Will Bitcoin Crash to Zero?

Will Bitcoin Crash to Zero?

Robert McDougall 

January 8, 2024

Cryptocurrency

Bitcoin prices can be extremely volatile and hard to predict. One year, Bitcoin prices may be at an all-time high, and the next, they might come dropping down. Volatility has defined cryptocurrencies pretty much since their inception.

Knowing just how volatile the market is and the fact that cryptocurrencies like LUNA and FTT have previously crashed to zero, investors and stakeholders are genuinely concerned about the future of Bitcoin.

As investors, stakeholders, and followers of the Bitcoin world, we have come up with a definite guide on whether Bitcoin will crash in the near future or not. By the end of this article, you will know whether Bitcoin can crash to zero and what happens if it does.

Understanding Bitcoin’s Volatility

While Bitcoin is the most popular cryptocurrency in circulation today, the coin isn’t tied to any real-world asset of value. Putting money into Bitcoin is considered a volatile investment as investors can never predict or see a crash coming.

Discussing Bitcoin’s Market Crash and Recovery

One of the most notable market crashes in Bitcoin's history happened back in 2017. At that time, Bitcoin experienced a massive bull run, which saw its price surge to an all-time high of around $20,000 in December. People were going crazy for Bitcoin, and it seemed like the party would never stop.

But then, reality hit. The market took a nosedive, and the price of Bitcoin dropped dramatically. It went from its peak of $20,000 to around $3,000 by the end of 2018. However, just when everyone thought the cryptocurrency was down for the count, it began its journey toward recovery. Slowly but surely, Bitcoin started climbing its way back up the charts.

In November 2021, Bitcoin reached its highest point when prices soared above $65,000. Starting in November 2021, Bitcoin's price, which had reached a peak of over $68,000, began to decline rapidly. As a result, many investors experienced substantial losses, with over $2 trillion being wiped out since the peak.

During this time, Bitcoin fell below $30,000 for the first time since July 2021, marking a significant drop from its previous highs. The crash had a cascading effect on the overall cryptocurrency market, with research by CNBC predicting cryptocurrencies losing nearly $800 billion in market value.

Factors Contributing to Bitcoin’s Volatility

From our experience, certain factors contribute to the volatility of Bitcoin. These factors include:

  • Regulatory ConcernsRegulatory concerns regarding Bitcoin have led to questions and skepticism from investors. The drop in Bitcoin prices during early 2023 can be accredited to growing concerns regarding regulations and a possible crackdown against cryptos.
  • Market Speculation: Renowned investor Nicole Lapin recently mentioned that investing in a speculative asset is a guaranteed way of introducing volatility into one’s portfolio. Since Bitcoin isn’t backed by a stable, tangible asset, factors such as hype, sentiments, speculation, and sensation can hurt the market.
  • Investor Sentiment: During our research process for this article, we came across a study that highlighted the impact of investor sentiment on volatility. Investor sentiment is a major factor behind Bitcoin’s volatility and does have an impact on the rapidly fluctuating prices.

Factors Influencing Bitcoin’s Value

Bitcoin's value is a rollercoaster ride that is influenced by a number of correlated factors. To get a measure of future crashes, it is necessary that investors understand these factors in full:

We now look at some of these factors and their impact on Bitcoin’s value:

Adoption and acceptance by businesses and institutions

We believe the market adoption and acceptance of Bitcoin by businesses and institutions plays a significant role in determining the price and value of BTC. As is the case with pretty much all assets and commodities, the forces of supply and demand play a crucial role in determining the price of Bitcoin.

As more businesses and institutions embrace Bitcoin for investments, transactions, or simply just a store of value, the demand for the cryptocurrency will increase, eventually driving up the price. Approximately 15,174 businesses worldwide accept Bitcoin, with around 2,300 of those businesses operating in the US.

The top four industries that accept Bitcoin are the Tourism, Banking, Food, and Retail industries. As per stats Bitcoin ATMs are also increasing across the United States, with trends suggesting meteoric growth. 

