Vitalik Buterin: The days of 1,000x crypto gains are over

When moon? December 2017. Now crypto's on the way back to Earth, Buterin says.

The days of 1,000x cryptocurrency gains are over, Ethereum founder Vitalik Buterin said to Bloomberg, pointing out that awareness among potential buyers has reached saturation point. Many others have previously said the same, such as Barclays Bank which tastefully likened bitcoin to a spreading disease which has run out of victims.

Rough calculations show that further 1,000x gains on bitcoin would, after all 21 million have been mined, put its total market cap north of US$130 trillion, considerably more than the entire world economy, so the numbers check out.

"The blockchain space is getting to the point where there's a ceiling in sight. If you talk to the average educated person at this point, they probably have heard of blockchain at least once. There isn't an opportunity for yet another 1,000-times growth in anything in the space anymore," Buterin said.

What's needed now is for people to shift efforts to real applications, he said, and to stop pushing cryptocurrency at people who have heard of it but aren't interested.

It's a very safe assumption that bitcoin isn't going to multiply a thousand-fold again, and the implications of it doing so conjure up a picture of a future where roving gangs break into hospitals to unplug life support machines so they can mine more bitcoin, but there's technically no reason why other projects can't still experience similar success.

Over 70% of people have heard of bitcoin, or some other kind of cryptocurrency, but fewer than 20% of people have heard of Ethereum and fewer still can name any other coin.

Awareness of bitcoin and cryptocurrency as a concept may be nearing saturation point, but functionally there's still a lot of room for growth. The overall much higher awareness of cryptocurrency in general now compared to ten years ago means it's probably extremely unlikely, but that's not the same as impossible.

But what about the possibility of getting into a "moon lambo" ICO? It might be equally near-impossible, with a clear and steady decline in returns as time goes by.

Consider the original Ethereum ICO in 2014, where 1 BTC (worth US$600 at the time) would score someone 2,000 ETH in the earliest sales stage. That's 30 cents per ETH. Current ETH prices of $200 are actually less than a 1,000x gain, and are instead only a measly 666x return on investment. But at its peak it was closer to a 5,000x return on investment.

It's not the most profitable ever ICO though. That honour goes to NXT, which didn't actually run an ICO but instead solicited donations, raising a total of $16,800 from 78 donors and distributing about a billion tokens accordingly. Each token was worth about a hundredth of a cent, and it reached $1.80 at its peak. That's approximately a bazillion times return on investment for someone selling at the peak.

The second most profitable ICO was IOTA, back in 2015, which has delivered similar returns to ICO participants, while the third most profitable at current prices was Ethereum. The point is that 1,000x returns are rare, even among the best-known millionaire-maker ICOs of years ago, and it has been downhill since then.

According to ICO Stats, at current prices, one might have pulled off a cheeky tenfold increase from certain ICOs in 2017, but you're still more likely to have lost money.

In 2018, it's probably reasonable to forget about those ten-fold ICO gains as well. The most statistically profitable route, even assuming one chooses the good non-scammy projects, is to dump ICO tokens as soon as possible after they hit the market. With "hodling" no longer being the thing to do, those monumental ICO gains, which take a lot of time to achieve, are probably more or less off the table. These days an exceptional project is one that actually manages to stay above its ICO price.

But in certain rare cases, a tenfold gain might be perfectly possible, even if it's probably not going to happen in the near future with ICOs. That's less than what many experts and some so-called experts predict for bitcoin going forwards. And assuming the cryptocurrency markets do start acting like a more rational way to invest in fledgling tech companies, it's not that unrealistic.

Is Vitalik Buterin stating the obvious? Yes. Is it worth saying anyway? Probably.

Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VET, XLM, BTC and ADA.

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