Striking Similarities Between Early Crypto Markets and Stock Markets

The crypto market is often perceived as a radically disruptive newcomer to finance. Yet, on closer inspection, its tumultuous beginnings are in many ways reminiscent of the early days of stock markets. These similarities deserve a closer look. Let’s take a look at the parallels between these two worlds in terms of volatility, technological evolution and maturation.

Volatility and initially uncontrolled crashes

When the first stock markets emerged in the 18th century, speculation and volatility were the order of the day. Speculative bubbles and crashes were frequent, the result of a lack of regulation.

Similarly, the crypto market has experienced extreme volatility over the past decade. The price of bitcoin, for example, rose from under $1,000 to almost $20,000 in 2017, before collapsing the following year. Speculative chaos comparable to the early days of the stock market.

Stock market or crypto: rapid technological evolution in both cases

Another parallel is the meteoric technological transformation of the markets. Innovations have followed one another at a breakneck pace for both equities and cryptocurrencies.

On the stock market, progress has been gradual, with the introduction of electronic trading and benchmark indices. In crypto, disruptive technologies such as blockchain itself or smart contracts have seen the light of day in just a few years.

Towards mass adoption and increased regulation

Finally, we see the same path towards mainstream adoption and a strengthened regulatory framework. Equities have moved from the restricted circles of finance to mainstream investment. The same goes for crypto, with millions of users today.

As for regulation, it became stricter after the speculative excesses of both the stock market and crypto. The aim is the same: to restore confidence by regulating practices.

Although different, the chaotic beginnings of the crypto market strongly echo the early history of the stock market. This comparison sheds light on crypto’s likely trajectory towards greater maturity.