As the year comes to a close, we almost can say with certainty that we've witnessed history -- and it has nothing to do with the impressive performance put on by stocks this year. Instead, all the glory should to go to cryptocurrencies, which left traditional equities eating their dust.
At the end of 2016, the aggregate value of all virtual coins combined worked out to just $17.7 billion. But as of Dec. 26, more than 1,370 separate cryptocurrencies combined to equal a market cap of around $605 billion. That's an increase of better than 3,300%, which just might be the single greatest year for any asset class we've ever witnessed.
This rally is about more than just bitcoin
Bitcoin, the largest virtual coin by market cap, often gets most of the credit for this rally. It was the first tradable cryptocurrency, has more merchants that accept it as a form of payment than any other altcoin, and is hands down the most popular (and news-driven) cryptocurrency in the world. For much of the year, it comprised well over half of the aggregate virtual currency market cap.
However, while bitcoin had a very good year, rising from $967 a coin to nearly $20,000 at one point, it actually underperformed many of its peers. While it's tough to pinpoint why that is, my suspicion is that investors are too busy looking for the next bitcoin to actually invest in bitcoin itself. The result has been far more impressive returns from burgeoning coins that may, in some cases, rival bitcoin.
For example, Ethereum came out of nowhere in 2017 to easily become the second-largest cryptocurrency by market cap. Ethereum's blockchain technology is currently being tested in small-scale and pilot projects in various industries by 200 organizations around the globe. It's not been hard to get investors excited about blockchain given its numerous advantages over today's payment networks, which is a big reason why Ethereum has done so well -- up more than 10,000% at one point this year.
These cryptocurrencies crushed it in 2017
Yet even Ethereum takes a back seat to some other players. Three cryptocurrencies, in particular, surged higher by more than 100,000% at one point during 2017, and in the process, firmly announced their arrival to virtual coin investors.
Verge: 1,581,942% peak gain
If there's such a thing as a true standout among a sea of cryptocurrencies that gained between 1,000% and 10,000% for the year, it's Verge. At the beginning of the year, according to data from CoinMarketCap.com, Verge was valued at $0.000019 per coin, and its average daily trading volume was around 200 coins.
As of Dec. 23, 2017, Verge peaked at $0.300588 per coin, representing a peak gain of almost 1,582,000%, with volume of close to 1 billion coins changing hands that day. To put this move into even more perspective, investing $64 into Verge's XVG coin on Dec. 31, and being lucky enough to sell at the peak on Dec. 23, 2017, would have made you a millionaire.
While the fear of missing out on big gains has likely played a big role in pushing Verge higher this year, its big gains of late are a result of increasing interest in privacy coins. Simply put, privacy coins take the basic principles of cryptocurrency transactions and focus on boosting the anonymity and privacy so the sender -- and possibly receiver -- of funds isn't traceable.
Why the sudden interest in privacy coins, you ask? Not too long ago, the Internal Revenue Service (IRS) won a court case that required cryptocurrency exchange Coinbase to hand over the information of 14,355 users who'd exchanged more than $20,000 worth of bitcoin between 2013 and 2015. In each of these years in question, the IRS notes that just 800 to 900 taxpayers a year recognized capital gains on bitcoin, meaning some folks may have been evading paying tax on their cryptocurrency capital gains. But the bigger picture here is that these transactions, once thought to be anonymous, aren't so anonymous after all.
Verge seeks to change that. Its Tor and I2P networks are geared at obscuring IP addresses, with its most prominent product, the Tor Android Wallet, designed to provide mobile anonymity. Additionally, its blockchain is designed to process transactions at an average time of five seconds, which is much quicker than bitcoin. With the Wraith protocol recently added, which allows users to switch between public and private ledgers, it's pretty evident that Verge is turning heads.
Einsteinium: 262,195% peak gain
In reality, Einsteinium and the EMC2 coin were a relative mile away from surpassing Verge, but I doubt any investors were complaining. EMC2 moved from a closing price of $0.001098 on Dec. 31, 2016 to a peak price of $2.88 per EMC2 coin on Dec. 7, which is good enough for a 262,195% gain.
What's really set Einsteinium apart from its peers is the Einsteinium Foundation's mission. Rather than focusing on becoming a medium of payment facilitation, or attempting to become the next-greatest blockchain for enterprises, the Foundation is all about giving back. Its mission is to be a charitable fund for scientific, technological, educational, and blockchain-based projects.
The way it works is that every time a block reward is paid out -- block rewards are EMC2 coins given as a reward to miners who proof transactions -- the Foundation nets 2.5% of the reward. Roughly 80% of this reward will go toward scientific projects, with the remaining 20% used for marketing and donations. The Foundation claims to have gifted 16 million EMC2 coins toward projects to date.
In October, the Foundation announced that it would be implementing a hard fork -- which completed on Dec. 10 -- that was designed to reduce its maximum EMC2 coin supply by 55 million, to 245 million. Reducing the maximum supply of coins makes the remaining coins that much scarcer, and potentially worth more.
Just over a week ago, the Foundation also announced the desire to change its mining algorithm in order to make it AISC resistant and GPU (graphics processing unit) friendly. The reason for doing this is to make mining profitable and doable for any individual who wants to get involved. Opening EMC2 to more mining candidates should keep any one party from centralizing ownership.
Reddcoin: 132,712% peak gain
Another cryptocurrency that's absolutely soared this year is the little-known Reddcoin, which began the year at just $0.000017 per coin and peaked at $0.022578 on Christmas Day. I know hitting a bit over $0.02 per coin might not sound really exciting, but that trough-to-peak move in less than a year works out to a 132,712% gain. In terms of market cap, we're talking about going from just over $500,000 to nearly $650 million in just shy of a year.
What is Reddcoin, you ask? According to its website, it's a virtual currency focused on social networking, and the numerous microtransactions conducted on social networks. Reddcoin relies on what's known as proof-of-stake velocity (PoSV), as opposed to mining, to proof transactions and create blocks. By relying on PoSV, it encourages ownership in Reddcoin (the stake), as well as activity (the velocity). In order to find a valid block and receive block rewards, you merely need to own Reddcoins and have your wallet running and connected to the internet.
Another interesting feature of Reddcoin is that of micro-donations. Its decentralized tip platform allows users to send and receive digital currency on social networks, and to support content creators through small donations.
However, the biggest catalyst just might be the nod it was given by cryptocurrency enthusiast and outspoken CEO of MGT Investments John McAfee on Dec. 24. McAfee named it his "coin of the day" in a tweet, and suggested that it's "the only currency that many children under the age of 10 have ever known."
Can these three supercharged cryptocurrencies keep it up in 2018? That remains to be seen, but if I were a betting man, I'd say no.