Can Bitcoin Crash To Zero?

Key Takeaways:

• A 2018 report estimated the likelihood for Bitcoin's value to fall to zero to be between 0% and 1.3%.
• Potential scenarios that could result in Bitcoin reaching zero include a loss in intrinsic value, worldwide banning, and replacement by an alternative.
• In the unlikely event that Bitcoin's value crashes to zero, all altcoins will follow suit given their ties to the world's largest cryptocurrency.
• The decentralized and highly integrated Bitcoin blockchain, along with its expanding utility and investment qualities means that a crash in Bitcoin is highly unlikely.

Bitcoin has provided one of the best returns on investment over the last decade, outpacing gold, oil, individual stocks, and indices. Throughout its short lifetime, the price of Bitcoin has consistently moved up and to the right. There have been market crashes. But, overall Bitcoin has continued to post new all-time highs every 4 years. The idea that Bitcoin can crash to zero seems to be impossible. But is it?

In this guide, we will discuss if it is technically possible for Bitcoin to crash to zero, what scenarios may lead to an infinite crash, and what factors may help to prevent that from ever happening.

Can Bitcoin Crash To Zero?

How Can Bitcoin Crash To Zero?

Scenarios that would force the price of bitcoin to zero remain unlikely, but they do exist. It would take a catastrophe, but for those that choose to buy bitcoin, it would be naive to think it wasn’t possible. For the coin to fall to zero, access to the coin needs to become restricted or faith in the coin needs to be obliterated.

Below are a few scenarios that could result in BTC falling to zero.

1. Lack of intrinsic value. A common argument against bitcoin is that the coin lacks intrinsic value. If everyone in the world deemed the coin worthless, bitcoin prices would fall as holders tried to sell back into fiat currencies or into another valuable asset. It is important to remember that coin’s worth lies in what people are willing to pay for it. For the coin to fall to zero, all holders would need to believe the coin was worthless.
2. Bitcoin is banned. One of the more likely scenarios to cause a drop in the cryptocurrency’s price is if all world governments banned the use of BTC and made it illegal. If the coin is illegal to use and own, which is already implemented by several countries, the cryptocurrency would lose substantial value. However, a drop to zero would require governments to ban and shut down all mining operations globally. Only once all nodes are offline could the coin be rendered useless. If no nodes exist in the network, BTC can no longer be transferred between holders.
3. Replaced by an alternative. It is possible that in the future another cryptocurrency may supersede what the coin can offer. New cryptocurrencies are launched every month. While the majority fail, it may only take one success for the world’s most valuable crypto asset to be replaced. If there is no need for users to hold the coin, the majority may decide to sell which would drive the price to zero.
4. Unknown creator. The creator of Bitcoin still remains a mystery. A pseudonymous character, named Satoshi Nakamoto, published the original Bitcoin whitepaper and helped to create the blockchain in 2009. However, it is still not known if Satoshi Nakamoto is a single individual, a group of individuals, or an organization. As Nakamoto has never walked into the spotlight, a concern remains that the unknown creator may still have the capability to cause BTC to lose all its value.

Although the underlying code for Bitcoin is open source and has been checked by experts within the industry, there are worries that a ‘back door’ may exist or that the creator may have the centralized control to independently pass a bitcoin improvement proposal. In reality, what is more plausible is the damage that may be created if it were discovered a centralized organization was behind the creation of the coin. Faith in the decentralized cryptocurrency would be severely tested.

What Would Happen If Bitcoin Crashed To Zero?

If Bitcoin crashed to zero it would be disastrous for the crypto industry and millions of people around the world. The collapse of Bitcoin would lead to a collapse in the entire crypto market. All altcoins within the market are still tied to the fate of Bitcoin. Therefore, if BTC crashed to zero, it’s likely the majority of other cryptos would be irreversibly damaged. Therefore, BTC falling to zero would be a catastrophic event.

Furthermore, If bitcoin dropped in price, millions of holders, including crypto whales, would rush to sell. However, to sell bitcoin there would need to be someone willing to purchase bitcoin. If all holders become sellers there may be no one to sell to. All BTC holders would be competing with each other. Cryptocurrency exchanges may also delist the coin which would make it nearly impossible to offload.

In addition to the collapse of the cryptocurrency market, millions of miners would have to abandon operations. The bitcoin mining market would collapse. This would lead to the closure of hundreds of businesses, which would leave thousands of people without work in countries worldwide.

When Could Bitcoin Crash To Zero?

For the price of bitcoin to collapse, an almost impossible situation would need to occur. In the financial industry, these events are often referred to as black swans. Unfortunately, black swan events are near impossible to predict and could happen at any moment.

For example, if governments wanted to ban bitcoin all around the world, it is unlikely a global effort could be orchestrated for a specific day. If the creator, Satoshi Nakamoto, wanted to destroy the coin’s ethos, there would be no way to know when they planned to do it. As a result, there is no way of knowing when or if bitcoin could experience such a drop. What’s important is acknowledging the scenario is a possibility.

Why Is It Unlikely Bitcoin Will Crash To Zero?

For every scenario where bitcoin crashes, there are some strong arguments for why that worst-case eventuality would not occur. Let’s take a look at some of the factors that could help to support Bitcoin’s value in the future.

• The Bitcoin blockchain. The underlying technology of the entire Bitcoin network means that it would be extremely hard for operations to cease, even after the last Bitcoin is mined. As a decentralized digital ledger, the blockchain is updated by various types of blockchain nodes (computers) located all over the world. The network only requires 1 node to remain operational for online trading to continue. With over 100,000 active Bitcoin nodes and almost a million miners worldwide, all would need to cease operations. With some nodes now even existing in space, stopping the blockchain’s existence would be extremely difficult.
• Expanding utility. Bitcoin was invented as a decentralized peer-to-peer payment network that allows the transfer of wealth without an intermediary third party. However, since its inception, the utility of the coin has grown. The coin has also become a popular store of value among investors. Thanks to the world of decentralized finance (DeFi) the coin can be leveraged in a whole range of financial products and services.
• Institutional investment. Bitcoin has been integrated into thousands of businesses internationally and is used as a payment method by hundreds of thousands of merchants worldwide. Some countries, such as El Salvador, have even adopted Bitcoin as a legal tender. With every substantial integration, Bitcoin becomes more irreversibly ingrained in the global economy.
• Passion for Bitcoin. It is human psychology that dictates the worth of assets. For the bitcoin price to fall, every human in the world would need to believe it was no longer a real-world asset. However, many passionately believe bitcoin is the answer to centralized banking. Even in a big crash, thousands of investors would be unwilling to part with bitcoin which would result in it retaining some value.

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