Regulatory developments and government policies

Any changes in regulations and government policies that impact the use of Bitcoin can significantly alter its value. Favorable regulations like widespread adoption by financial institutions and acceptance of Bitcoin as a legal tender can signal a positive increase in value, while a crackdown in the form of penalties can have a detrimental impact on price.

As mentioned previously, the drop in Bitcoin prices during early 2023 can be accredited to growing concerns regarding regulations and a possible crackdown against cryptos.

Technological advancements and upgrades

The growing technological advancements within the blockchain and cryptocurrency market could play a role in influencing the price and value of Bitcoin. For instance, we believe that integration with the Lightning Network may increase the value and utility that Bitcoin has to offer, eventually driving up prices.

The Lightning Network allows for near-instant, low-cost Bitcoin transactions. Users can send and receive Bitcoin without having to wait for long confirmation times or pay hefty fees. It achieves this by using payment channels to handle Bitcoin transactions, which helps reduce Bitcoin network congestion.

Analysis of recent trends and events affecting Bitcoin's Value

The last few years have signaled a slew of positive and negative trends for Bitcoin. In recent times, institutions have started to adopt Bitcoin and other cryptocurrencies. Investment giants like BlackRock are exploring ways to incorporate Bitcoin into their portfolios. This institutional adoption of cryptocurrencies is providing greater legitimacy to the market and helping attract more investors, which is driving up the demand for Bitcoin.

Expert Opinions and Predictions from Industry Leaders

Crypto experts and industry leaders believe that a bounce back can be likely if Bitcoin holds its position and sticks to the resistance level of $30,000. Marshall Beard, Chief Strategy Officer at U.S. based cryptocurrency exchange Gemini, believes Bitcoin to break all-time highs this year.

He said: “$100,000 price figure is an “interesting number, if Bitcoin gets to its previous record high of near $69,000”.

At the time of writing, the global cryptocurrency market capitalization is trading around $1.19 trillion. According to CoinMarketCap, the volume of all stablecoins is now $26.23 billion, which is 91.01% of the total crypto market 24-hour volume, and Bitcoin's dominance is currently 49.71%, an increase of 0.10% over the day, at the time of writing.

Addressing Skepticism and Criticism

Ever since its inception, Bitcoin has been subjected to plenty of criticism. While some of it is justified, most of it can be easily refuted.

We discuss some of the common criticism of Bitcoin, including its validity, below:

Bitcoin Comes with No Intrinsic Value

Critics believe that Bitcoin is a purely digital asset and has no intrinsic value of its own. In defense of Bitcoin, the cryptocurrency’s value is in its demand rather than being tied to something else.

Industry experts also suggest that many of the attributes Bitcoin has are closely similar to gold. Humanity values gold as a $10 trillion industry, and Bitcoin is similar but at a digital level.

However, Bitcoin is not a stablecoin and can crash to zero as other non-stablecoins have crashed before. Bitcoin is not backed by a digital asset, and although it does hold value, the price and value of the asset are speculative in nature.

Bitcoin Is Too Volatile

When Bitcoin first emerged as a mode of transaction, there was skepticism in people over how safe it would be. Many people doubted whether the currency would be safe and whether there would be countless security issues to deal with.

However, people who are aware of the infrastructure behind Bitcoin know that it is safer than other forms of monetary transactions and stores of value. Digital currencies are based on the blockchain, which is a secure space that stores data pertaining to each node. No one can tamper with the blocks, which ensures security for all.

Some cryptocurrencies, such as Luna and DogeCoin, have crashed over time, but the general market volatility is based on investor risk appetite. Despite the general concerns over regulations, the crypto market is generally safe from scams.

Bitcoin is a Scam

Most people still believe that Bitcoin is a scam to defraud people. We believe investing in digital currencies is quite similar to investing in stocks, gold, or other commodities of that nature. This being said, there are certain scams in the crypto market. These scams are hosted at an individual level and cannot dictate the truth of the crypto market. As an investor, you need to be extremely cautious while investing in crypto to make sure that you don’t fall for a scam.

