Rick Martin should probably be out of work. The 33-year-old entrepreneur co-founded a crypto start-up called Decaf in early 2022, diving into the industry just before a $3 trillion bubble burst, ushering in bankruptcies across the crypto world.
Today, he is still plugging away, among many others in crypto. At a “hacker house” event in Austin, Texas, Martin mingled with dozens of other enthusiasts, all talking excitedly about their apps. “This technology is superfast, supercheap, and I think it’s ready to replace financial infrastructure,” he said.
On the face of it, crypto should be on life support. Fourteen years since its launch, the technology remains an experimental oddity. Meanwhile, trillions of dollars have evaporated in frauds, bankruptcies, and token losses. And trading platforms, including Coinbase Global (ticker: COIN), hang by a regulatory thread as governments try to reel in the crypto casino.
Yet crypto is proving resilient. Led by a 60% rally in Bitcoin this year, the token market is back to where it was before FTX collapsed in November, worth an estimated $1.1 trillion. Shares of Coinbase are ahead 70% this year, while Bitcoin “miners” like Marathon Digital Holdings (MARA) have surged more than 150%. The Global X Blockchain exchange-traded fund (BKCH), a basket of crypto-related stocks, is up 90%.
See the article: https://www.barrons.com/articles/bitcoin-crypto-prices-bubble-recovery-3f109a05
U.S. attorney Damian Williams speaks to the media regarding the indictment of Samuel Bankman-Fried, the founder of failed crypto exchange FTX in New York City, U.S., December 13, 2022.... Acquire Licensing Rights, opens new tabRead more
Nov 3 (Reuters) - The cryptocurrency market is starting to bounce back a year after the collapse of crypto exchange FTX and other big players in 2022 crushed prices, tarnished the industry and prompted a regulatory crackdown.
A jury in New York on Thursday found Sam Bankman-Fried (SBF), the former CEO of FTX, guilty of defrauding FTX's customers prior to its abrupt collapse in November 2022. He had pleaded not guilty and said that while he mismanaged the company, he did not commit fraud.
FTX was one in a series of industry meltdowns that sent bitcoin crashing to its lowest price since 2020.
While the sector remains far from the investment fever pitch it hit in late 2021, bitcoin and other major tokens have enjoyed a rally in recent weeks as the expected end of central bank rate-hiking cycles draws cash back into high-risk assets.
The crypto industry has also become focused on the prospect of new spot bitcoin exchange-traded funds(ETFs), which would throw open the market to more investors. Though none have been approved, several firms have filed for such a product.
The blockchain technology and the concept of digital assets are relatively young phenomena. And ever since the first digital currency – Bitcoin, was introduced to the world back in 2009, the Cryptocurrency market has been experiencing a rollercoaster ride.
Table of contents
Understanding Bitcoin’s market dynamics
The hypothetical drop: can Bitcoin go to zero?
The domino effect of a Bitcoin crash
Is a zero-value Bitcoin a feasible scenario?
Preparing for the worst: strategies for a Bitcoin downturn
Whilst the market uncertainty prevails and even the biggest companies occasionally find themselves at a tragic end due to misconduct or external factors, many speculate about possible repercussions a global Crypto collapse can bring upon the Cryptocurrency ecosystem.
Among the many interesting scenarios that could cause such an event, one remains quite popular and is likely the most heavily discussed: What would happen if Bitcoin’s price dropped to zero?
A straightforward question, yet one that requires deeper analysis of the context to give an answer.
Understanding Bitcoin’s market dynamics
In order to solve this puzzle and come to a logical conclusion, it is vital to consider several factors and mechanics in motion, such as the driving force of Bitcoin and it’s value on the market.
Bitcoin is not a stablecoin, which means thats it’s value is not tied to any tangible asset, like the US dollar is backed by gold reserves.
This makes it vulnerable to significant price drops and/or any sudden upward spikes on a daily basis, just like any other Crypto asset.
Fundamentally speaking, volatility is the core characteristic of the Crypto market making any digital asset prone to skyrocket or crash in a matter of months, days or even minutes.
And Bitcoin’s price is no exception to this rule, as it’s historical performance proved this on multiple occasions.
Throughout the recent years several factors have affected the price of Bitcoin. Such as Donald Trump’s statement back in June of 2021 that “Bitcoin is a scam”.
Or the announcement of Elon Musk – Tesla’s CEO, earlier in May that Bitcoin will no longer be accepted as a payment method for produced vehicles.
Both with a negative impact on the price by nearly 55%, settled Bitcoin from a high of $57,352.77 to a low of $31,397.31.
Yet subsequently it rose over the course of the second half of the year hitting a record high of $64,863.98 as El Salvador was the first country to embrace Bitcoin as a legal tender.
Unfortunately many regulatory changes, the 2022 Bitcoin incident when Binance froze withdrawals and the cascade collapse of FTX and other crypto exchanges all together depleted Bitcoin of it’s value, making it depreciated as much as it was back in November of 2020 at a yearly low of $16,195.59.
The hypothetical drop: can Bitcoin go to zero?
In the light of these events concerns arise. A reasonable assumption that Bitcoin could hypothetically reach the null state of it’s value is worth the thought.
Even-though such an event is very less likely to take place, there are some factors that could theoretically lead to Bitcoin price crashing to zero.
Among many, here are the most hazardous ones. Those, which can lead to severe consequences and hypothetically terminate Bitcoin as a currency with a market price:
Crypto market mechanisms and their role
In contrast to the stock market, the cryptocurrency market does not have a circuit break. Which means that the trading sessions are never paused.
Such mechanics are downside accelerators when the price of a certain currency faces an extreme drop in the event of a massive sell-off.
Moreover, if a sell-off triggers panic, similar to the one that subjugated thousands during the FTX collapse, it can undermine consumer confidence.
Crypto investors may proceed with further sell-offs exponentially multiplying the disaster which might lead to a drop to zero.
External threats to Bitcoin’s stability
Beyond internal factors that may affect the price of Bitcoin, a number of external threats can also pose immense danger. Scalability issues are one of those.
As volume on the Bitcoin network rises with each transaction, latency increases, which in it’s turn intensifies insufficiency of processing operations.
Despite the ever growing Cryptocurrency ecosystem and more Bitcoin investors joining the community, global market competition pulls it’s share of the blanket.
Heating interest around artificial intelligence and it’s capabilities switches the focus of investors, giving them alternative purposes to consider.
Another nemesis to digital currencies are escalating implementations of strict regulatory frameworks that force investors to free cash towards other obligations.
In addition to that, the US Federal Reserve places higher interest rates thus cultivating a hostile environment that affects Crypto prices.
Read the essay: https://primexbt.com/for-traders/what-happens-if-bitcoin-crashes-to-zero/
