Imagine Bitcoin which is the the spearhead of cryptocurrencies, to crash and from 28.000 euros today to fall to zero. What is going to happen then?
If you think we have a lot of imagination, laugh. In a global financial market where even national currencies are at risk, cryptocurrencies are the least volatile and unpredictable. And Bitcoin is not safe.
The closest example of a cryptocurrency that "died" is the Terra Luna which while at the beginning of April 2022 had reached the upper price of 105,00 euros, on May 11, 2022 literally zeroed and had no value.
And in general, cryptocurrencies that are not controlled by any organization or state or at least a central authority, but are 100% dependent on the free market, it makes sense to have incredible fluctuations, with one month being eight times the value and the other not have almost no value.
Unfortunately, this is the game when it comes to encryption. But what would happen if the market's oldest and most valuable asset, Bitcoin, crashed to zero?
The volatility of Bitcoin
Bitcoin, but also every cryptocurrency is not controlled by any public authority. But neither is it associated with any real-world assets, such as gold, oil, etc.
In addition, while in government currencies the increase in their quantity is proportional to the increase in the associated asset, in Bitcoin the increase in its quantity is done only by wasting computing power and time, by mining.
All of the above make it prone to large fluctuations, even crashes, like all cryptocurrencies. If you watch its price for 5 years, you will understand what we mean.
If you consider all of the above reasons and since the instability factors of regular currencies also affect cryptocurrencies, you realize that no one can really know what can happen to Bitcoin every day. Many investors will never anticipate an impending crash, and that is why investing money in encryption can be risky.
Bitcoin saw its peak price around November 2021, when it climbed to $ 67.000. But it also had crashes, such as in April 2018, May 2021, January 2022 and most recently in May 2022, where it is at $ 28.000. The above curve is quite clear and in fact we would say scary, if you imagine that the ups and downs are in the order of $ 32.000.
Thus, it is safe to say that even the largest cryptocurrencies can be crushed just as quickly as anything else. But what if a crash happened that drove the price of Bitcoin to zero? Is this possible and what would be the consequences if such an event happened?
Can the price of Bitcoin fall to zero?
First of all, it is technically possible for the price of any cryptocurrency to fall to zero. It all started with Terra Luna. But the more popular and mobile a cryptocurrency is, the more cosmopolitan the changes must be in order for it to become a catastrophic loss of value.
And this is a consequence of both their way of operating and their acceptance by investors and states.
Bitcoin is often bought as a long-term or short-term investment plan. Some people like to buy it when the price falls in anticipation of the next increase and then sell it as soon as it happens. Others buy Bitcoin in order to keep it for much longer, despite the ups and downs that may follow.
But there are those who believe that Bitcoin (or cryptography in general) will one day replace the traditional market. These cryptocurrency lovers often believe that countries' central banks are dangerous or often unfair and that financial decentralization by banking authorities is the future. For one who has such a belief, buying Bitcoin is more than just an investment. He is passionate about cryptocurrencies.
Nowadays, Bitcoin can also be used to buy goods and services in various countries around the world. Some nations have even adopted it as their national currency! El Salvador adopted Bitcoin as legal tender in 2021 (with very mixed results). Other countries are even developing their own cryptocurrencies for use by citizens as a method of payment.
In addition, it would be incredibly difficult to dismantle the entire Bitcoin network, even if it was restricted or made illegal in most countries worldwide. With more than 100.000 active nodes on the Bitcoin network spread around the world, it would take a loss of credibility or interest for these nodes to actually destroy the blockchain.
Read: How Blockchain Works Guide for Beginners
Destroying Bitcoin would not be the same as taking down a website. Its complex infrastructure, along with its decentralized nature of it, gives it a strong base that is not easy to destabilize, even if you are a strong government.