Experienced investors go about investing in crypto just like they normally would with other investments. It is necessary to invest with pragmatism and to only do so after you have studied the crypto market to understand what the market is like.

Counter Arguments: Bitcoin's Resilience

Bitcoin has gone through its fair share of crypto winters and has come back stronger each time. While there is a possibility that Bitcoin may crash to zero, the cryptocurrency has shown enough potential and resilience to suggest that may not be the case.

Bitcoin's first crash came in June 2011 when the cryptocurrency fell sharply in value. Valued at $32, Bitcoin fell to a bottom of $0.01 in no time. The drop was attributed to Mt. Gox, a Japanese crypto exchange that saw a breach of 850,000 Bitcoin. However, the cryptocurrency demonstrated resilience and reached new heights in 2013. This is the only case where Bitcoin actually crashed to near-zero limits, and the strength to bounce back is the perfect case study for Bitcoin's resilience.

Bitcoin's second crash came in 2018. However, 2020 and 2021 saw speculative interest from influential people and brands, and Bitcoin peaked again in 2021. The last and most recent crash came when Bitcoin crashed to under $20,000 in 2022 after reaching a high of $68,000 in December 2021. The crash was attributed to volatility in the market, a general economic downturn world over, and negative speculation from industry thought leaders.

As of now, BTC is trading at a little over $30,000 as we write this article, and the market is showing a slight correction since the fall of 2022. 

Decentralized Nature and Anti-Inflationary Properties

Bitcoin is decentralized in nature. Due to this, no single entity has control over the cryptocurrency, promoting a sense of security among its users. Additionally, Bitcoin has inherent anti-inflationary properties. The total supply of Bitcoin is capped at 21 million coins, a limit set by its creator, Satoshi Nakamoto.

As a result, the risk of inflation caused by an increase in supply is eliminated. These unique aspects have driven Bitcoin’s resilience during periods of turmoil. The cryptocurrency has effectively managed bearish markets to still rank as a volatile but fruitful investment.

Countries Turning to Bitcoin in the Face of Economic Turmoil

Going by the anti-inflationary nature and decentralized properties of Bitcoin, some countries have turned to cryptocurrency for directions. El Salvador became the first country to use Bitcoin as legal tender in 2021.

The country still realizes the importance of Bitcoin in national affairs and has seen a spike in cryptocurrency users, with youngsters leading the movement. Research on the country's acceptance of Bitcoin reports over 40% of users who downloaded the official crypto app made a transaction through it.

The Central African Republic has also recognized Bitcoin as a legal tender. The country turned to Bitcoin as a means to minimize inflation and set a decentralized legal tender. The decision was made in the second half of 2022.

Future Outlook and Conclusion

The cryptocurrency market is categorized by various factors, such as end-user industry, applications, type, and geography.

The total crypto market is projected to increase from $910.3 million in 2021 to an estimated $1,902.5 million in 2028. It’s very likely that Bitcoin will profit from the growth in market stats.

Future of Bitcoin

Bitcoin has shown a pattern of resilience over time. Despite numerous price fluctuations, its value has generally trended upward since its inception. Given this pattern, some analysts forecast a continued increase in Bitcoin's value over the coming years.

Analysts have also linked Bitcoin with gold and suggest that the future will see it being treated as digital gold. Bitcoin’s resilience is based on limited supply and fluctuating demand. In our opinion, Bitcoin is far too resilient to crash to zero.

Closing Thoughts

As readers and stakeholders in the cryptocurrency industry, it is necessary that you stay informed and monitor all market developments. The cryptocurrency industry is rapidly changing, and the innovations you see today may become disruptive norms tomorrow.

The speculative nature of cryptocurrency investments is a defining factor for the industry. Investors and traders should know the risks associated with cryptocurrency investments, including potential scams, volatility, and financial breaches.

You can also conduct thorough research and seek professional advice on crypto investments if the need be. Thorough research and a word of advice or an educational tip from a professional can help protect your interests.


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