What if Bitcoin’s price drops to $5000?
With all due respect to the judges, I’m no Cassandra.
At last check, bitcoin prices are just over $21,000. But let’s imagine a situation that some would consider the worst-case scenario: a price crash that takes bitcoin to $5,000.
Would this be a disaster, a black day of sorts for crypto?
This question was recently asked of me and I was surprised because I never thought it could go below $10,000. But after thinking about it I said no, it wouldn’t be that bad.
I know that for maximalists, who see the king of cryptocurrencies at $100,000 in the medium term, bitcoin at $5,000 would be a nightmare.
The first consequence would be a slowdown in the broader cryptocurrency market, which is currently valued at $1 trillion, according to data firm CoinGecko. Of this figure, 40% is represented by bitcoin.
Currently, 19.1 million bitcoins are in circulation, representing a total value of more than $401 billion at current prices of $21,000. If prices crashed to $5,000, bitcoin’s value would drop to $95.52 billion. About $305 billion would be wiped out.
Many will lose a lot of money. As painful as it is, many of them will stop looking at bitcoin’s price day-to-day, minute-by-minute, and many will probably lose interest in bitcoin altogether.
And that is good!
Is the crypto industry similar to cryptocurrencies?
One of the biggest problems in the crypto industry today is that the general public boils down the entire industry to digital currencies.
And generally, when people talk about digital currencies, they talk about price. And in turn, when they talk about price, they talk about speculation.
Last year, many people became interested in cryptocurrency because they heard that prices were skyrocketing and that they could get rich quickly. (Big mistake.)
But if bitcoin really declines and people stop thinking about instant wealth and retirement, the intense focus on cryptocurrencies will disappear. The industry can then start from scratch and change the narrative to show that it is much more than digital currencies.
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It would give the crypto industry a chance to return to its original promise: to build an alternative financial system to democratize finance, to make it accessible to everyone everywhere.
Developers can focus on building products and services and ensuring that the fundamentals – especially security – are solid. And regulators, who have until now played cat and mouse with the industry, would be able to take a breather, engage with industry leaders and players, and create the clarity that the industry has been crying out for.
Economics for all
At the end of 2021, during my last trip to Africa, I had the opportunity to chat with a few young people. I expected them to tell me they knew a bit about bitcoin and maybe ether, the second digital currency by market capitalization.
In fact, I was pleasantly surprised. They knew the crypto industry well. They talked about everything the crypto industry was going to change for them: giving them access to financial services (banks are a luxury in many African countries, serving mainly the wealthy); and enables them to trade directly with people all over the world.
But above all, it was the idea that they too could participate in this new economy. They seemed not to have forgotten the promise: the promise of financial services for all, which would give a chance to people who are often systematically excluded.
Bitcoin at $5,000 will also allow the industry to do some necessary introspection.
No more secrets
One of the things that crushes prices is a lack of transparency. Transparency cements trust. Lack of transparency creates doubt, suspicion and the idea that something is being hidden.
As a journalist, I must say that it is more difficult to get information about those responsible for a crypto project than those who work in traditional financial institutions.
Recently I spoke with a crypto lender who wanted to buy out other struggling crypto lenders. The company would not say where the headquarters were. After investigation, we found out where it was, but a company spokesman demanded that it not be mentioned.
Here is a company that wants to buy companies whose main problem was a lack of transparency, and the buyer himself insists on secrecy. This must be changed.
If one of the worst aspects of mainstream finance is secrecy and lack of transparency, the crypto industry cannot disrupt legacy institutions by doing exactly the same.
Eventually bitcoin at $5000 will shake out projects that have no use. More than 13,000 coins are listed by CoinGecko, and experts say that more than half of these coins are empty shells.
It is time for them to go away, to avoid fooling naive investors, who will blame the entire crypto industry for the efforts of bad actors. The sector does not need this bad publicity. Its mission is too important.
