We all know how volatile and unpredictable the cryptocurrency market can be. One month a coin could be at the height of its value, and the next, it could have almost no value at all. Unfortunately, this is simply the name of the game when it comes to crypto. But what would happen if the market’s oldest and most valuable asset, Bitcoin, dropped to zero?
Because Bitcoin isn’t a stablecoin and therefore isn’t pegged to any real-world asset, it can be just as susceptible to crashes as many of the other cryptos in the industry. If you follow Bitcoin and its price, you’ve likely seen that there’s often no knowing what will happen next. Many investors never see a crash coming, and this is why putting money into crypto can be dangerous.
Bitcoin saw its peak price of around $67,000 in November 2021, but it has been tumultuous since this all-time high. Bitcoin saw a big crash in early 2018, then another in May 2021, and then another in the same month that it reached its peak value. And the trend certainly continued in 2022.
So, it’s safe to say that even the biggest coins can crash just as quickly as any other. But what if a crash took place that took Bitcoin’s price all the way down to zero? Is this possible, and what would happen if such an event occurred?
Can Bitcoin’s Price Drop to Zero?
It is technically possible for any cryptocurrency’s price to crash to zero, as seen with the Terra Luna price crash. But, for something as popular and valuable as Bitcoin, some huge shifts would need to take place to allow for such a catastrophic loss of value. It’s important to understand Bitcoin’s functionality to understand why this is the case.
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Bitcoin is often bought as a long- or short-term investment plan. Some like to buy it when the price dips in anticipation of another increase and then sell it once it occurs. Others buy Bitcoin with the intention of holding onto it for much longer, despite the crashes and hikes that may follow their purchase.
But there are individuals who believe Bitcoin (or another crypto) will replace traditional tender one day. These crypto enthusiasts often believe that centralized banking is dangerous or unfair and that decentralization is the future. For a person who holds such a belief, the purchase of Bitcoin goes beyond just an investment. It speaks to their passion for cryptocurrency.
And now, Bitcoin can also be used to buy goods and services in various countries worldwide. Some nations have even adopted it as a national tender! El Salvador adopted Bitcoin as legal tender in 2021 (with very mixed results), with other countries even developing cryptocurrencies for citizens to use as a payment method.
Additionally, it would be incredibly hard to dissolve the entire Bitcoin network, even if it became highly restricted or illegal in the majority of countries worldwide. With over 100,000 active nodes on the Bitcoin network spread around the globe, it would take the loss of faith or interest of these nodes for the blockchain to be truly destroyed.
Destroying Bitcoin wouldn’t be the same as taking down a website. Its complex infrastructure, along with its decentralized nature, gives it a strong foundation that isn’t easy to destabilize, even if you are a powerful government.
What’s more, big players in the crypto industry can have a huge influence on the price of Bitcoin. Known as crypto whales, these individuals or groups own huge amounts of cryptocurrency, allowing them to manipulate the market when they deem it necessary. If these whales don’t want Bitcoin to fall to zero, they can prevent this from happening in certain scenarios.
These factors all make a total Bitcoin crash very, very unlikely. But there are other influences at play that put Bitcoin’s value in danger.
What Puts Bitcoin’s Price at Risk?
One of the biggest arguments used by those who don’t support Bitcoin is that it isn’t backed by any kind of physical asset. Additionally, some say that it doesn’t yet have enough prevalence in the traditional economy to succeed. Of course, your country’s national currency is likely still a lot more versatile in your day-to-day life than Bitcoin when it comes to buying goods, meaning it has more of a practical use than the latter.
Bitcoin’s continued struggle with scalability is also putting its future at risk. As more and more individuals invest in bitcoins, the transaction load on the blockchain increases. This creates something called latency, wherein it takes a long time for each transaction to be verified by miners. Because Bitcoin’s block size is pretty small, the blockchain can only process a limited number of transactions every minute. Many see this factor as Bitcoin’s Achilles heel.
A range of other factors also affect Bitcoin’s price. Even a simple tweet from Tesla and SpaceX CEO Elon Musk caused a crash in 2021, so it’s safe to say…