able to stay online to actually delivering an exceptional product for customers. This will undoubtedly prove to be good news for wider adoption in the future.
"We’re at the tiny tip of the start of this," Booth says. "Imagine what happens when half of the planet actually knows that they can go trade on a crypto exchange. The volume of work that will be available for exchanges all over the world will just be massively bigger than we currently see."
"I don’t think there’s a short term end in sight for this stuff," Booth says. "I think it will really make an impact in how we manage global finances and I'm glad we're here."
He's not alone there. Most exchanges are rolling out enormous growth plans for 2018, with a similar emphasis on how to best serve customers rather than simply finding their feet. The calibre of talent in the cryptocurrency space has also grown rapidly since last December, with an almost constant flow of industry veterans moving from Wall Street to the cryptosphere.
Almost everyone in the space is expecting enormous growth in 2018. And this time they plan to be ready for it.
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VEN, XLM, BTC, NANO
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