Throughout history, the stock market has been the greatest creator of long-term wealth. But in 2017, the stock market, which has historically returned about 7% per year, inclusive of dividend reinvestment and adjusted for inflation, took a big back seat to the cryptocurrency market.

Just how big of a back seat? U.S. stock indexes were generally lauded for roughly 20% gains in 2017, which roughly tripled their historic average. Meanwhile, the aggregate cryptocurrency market cap increased in value by more than 3,300% from Dec. 31, 2016, to Dec. 31, 2017, according to CoinMarketCap.com.

View photos A physical gold bitcoin on a table. More

Image source: Getty Images.

Bitcoin, the world's largest virtual currency by market cap, and the digital currency most accepted by merchants worldwide, is often credited with putting the cryptocurrency rally on its back last year. Having begun the year at just $967 per coin, bitcoin wound up ending the year at $14,156 per coin after nearly hitting $20,000 in December.

However, the rally in cryptocurrencies last year was about way more than just bitcoin. If anything, it was about everything not named bitcoin. The aggregate market value of every investable cryptocurrency, excluding bitcoin, catapulted from $2.24 billion as of Dec. 31, 2016, to $374 billion by the end of the year. In other words, the search for the next bitcoin is what really drove cryptocurrency gains in 2017.

Privacy coins dazzled in 2017

Among the trends that really stood out and pushed virtual coins higher was the late-year excitement over privacy coins. All cryptocurrency blockchain networks are designed to be secure and provide some degree of privacy. After all, no bank account or Social Security number is required to purchase virtual currencies, which is one of their primary selling points. But, as we've learned recently, cryptocurrency transactions aren't nearly as anonymous as once believed.

In late November, the Internal Revenue Service (IRS) won a court case against cryptocurrency exchange Coinbase that required Coinbase to turn over information on 14,355 users. These users had exchanged at least $20,000 worth of bitcoin between 2013 and 2015. Though the IRS's purpose for this case was to seek out possible tax evaders (only 800 to 900 taxpayers a year reported bitcoin-based capital gains between 2013 and 2015), the bigger picture is that these blockchain-based transactions could be traced back to individual people. In short, the bitcoin blockchain wasn't so anonymous after all.

View photos A person wearing black gloves typing on a keyboard with a dark background. More

Story continues