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Traditional investments, like company shares or stocks, have underlying assets that determine their worth, but Bitcoin does not. This infers that any fluctuation in price is purely based on speculation among investors. Due to this, Bitcoin can and does experience violent swings in its price, even in the span of 24 hours.
What Impacts the Value of Bitcoin?
Experts at Bitcoin Method say that how cryptocurrency assets perform in the event of a stock market collapse will depend on the reason for the financial market collapse. In the event of an inflationary shock, which happened in 1974, many Bitcoin experts believe that it would have been provided with ample protection to avoid a collapse.
Rosie Bullard, partner and portfolio manager at James Hambro & Partners, confirmed this by stating, "If you look back to March of last year when we saw the market collapse, you didn't see bitcoin suddenly rally in that period."
Globally, stocks have declined due to political matters and macroeconomic challenges like the war in Ukraine, inflationary fears, and higher interest rates. The main factors influencing the price of bitcoin are its supply, the market's demand for it, its accessibility, rival cryptocurrencies, and investor mood. There is a finite amount of bitcoin, and the last coins will likely be mined around 2140. Therefore the supply is limited.
What Happens if Bitcoin Hits $0?
A complete decline in Bitcoin would cause a monumental financial loss to millions of individuals worldwide. There would be no option to resell Bitcoin to the exchanges because it would be de-listed for trading. All mining rewards would decline to nothing, and many miners (nearly a million), would be pushed to find another revenue stream. In saying such, all mining farms would close, causing unemployment for thousands. Hundreds of companies would be impacted, particularly those who deal in Bitcoin payments.
Bitcoin reaching zero would cause a drastic impact on the entire cryptocurrency market, resulting in the crash of many other cryptocurrencies. If this happens, many investors will lose trust in the market and withdraw completely. This could, perhaps, lead to the end of cryptocurrency as we know it.
Will Bitcoin Hit Zero?
Bitcoin has struggled with scalability for quite some time, influencing a price drop. This is because, in the process of increasing transaction load, latency is created, where it takes longer to verify transactions by miners. Bitcoin has a relatively small block size, which means that only a limited amount of transactions can be processed every minute. This is, without a doubt, Bitcoin's Achilles heel.
Nevertheless, it is impossible for Bitcoin to ever have a negative value. Styliana Charalambous, head of investments and market research at fund manager Pure, mentioned that, in order for values to be zero or less, it would mean that "you would have to pay someone to take your coins or tokens."
Brian Gallagher, the co-founder of Web3 infrastructure outfit Partisia Blockchain Foundation, remarked that it is hard for BTC to drop below zero "because it's a hard supply of currency."
In addition to all the above, the technology being used in Bitcoin remains solid. It has survived turbulence since its establishment over a decade.
Vasja Zupan, the President of digital asset exchange Matric, mentioned in an interview that "It's [Bitcoin] a key new financial tool that has long-term value and usability. I'm sure that once global markets stabilize and recover, bitcoin will recover even faster,"
Why Do People Still Invest in Bitcoin?
Bitcoin has proven time and time again that it will gain momentum. The recent decline in price has many questioning why anyone would still enter the market despite its volatile nature. Many choose to stay in the market because of positive qualities such as:
- Technology that could revolutionize various industries.
- Simpler and less expensive transactions by removing "middlemen" like commercial banks.
- Global trading would be more straightforward because there wouldn't be any worries about exchange rates with non-fiat digital money.
- The transactions are more private.
- Because it cannot be printed or confiscated, it is a secure way to keep value.
- Bitcoin has been promoted as a replacement for gold. Thus it may prove to be an effective hedge against inflation.
Without a doubt, the crypto industry would suffer irreparable damage if the price of Bitcoin dropped to zero. However, there is very little probability that Bitcoin will abruptly plummet in this manner. Even if some circumstances may eventually cause Bitcoin's value to decline, it would need significant governmental and economic reforms, as well as the dissolution of the Bitcoin network itself, for Bitcoin to reach zero in a short amount of time.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.