The recent massive crash in the cryptocurrency market shocked investors worldwide. But Vitalik Buterin wasn’t surprised, even though the plunge wiped out a big chunk of his personal wealth.
The 27-year-old Ethereum co-founder told CNN in an exclusive interview that he believes the crypto market is in a bubble.
However, he stressed it’s “very hard to predict” exactly when the bubble will burst.
“It might have already ended,” Buterin said. “Or it could end a few months from now.”
On the morning of May 19, Ethereum, the native currency of the network Buterin created, fell below $1,900, a shocking drop of over 40% compared to the night before, according to Coinbase. It later bounced back to around $2,700 by May 20 morning, but that’s still far below its all-time high of $4,384 reached on May 11.
This crash likely hit Buterin’s net worth hard. The value of Ethereum in his public wallet stood at about $870 million on May 20 morning, down significantly from roughly $1.1 billion the day before. Despite being only 27, Buterin is a crypto veteran who has seen multiple boom and bust cycles over the years.
“So far, we’ve seen crypto bubbles burst at least three times,” the Russian-Canadian programmer who dropped out of university said. “Usually, these bubbles end because some event reveals that the crypto technology isn’t quite ready yet.”
“Cryptocurrency is more than just a toy”
Buterin laid out his vision for Ethereum in a 2013 white paper, and the cryptocurrency launched two years later. Today, it’s the world’s second-largest cryptocurrency after Bitcoin.
Unlike Bitcoin, often called “digital gold,” Ethereum is a blockchain platform for developers to build and run applications. It’s like the Android or iOS of the crypto world.
Back in late 2017, Buterin questioned whether the crypto space really deserved its market valuation, which had just surpassed $500 billion. He noted that despite the hype, crypto had achieved very little and predicted prices would soon correct.
But what Buterin values most isn’t the community’s FOMO but the “massive” progress crypto technology and applications have made in recent years.
For example, Ethereum’s activity has surged recently because it supports the sale of many non-fungible tokens, or NFTs.
“It seems crypto is closer to mainstream adoption than it was four years ago,” Buterin said. “Cryptocurrency is no longer just a toy.”
He added that while uncertain, there’s a “possibility” Ethereum could eventually catch up to and surpass Bitcoin in market value.
The “Elon factor”
Still, Ethereum and crypto face challenges. First, they remain extremely volatile, especially for retail investors used to stock market swings.
And “some billionaires” seem to treat crypto like a toy. Elon Musk is a prime example, stirring waves across the crypto market.
Community sentiment shifted dramatically after Musk tweeted on May 12 that Tesla would stop accepting Bitcoin payments over environmental concerns. That day, $365 billion vanished from the market, CNBC reported.
Buterin acknowledged crypto markets are “vulnerable” to disruptive events but will “build immunity over time.”
“Elon Musk’s tweets are something the crypto space has only literally started experiencing in the past few months,” Buterin said. “It’s reasonable to expect some craziness. But the market will learn, and Elon won’t be able to have this kind of impact forever.”
Tesla’s CEO has also pumped Dogecoin, a cryptocurrency that started as a joke, before mocking it during his recent Saturday Night Live appearance. Buterin finds Musk’s Dogecoin obsession fascinating.
“Even if you’re a billionaire worth over $100 billion or the CEO of Tesla and SpaceX, at the end of the day, you’re human, and humans have a weird connection to dogs,” Buterin shared. “I don’t think Elon Musk has any bad intentions behind his actions.”
Vitalik Buterin, Ethereum’s co-creator, says governments can’t completely shut down blockchain but can make it harder to access.
“Please don’t send me crypto”
Another popular animal-themed crypto besides Dogecoin is Shiba Inu, which also started as a joke.
This coin lost about a third of its value last week after Buterin donated roughly $1 billion worth of Shiba Inu to India’s Covid-19 relief fund.
“The challenge with these ‘dog coins’ is that their market is still pretty thin,” Buterin said. “There’s basically no way to sell $1 billion worth of Shiba Inu and get more than a few million dollars back because of huge slippage.”
Buterin recently announced plans to burn, or remove from circulation, 90% of his Shiba Inu tokens, which he received from people sending them to him. He emphasized he doesn’t want “someone” creating coins just to send them to him for “marketing” purposes.
“First, I don’t really know or understand many of these projects, so I can’t endorse them,” he said. “I see a few thousand dollars of so-called free coins in my wallet. I don’t know what they are.”
Buterin urged those wanting to “do something warm and soft” with crypto supply to donate directly to charity instead.
Governments can make crypto survival harder
The latest crypto sell-off was partly triggered by fears of a crackdown in China. On May 18, three Chinese financial and banking regulators warned financial institutions and payment companies not to engage in any crypto-related transactions or services.
Speaking on China’s policy moves, Buterin admitted regulations “are always a concern,” though fears of total bans have faded.
“Doing something like that seems much harder and less realistic,” Buterin said. “But at the same time, governments have a lot of power to make participating in crypto more difficult.”
While blockchain is decentralized and “governments can’t completely take them down,” Buterin said they can block or restrict access.
“It’s important to listen to regulators and try your best to address their concerns,” Ethereum’s creator added. One risk is that the relationship between crypto and regulators becomes “more adversarial than necessary.”
Ethereum fees will drop
Another major issue Ethereum faces is high transaction fees, which hurt user experience. Buterin acknowledged this and said the network currently handles only 20-50 transactions per second, far below demand.
But he’s “very confident” fees will drop soon thanks to a major technical overhaul that will allow rapid scaling.
Ethereum is moving away from Proof of Work, the original blockchain algorithm, toward a newer concept called Proof of Stake. Simply put, this upgrade rewards participants with Ethereum for staying online and helping keep the network secure. A recent study found this shift could cut Ethereum’s energy use by 99% compared to mining.
“We’ll go from consuming energy like a medium-sized country to just like a village,” Buterin said.
He also didn’t rule out Ethereum one day “catching up to and even surpassing Bitcoin” as the top cryptocurrency.
“If Bitcoin sticks with its current Proof-of-Work mining technology, there’s a big risk it will be left behind,” he said.
Source: CNN
