Arthur Hayes is a former derivatives trader for Deutsche Bank and Citigroup, and the current CEO of bitcoin derivatives exchange BitMEX.

The following article is an exclusive contribution to CoinDesk’s 2017 in Review opinion series.

Act I: Bye bye China

2017’s epic cryptocurrency rally may seem sudden. It’s not.

To understand where we went, we have to go back all the way to August 2015, when the PBOC conducted a shock devaluation of the yuan. Imminent fears of more currency debasement prompted Chinese bitcoin punters to break the cryptocurrency out of its $200-to-$300 prison.

By 1 Jan. 2017, bitcoin rose 5x to $1,000.

Unknowingly priming the market were yuan bears who dominated the news with forecasts of a mega-devaluation before Chinese New Year, and Chinese savers fearful of currency debasement continued to purchase bitcoin as a hedge. This narrative framed the bullish case for bitcoin.

At the time, the vast majority of all trading volume remained on the big three Chinese exchanges (OKCoin, Huobi and BTCC).

Then the PBOC struck. Just as it had in Dec. 2013, the PBOC reminded the world that bitcoin was risky. There was talk of inspections by government authorities into the operations of the largest exchanges. Next, the PBOC banned margin trading, the bread-and-butter exchange profit engine.

The rally turned quickly into an aggressive bear raid, chopping close to 30 percent off the price.

However, unlike 2013, bitcoin in 2017 proved a different animal. In under one week, the price completely retraced and continued to march higher. The PBOC reached for their FUD playbook and announced that the major exchanges violated KYC/AML rules and must now submit to rigorous government inspections.

The price tanked once more but less violently. Again after a few days, a complete retrace occurred, and bitcoin made new highs. Frustrated, the PBOC decreed that bitcoin withdrawals were now halted. At this point, the Chinese exchanges lost all relevance to the price of bitcoin.

The market took this negative news in stride and continued higher.

The bull market baton shifted from China to Japan and South Korea. The Japanese government regulated the market and provided a sensible regulatory regime for exchanges to operate under. South Koreans took to bitcoin as they had other digital assets, and local exchanges rose to dominate global trading volumes.

Act II: IC-what?

But just while the North Asia bitcoin melodrama played out, the ICO craze intensified.

Project after project, even those with questionable underlying value, raised gargantuan sums of money. Bancor, BAT and Status were some of the hottest deals in 2017. With ether up over 30x from the start of the year, upcoming mega-deals such as Tezos, EOS and Filecoin gained masonic status.

And the value proposition was easy enough to understand. ICOs purported to shift the balance of power away from gentil VC gatekeepers, and allow the plebs to fund the technology of tomorrow.

As ICOs raised more capital, the Chinese government curiously allowed the exchanges to re-enable bitcoin withdrawals. That set the ICO market on fire. Now the world’s greatest punters could exchange RMB for bitcoin and ether, and then purchase any ICO.

The race was on to issue ICOs aimed at the Chinese, Korean and Japanese markets.

The hunger of the proles to place their economic future in anything other than overpriced stocks and property allowed deals to raise god-like sums of money.

Act III: Back to bitcoin

As the summer waned, the scaling debate hit a fever pitch. The big and small blockers organized successive games of chicken to force the community to finally decide how bitcoin would scale.

The first game was the user-activated soft fork (UASF). The Bitcoin Core acolytes pushed forward a Bitcoin Improvement Proposal that if SegWit was not activated by Aug. 1st, a possible chain split would occur. Exchanges, miners and holders were scared shitless of the consequences of a chain split.

In desperation, the miners came together under the New York Agreement and enacted a face-saving measure to activate SegWit, and a possible hard fork to a 2 MB block size in Q4 2017.

At the last minute, a group of big blockers proposed a bitcoin hard fork to an 8 MB block. This was the birth of bitcoin cash and the start of the bitcoin-fork-o-rama.

Bitcoin cash (or bcash) emerged with a non-zero value, and exchange after exchange listed the altcoin. Some miners continued to support it for pure ideological reasons, and the pump and dump team kept the volatility high to entertain traders.

Still, something unexpected happened. Bitcoin hard forked, and both chains survived. The price dipped down to $3,000 but quickly rebounded and made higher highs.

Act IV: Regulators mount up

Back in ICO-land, the craze continued even as many governments attempted to pour cold water on the concept. Countless alphabet-letter regulatory agencies around the globe beat the drum that ICOs were volatile, of questionable value and possibly operating in violation of securities laws.

However, the punters ignored the brahmins and continued to invest.

China decided it had had enough, effectively declaring that its citizens should not be able to escape the equity and property markets. In the run up to the National Congress, bitcoin’s potential threat to societal harmony was deemed too great to avoid a good stamping out. As a result, the PBOC decreed ICO fundraising illegal, and shut down all cryptocurrency exchanges in China.

The market sighed, but continued higher. Bitcoin inexorably marched towards $10,000.

Act V: ShitCoin2x

The next obstacle was the SegWit2x hard fork.

The signers of the New York Agreement were steadfast that bitcoin should be upgraded to a 2 MB block with SegWit. However, many were perplexed why such a hard fork was needed. Surely those who wanted big blocks could purchase bcash?

The SegWit2x proponents did not heed calls for replay protection, which meant that if the hard fork happened, it might be contentious. Exchange after exchange clarified and re-clarified what they would call the “real” bitcoin.

In the end, vocal community stakeholders, myself included, called SegWit2x what it really was, a shitcoin.

At the last minute, the miners, exchanges and community leaders supporting SegWit2x dropped their support. It died an inglorious death days before the scheduled hard fork.

Act V: CME goes all-in

It was pump time for bitcoin.

As bitcoin hovered around $7,000, the community wondered what would take us to the $10,000 promised land. Then, CME Group, one of the largest derivatives exchanges in the world, announced it would list a US-dollar denominated bitcoin futures contract. That set the market on fire.

In the next few weeks, the market screamed higher and surpassed $10,000. That is where we stand now.

After hard forks, and governments attempting to stifle the rise of bitcoin, the largest exchanges in the world (the CME, the CBOE and Nasdaq) blessed bitcoin as a real asset.

The moral of 2017: BTFD!

Disagree? CoinDesk is looking for submissions to its 2017 in Review series. Email news@coindesk.com to pitch your idea and make your views heard.

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