In addition, the big players in the crypto industry can have a huge impact on the price of Bitcoin. Known as crypto whales, these individuals or groups possess huge amounts of cryptocurrencies, allowing them to manipulate the market when they deem it necessary. If these "whales" do not want Bitcoin to collapse, they can prevent it, at least in some scenarios.
All of these factors make a total Bitcoin crash very, very unlikely. But there are other influences that jeopardize the value of Bitcoin.
What jeopardizes the price of Bitcoin?
One of the biggest arguments used by those who do not support Bitcoin is that it is not backed by any kind of physical asset. In addition, some say it does not yet have enough dominance in the traditional economy to succeed.
Of course, your country's national currency is probably much more flexible in your daily life than Bitcoin when it comes to buying goods, which means it has more practical use than the latter.
Bitcoin's ongoing battle with scalability also puts its future at risk. As more and more people invest in bitcoin, the burden of blockchain trading is increasing. This creates something called a latency situation, where it takes a long time for each transaction to be verified by the miners.
And because the size of Bitcoin blocks is quite small, the blockchain can only process a limited number of transactions per minute. Many see this factor as the Achilles heel of Bitcoin.
There are a number of other volatile factors that also affect the price of Bitcoin. Like when a simple tweet from Tesla and SpaceX CEO Elon Musk, caused a crash in 2021. It is therefore safe to say that Bitcoin is not a fixed asset.
It is also important to remember that, above all, Bitcoin is a demand-based asset rather than something tangible. This also makes it incredibly insecure.
Suppose, then, that the price of Bitcoin somehow falls to zero. What impact would this have on the market?
What would happen if the price of Bitcoin fell to zero?
Imagine that, one day, every country in the world outlaws the trading, mining and use of Bitcoin and because of this fact its price has dropped to zero.
While the network itself could remain intact, such drop it would still cause monumental economic losses for millions of people around the world. There would be no way to sell Bitcoin to exchanges as they would be legally required to delist it for trading. In short, Bitcoin investors who hadn't already cashed in would be in a tough spot.
In addition, the total Bitcoin crash would send huge waves to the cryptocurrency mining industry. The Bitcoin mining industry itself is a mammoth in size, with many relying on it to make a living.
Read: British police raid illegal Bitcoin mining facility thinking they are growing cannabis
With Bitcoin no longer of any value or use, mining rewards would drop to zero and nearly a million miners would be forced to find another revenue stream. Mining facilities would also have to close, causing thousands of people to lose their jobs worldwide.
Hundreds of other companies will also be affected, including those involved in Bitcoin payments, lending or exchange. In short, the total crash of Bitcoin would be catastrophic for millions of people who are involved with it in one way or another.
If Bitcoin collapses like this, it would likely result in the collapse of many other cryptocurrencies. After all analysis, if investors see that the biggest coin in the crypto market has lost all value, there is a good chance that they will cash out as soon as possible and unload their remaining cryptocurrencies to avoid further losses.
Overall, if Bitcoin falls, it will likely be followed by many other cryptocurrencies.
A total Bitcoin crash is unlikely to happen any time soon
There is no doubt that a fall in the price of Bitcoin to zero would have a devastating effect on the crypto industry. However, the chances of Bitcoin collapsing suddenly and thus are extremely low.
Although there are several factors that could reduce the value of Bitcoin over time, it will take some huge financial and governmental changes, not to mention the destruction of the Bitcoin network itself, for Bitcoin to fall to zero in a short time. .
Furthermore, while a total collapse of Bitcoin would be damaging, the impact on the wider global financial markets is also worth considering. Expert opinion on this theme varies, with some speculating that falling Bitcoin and cryptocurrency prices would have little impact.
However, if one considers that some of the largest cryptocurrency companies, such as Crypto.com, Binance and BitPay, all have sponsorship deals with companies (usually related to sports), there is no doubt that enough damage will be done.
How much damage? Who knows. In 2022, when the price of Terra Luna collapsed, there was almost zero reaction from the global financial markets. In Bitcoin, however, it would probably be a different story.
