The cryptocurrency market can be very volatile and hard to predict, that comes with the territory. One month, a coin might be reaching an all time high, and the next, it might be dropping like a stone thrown from a bridge. When it comes to crypto, this is unfortunately just the way things work, which begs the question:
What would happen if Bitcoin, the oldest and most valuable cryptocurrency asset in the world, crashed to zero?
Overview
Bitcoin isn’t tied to any real-world asset
Because Bitcoin isn’t a stablecoin and isn’t tied to any real-world asset, it can crash just like many other cryptocurrencies. If you keep up with Bitcoin and its price, you may have noticed that you can’t always tell what will happen next. Putting money into crypto can be risky because many investors never see a crash coming.
Bitcoin was worth about $67,000 at its all-time high in November 2021, but since then, its price has been all over the place. Bitcoin had a big crash at the beginning of 2018, another one in May 2021, and a third one in the same month it reached its highest value. At the time of this post Bitcoin is worth about $50,000 less per coin than what it was worth in November 2021.
So, it’s safe to say that even the biggest coins can fall just as quickly as any other. But what if there was a crash that sent the price of Bitcoin all the way down to zero? Is this something that could happen, and what would happen if it did?
Zero Happens
Technically, the price of any cryptocurrency could fall to zero, as happened with Terra Luna. But for something as popular and valuable as Bitcoin to lose so much value, a lot of big changes would have to happen. To understand why this is the case, it’s important to know how Bitcoin works.
Why do people buy Bitcoin?
People often buy Bitcoin as a long-term or short-term investment. Some people like to buy it when the price goes down because they think it will go up again and then sell it when it does. Others buy Bitcoin with the intention of keeping it for a long time, even if the price goes up and down after they buy it.
Also, it would be very hard to get rid of the whole Bitcoin network, even if it became very hard to use or illegal in most countries around the world. With over 100,000 active nodes on the Bitcoin network spread all over the world, the blockchain could only be destroyed if all of these nodes stopped trusting or caring about Bitcoin.
Getting rid of Bitcoin wouldn’t be like getting rid of a website. It has a strong foundation that is hard to shake up, even if you are a powerful government. This is because it has a complicated infrastructure and is not centralized.
Also, big players in the crypto industry can have a big effect on how much Bitcoin costs. Crypto whales are people or groups who own a lot of cryptocurrency and can use it to move the market when they think it’s necessary. If these whales don’t want Bitcoin to go to zero, they can stop this from happening in some situations.
All of these things make it very, very unlikely that Bitcoin will completely crash. But there are other things going on that could hurt Bitcoin’s value.
What threatens the price of Bitcoin?
One of the most common reasons why people don’t like Bitcoin is that it isn’t backed by anything tangible. Some people also say that it isn’t used enough in the traditional economy for it to succeed. Of course, your country’s national currency is probably still a lot more useful to you in your day-to-day life than Bitcoin when it comes to buying things. This means that it is more useful than Bitcoin.
Bitcoin’s future is also in danger because it is still hard to use on a large scale. As more and more people buy bitcoins, the number of transactions on the blockchain grows. This creates something called “latency,” which means that it takes miners a long time to check each transaction. Due to the small size of a Bitcoin block, the blockchain can only handle a certain number of transactions every minute. Many people think that this is Bitcoin’s weak point.
Bitcoin’s price is also affected by a number of other things. Even a simple tweet from Elon Musk, CEO of Tesla and SpaceX, caused a crash in 2021. This shows that Bitcoin is not a stable asset.
It’s also important to remember that Bitcoin is, above all else, a commodity whose value depends on how much people want it. This also makes it very dangerous.
So, let’s say the price of Bitcoin did fall to $0. What would happen to the market because of this?
What Would Happen if the price of Bitcoin fell to Zero?
Let’s say that one day, every country in the world made it illegal to buy, sell, mine, or spend Bitcoin, and its price fell to $0. Even if the network itself stayed the same, such a drop would still cost millions of people all over the world a lot of money.
There would be no way to sell Bitcoin back to exchanges because they would be required by law to take it off the list of things that can be traded. In short, people who had invested in Bitcoin but hadn’t yet cashed out would be in an impossible situation.
Also, the crypto mining industry would be hit hard by Bitcoin’s total collapse. Even just the Bitcoin mining market is huge, and many people depend on it to make a living. If Bitcoin lost all of its value and uses, the rewards for mining would drop to zero, and almost a million miners would have to find another way to make money. Mine farms would also have to close, which would put thousands of people out of work.
Hundreds of other businesses, like those that accept Bitcoin payments, lend Bitcoin, or swap Bitcoin, would also be affected. In short, the end of Bitcoin would be terrible for millions of people.
If Bitcoin crashed in this way, it would probably cause a lot of other cryptocurrencies to crash as well. After all, if investors see that the biggest coin on the crypto market has lost all value, it’s likely that many of them will cash out as soon as possible to avoid more losses. All in all, if Bitcoin goes down, it’s likely that a lot of other cryptos will go down with it.
It’s not likely that Bitcoin will crash to zero
There’s no doubt that if the price of Bitcoin dropped to zero, it would be a disaster for the crypto industry. But there are very few chances that Bitcoin will suddenly crash in this way. Even though some things could make Bitcoin’s value go down over time, it would take big changes in the economy and government, as well as the destruction of the Bitcoin network, for Bitcoin’s value to drop quickly to zero.
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Final thoughts
Even though a Bitcoin crash to zero would be bad, it’s also important to think about how it would affect the global financial markets. Some experts think that a drop in the price of Bitcoin and other cryptocurrencies wouldn’t have much of an effect. But when you think about the fact that some of the biggest cryptocurrency companies, like Crypto.com, Binance, and BitPay, all have sponsorship deals with companies (usually in the sports industry), it seems likely that at least some damage would be done.
How much damage? That’s difficult to assess. When the price of Terra Luna crashed to zero earlier this year, there was almost no reaction from the financial markets around the world. But Bitcoin is probably a different story, if for no other reason than its adoption by Wall Street firms such as JPMorgan Chase, Social Capital, Greyscale and ARK Investments, to name a few. This institutional adoption lends more credence and stability to Bitcoin, something that most other cryptocurrencies do not enjoy. The key with Bitcoin is the blockchain technology which underpins it, not so much the currency itself.
If you enjoyed this article, you might also like: How Long Does it Take to Mine One Bitcoin? or What Happens After All Bitcoin Has Been Mined?
Jay Speakman is a technology writer based in San Francisco, California. He writes on the topics of blockchain, cryptocurrency, DeFi and other disruptive technologies. Clients include Avalanche, Be[in]Crypto, Trust Machines and several blogs devoted to blockchain gaming. He will not rest until fiat currency is defeated.
