What happens if Bitcoin’s price crashes?
Several things can happen if the price of Bitcoin crashes. This short article explains some things that could happen if Bitcoin’s price crashes.
Crypto skeptics believe Bitcoin is a bubble and will crash soon. But Bitcoin believers take a different position. For them, Bitcoin is not a bubble, so the price cannot bottom. Without taking sides, this article focuses on what would be the effect of Bitcoin’s crash.
Could Bitcoin Crash?
Whether Bitcoin can crash is a notion that you have to see from the perspective of Bitcoin has high price volatility. The price changes from minute to minute and can rise or fall unexpectedly. Investors in Bitcoin tend to believe that the price will continue to rise in the long term. And they are justified considering that the price has grown since its launch in 2009.
But Bitcoin has experienced several crashes during its lifetime. Some of these crashes occurred in 2018, 2021 and 2022. Bitcoin’s price has fallen from a peak of over $68,000 in November 2021 to just under $22,000 today. And this represents a drop of around 67%. With such realities, the possibility of Bitcoin crashing is real. However, crashing to zero can be challenging.
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What happens then?
Assuming Bitcoin’s price crashes, several things could happen. First, many people and entities would lose billions of their investments. For those who had bought Bitcoin, that would mean apparent loss. Let’s use an example. A large organization can buy $1 billion worth of Bitcoin. If Bitcoin crashes to zero, the organization will lose $1 billion.
Since you cannot sell Bitcoin when it has zero value, you suffer the loss of your investment in a total crash. However, if the collision is not complete, meaning the price does not fall to zero, investors will still lose part of their investment in Bitcoin. If you bought Bitcoin when the price was $67,000, your investment would be 67% less today.
Second, if Bitcoin crashes, it will negatively affect other cryptocurrencies. Bitcoin is the most popular cryptocurrency. Other smaller cryptocurrencies would probably also bottom out because of this. And since many other investors hold these cryptocurrencies, they will also experience financial losses.
Third, Bitcoin’s crash could put many Bitcoin miners and nodes out of business. A total hit would render mining useless since miners will not earn anything. And considering the massive investments that miners are making, a crash would have harrowing implications. Their huge investments in mining resources, including computers, energy and manpower, would go to waste.
Fourth, a Bitcoin crash could affect businesses that use Bitcoin. Consider a company that accepts Bitcoin as payment for services or goods. Bitcoin’s crash will mean that the organization may have to stop using Bitcoin as payment.
However, a crash cannot affect the blockchain technology that supports Bitcoin. Different entities are now using blockchain for different reasons beyond using Bitcoin. For example, the real estate industry has begun to use blockchain technology to improve security, privacy and convenience in operations. A Bitcoin crash might not make them abandon the technology.
Conclusion
Bitcoin’s price has crashed several times during its lifetime. However, the price has never crashed to zero. Although this may be possible, the probability is very low. Still, several things can happen, assuming even such a crash can happen. The investors will be most affected due to the financial losses. Other devices that use Bitcoin for payment will also be affected. All entities that use or depend on Bitcoin will be adversely affected.
Image by Sergei Tokmakov, Esq. from Pixabay
