This happens when the colour carrier frequency is outside the tolerance limits.
When your TFT isn't anymore able to sync to the colour phase, those psychedelic colours result - or an altogether b/w picture.
Please identify the mainboard revision (DIN or 2-prong PSU plug):
The fine adjustment of the oscillator is done by a capacitor trimmer in the vicinity of the VIC chip. On the 2-prong, this is C35 near to the quartz. On the DIN mainboard, this is C48. In most cases the VIC chip and the trimmer are located inside a metallic RF box.
Mark the old position of the trimmer or remember it. Normally, you'd need a non-metallic adjustment stylus, however while running the computer reacts to changes of the frequency quite often with a crash including black screen. Therefore, a normal screwdriver also does the service - while the VIC-20 is switched off. A quarter-turn at max in one of the two directions should suffice.
If you got it quite right, you have stable colours again. Do several trials in the warmed-up state to find the range where you have colour, finally set the trimmer into the middle of that range.
It is the 2 prong version. The trimmer tweaking you are explaining as alteady been done (There are 2 plastic round trimmer one for video and one for black I believe) as I wasn't happy with the picture output. Anyway this strange artifact is still coming out from time to time. Maybe I need to trim again.
Hope something is not failing in my VIC. I am using a video to SCART cable working good with a C64.