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Home News Bitcoin News

What Happens if Bitcoin Crashes To Zero?

Asif Ali by Asif Ali
January 12, 2023
in Bitcoin News
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The cryptocurrency Bitcoin market may be volatile and unpredictable, and that’s something important to keep in mind. A few months later, a coin may be reaching an all-time peak, while the subsequent one may be dropping like unthrown from a bridge.

When it comes to cryptocurrencies, this is unfortunately exactly how things work. This begs the question: How could things operate differently?

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What happens if Bitcoin, the oldest and most valuable cryptocurrency asset in the world, crashed to zero?

Table of Contents

  • Zero Happens
  • Bitcoin is Not Tethered To Real-World Assets
  • As To Why People Purchase Bitcoin
  • What Poses a Threat to Bitcoin’s Price?
  • What Would Happen if Bitcoin’s Price Reached Zero?
  • It’s Unlikely That Bitcoin Will Go Bankrupt
  • Verdict

Zero Happens

Technically, the price of any cryptocurrency can fall to zero, as has happened to Terra Luna. But for something as popular and valuable as Bitcoin to lose so much value, a series of large changes would need to take place. To understand why this is the case, it’s important to understand how Bitcoin operates.

Bitcoin is Not Tethered To Real-World Assets

Bitcoin isn’t a currency that is tied to real-world assets, so it has the potential to crash just like many other currencies.

If you follow Bitcoin and its worth, you may have noted that does not always give you an indication of where it’s headed. Placing money in crypto could be risky because many investors never see a crash coming in.

Bitcoin was worth roughly $67,000 at its all-time high in November 2021, since then its price has varied widely. Bitcoin suffered a major crash in late 2018, another shortly thereafter in April 2021, and a third major crash in May 2021, the calendar month when it reached its historical high.

Writing this bankruptcy, Bitcoin was worth $50,000 less per coin than on the day it was at the peak of popularity.

It is possible for even the finest coin to decrease just as much. If a crash arose that caused the price of Bitcoin to zero, what would happen next? Is this something likely to happen, and what would that mean?

As To Why People Purchase Bitcoin

Many people purchase Bitcoin as a medium- or long-term investment. Some people choose to purchase it when the price decreases because they believe the price will rise once again and then sell it when it happens.

Others purchase Bitcoin with the purpose of holding onto it for a long time, regardless of price fluctuations following their purchase.

Even if using Bitcoin were to become extremely difficult or illegal in the majority of nations throughout the world, it would still be incredibly difficult to eradicate the entire Bitcoin network.

The blockchain could only be destroyed if all of the approximately 100,000 active nodes on the Bitcoin network, which are dispersed around the globe, quit believing in or caring about Bitcoin.

A website could be removed, but Bitcoin couldn’t be. Even a strong government would find it challenging to overturn its solid base. Its complex infrastructure and lack of centralization are the reasons for this.

The price of Bitcoin can also be significantly impacted by major players in the cryptocurrency market. Crypto whales are individuals or organizations that own large amounts of cryptocurrencies and can utilize them to influence the market. When they feel it is required.

In some circumstances, these whales have the power to prevent Bitcoin from falling to zero.

It is quite improbable that Bitcoin would entirely fall due to all of these factors. However, there are other developments that can reduce the value of Bitcoin.

What Poses a Threat to Bitcoin’s Price?

The lack of physical backing for Bitcoin is one of the most frequent arguments against it. Additionally, others claim that the traditional economy doesn’t use it enough for it to be successful.

Of course, when it comes to making purchases, the national currency of your country is still very likely to be far more useful to you. It is therefore more practical than Bitcoin.

Because it is still challenging to use Bitcoin on a wide basis, its future is also in jeopardy. The number of transactions on the blockchain rises as more individuals acquire bitcoins.

Due to the “delay” this causes, it takes miners a considerable amount of time to examine each transaction. The blockchain can only process a specific number of transactions per minute due to the small size of a Bitcoin block. This is regarded by many as Bitcoin’s weak point.

Other factors can potentially influence the price of bitcoin. In 2021, a crash was brought on by a single tweet from Elon Musk, the CEO of Tesla and SpaceX. This demonstrates that bitcoin is a volatile asset.

Additionally, it’s critical to keep in mind that Bitcoin’s is, above all else, a commodity whose value is based on how much demand there is for it. This further increases its hazard.

Let’s assume that Bitcoin’s did indeed reach a price of $0. What impact would this have on the market?

What Would Happen if Bitcoin’s Price Reached Zero?

Let’s imagine that Bitcoin’s value dropped to zero and that, one day, it became forbidden to mine, buy, trade, or use it anywhere in the globe. Such a reduction would still be very expensive for millions of people worldwide, even if the network itself remained unchanged.

Since exchanges would be forced by law to remove it from the list of commodities that can be traded, there would be no way to sell Bitcoin’s back to them. In other words, anybody who had bought Bitcoin but hadn’t yet cashed out would be in a hopeless predicament.

A complete collapse of Bitcoin’s would also have a significant negative impact on the crypto-mining sector. The market for Bitcoin mining alone is enormous, and many people rely on it for a career.

The benefits for mining would become zero if Bitcoin’s lost all of its value and applications, forcing almost a million miners to find alternative sources of income. Thousands of people would lose their jobs if mine farms had to close.

Numerous additional companies that take Bitcoin’s payments, lend Bitcoin, or exchange Bitcoin’s would also be impacted. In conclusion, millions of individuals would suffer greatly if Bitcoin’s were to disappear.

This type of crash for Bitcoin’s would likely trigger crashes for many other cryptocurrencies. After all, many investors will certainly sell their holdings as soon as possible to avoid further losses if they notice. That the largest coin on the cryptocurrency market has lost all of its value.

Overall, if Bitcoin’s declines, many other cryptocurrencies are likely to follow suit.

It’s Unlikely That Bitcoin Will Go Bankrupt

Without a doubt, the crypto business would suffer greatly if the price of Bitcoin’s fell to zero. However, there is a very low likelihood that Bitcoin will abruptly plummet in this manner. Even while there are several factors that could cause Bitcoin’s value to decrease over time, it would need significant changes. In the political system, the economy, and the network itself for Bitcoin to rapidly go to zero.

Verdict

It would be horrible if Bitcoin crashed to zero, but it’s also crucial to consider how it might impact the world’s financial markets. A decline in the value of Bitcoin’s and other cryptocurrencies, according to some analysts, wouldn’t have much of an impact.

It seems likely that at least some harm would be done, though, when you consider that several of the biggest cryptocurrency companies, including Crypto.com, Binance, and BitPay, all have sponsorship agreements with businesses (often in the sports industry).

What kind of harm? It’s difficult to evaluate that. There was almost no response from the global financial markets when the price of Terra Luna fell to zero early this year. However, Bitcoin’s is undoubtedly a different scenario, if only because Wall Street companies like JPMorgan Chase, Social Capital, Greyscale, and ARK Investments, to name a few, have adopted it.

The majority of other cryptocurrencies do not benefit from the credibility and stability that this institutional acceptance gives to Bitcoin. Bitcoin’s blockchain technology, rather than the currency itself, is what makes it so important.

Read Also: Galoy Introduces Bitcoin-backed Synthetic Dollar Pegged to USD

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