Opinion: As bitcoin becomes boring, the days of outsized crypto gains are ending

At the peak of the bull market, the rise to almost US$70,000 per bitcoin last year seemed like a big increase. What a number!

What unit of something investable is actually $70,000? Sure, one Berkshire Hathaway Inc. Class-A share is about $400,000. But what else? A barrel of oil is considered expensive when it is over 100 dollars.

But absolute numbers are misleading because what constitutes a single unit is completely arbitrary.

Without the stock splits — where one share is arbitrarily divided into a certain number so that individual shares appear cheaper — one Apple Inc. share would be worth more than $30,000, compared to $130 currently.

It is therefore more accurate not to look at absolute numbers, but at percentages. And through that lens, bitcoin hasn’t really appreciated very much. Throughout each market cycle, the highs have actually been lower.

It reflects major forces flowing through the markets that have only been more intense lately: the regulation and enforcement that, while welcomed by some, is changing crypto in a fundamental way.

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All that points to an inevitability: the days of constant wild price swings and big gains are over.

In the boom-bust cycles of bitcoin, there have been three notable peaks: USD 1,000 in 2013, almost USD 20,000 in 2017 and almost USD 70,000 in 2021.

Each time the increase in percentage has decreased. The last peak was only a little more than three times the one before it. But 2017’s US$20,000 was 20 times the 2013 peak.

And 2013’s USD 1000, compared to prices before? Well, before that the bitcoin markets were even less established than now and it is difficult to objectively determine the price.

Those were the days when, famously, 10,000 units were exchanged for two pizzas. For all intents and purposes, bitcoin was practical worthless at the time. From that to the 2013 peak of $1,000 – whatever the multiple, it was definitely a lot more than 20 times.

What had driven this rise was that it was easy to participate for both investors and those who make the investment products.

Unlike any other financial instrument, bitcoin, and the world of cryptocurrency it spawned, had not come without paperwork for anyone. You can meet someone off Craigslist, pay them cash and receive bitcoins on a smartphone app.

On the industry side, anyone could start their own coin or exchange platform. The collapsed QuadrigCX switchboard was notoriously just a guy on his laptop.

All that ease resulted in a wave of new money entering the crypto world, money that hadn’t been in the markets before. In early 2022, a survey found that 55 percent of bitcoin investors had started within the past year.

It won’t go on much longer. And it is not just because of the macroeconomic conditions with higher interest rates and more expensive borrowing.

Enforcement has been outstanding. The US government has imposed sanctions on some blockchain codes, as both the Justice Department and an increasingly hawkish Securities and Exchange Commission step up scrutiny of the industry.

The world’s largest exchange platform, Binance, is under investigation by almost all arms of the US government, with some in the industry speculating that the founder is avoiding the country due to fear of arrest (which he has denied).

Even the creators of the Bored Ape Yacht Club NFT (non-fungible token) collection of digital images are under investigation by the SEC.

On Monday, the Organization for Economic Co-operation and Development proposed new global rules for crypto, and the European Union each set its own new rules.

The European Commission has looked into analyzing data on the Ethereum platform, which underpins a large part of the crypto world. Such analysis has been a big business for firms that do it – crypto activity is becoming more and more open and traceable.

In short, this is a reversal of the phenomenon that had made crypto rally so hard in the previous years. Under the growing regulatory yoke, crypto is being forced to become more like regular finance, with all the attendant red tape.

To be sure, this does not mean that in the near future crypto’s price movements will become like regular finance, or that we will never again see headlines with much larger number for one unit of bitcoin.

It’s just that those days would be fewer and further between, and the market would take much longer to reach the big numbers.

Because the ridiculous ease with which people can both invest in crypto or create investment products is becoming a thing of the past. And while crypto may be safer, less volatile and more agreeable to the government as a result, it will also become duller and less attractive to those seeking its traditional outsized gains.