Every time there is a significant Bitcoin price drop, a drove of critics appears saying that this time, the bubble has truly popped and Bitcoin is finally going to zero.
At this point, it’s very unlikely for Bitcoin to crash to zero in the foreseeable future. However, this doesn’t mean that it’s impossible for Bitcoin’s value to decline significantly.
Even if Bitcoin declines by 90% or more from its current valuation, it will likely still maintain some value since there is a global community of hardcore Bitcoin enthusiasts who will keep using and promoting the adoption of Bitcoin regardless of what’s happening with its price.
In the earliest days of Bitcoin, BTC was practically worthless in terms of monetary value. However, it still attracted a dedicated community of people who realized the potential of its unique technology.
To understand why you shouldn’t expect Bitcoin to crash to zero, let’s take a look at how big Bitcoin actually is.
Why Bitcoin will not crash to zero — putting the size of Bitcoin in context
At the time of writing this article, Bitcoin has a market capitalization of $811 billion. At its all-time high, the Bitcoin market cap was $1.22 trillion.
If Bitcoin were a company, it would be the 8th largest company in the world, ahead of Berkshire Hathaway ($788 billion) and behind Meta Platforms ($966 billion). Currently, the most valuable company in the world is Microsoft, with a market capitalization of $2.92 trillion.
Bitcoin is held as an investment by publicly traded companies (MicroStrategy, Tesla, Coinbase, Block) and even by a country (El Salvador). Bitcoin investments are also offered in markets across the globe through exchange-traded products, allowing investors to put their money in Bitcoin without having to deal manage their wallets or even touch the blockchain at all.
After the introduction of Bitcoin ETFs (exchange-traded funds) in the United States, Bitcoin quickly overtook silver as the second largest ETF commodity in the US, behind gold.
According to an estimate by River, there are between 81.7 million and 130.4 million people in the world who own Bitcoin. Estimates for the number of total Bitcoin users vary from source to source, but it’s quite clear the number is at least in the tens of millions.
So, could Bitcoin ever go to zero? Even though it’s not impossible, an asset of this size, liquidity and adoption crashing to zero would require a series of truly exceptional negative events to happen.
What are the main risks for Bitcoin?
While we think Bitcoin becoming completely worthless is next to impossible in the foreseeable future, Bitcoin will be facing some substantial risks that might even require modifications to the Bitcoin protocol to overcome. Let’s take a look at some of the most serious threats to the future of Bitcoin.
Fees might not be enough to sustain the security of the Bitcoin network
One of the main selling points that Bitcoin enthusiasts like to promote is that the supply of Bitcoin has a hard limit of 21 million coins. This is presented as a benefit in comparison to fiat currencies such as the US dollar, which lose their purchasing power over time as more money is printed and enters circulation.
However, the fact that Bitcoin has a limited supply could prove to be a real problem in the future. The Bitcoin network’s security is derived from mining, which is a process that requires a lot of electrical power, expensive hardware and physical infrastructure.
Mining is financially feasible due to the block reward, a mechanism that rewards the miner who finds a Bitcoin block with a pre-determined amount of BTC. On top of that, the miner who adds a block to the Bitcoin blockchain also receives all the transaction fees users paid to have their transactions included in the block.
Historically, fees have represented a very small percentage of the total revenue earned by miners. This ratio tends to spike during the peak of BTC bull runs, when demand for transacting on the Bitcoin network skyrockets. However, as the price action calms down, fees tend to go back to representing a small percentage of miner revenue (historically, well under 10%).
Historical chart showing the percentage of Bitcoin miner income coming from fees. Image source: Bitbo.io
With each Bitcoin halving, the block reward is reduced by half. At the time of writing, this reward is set at 6.25 BTC, but will reduce to 3.125 BTC with the next Bitcoin halving, which is estimated to happen in Q2 of 2024. This process will stop more than a hundred years from now, when the last Bitcoin will be mined.
With every subsequent halving, Bitcoin miners will increasingly be relying on transaction fees to sustain their operations. If there isn’t enough demand for Bitcoin transactions, there could potentially be a significant decline in the Bitcoin’s network’s hashrate as many miners would be forced to shut down.
In early 2023, the concept of Bitcoin ordinals, which allows any type of data to be stored on the Bitcoin blockchain, began gaining traction. In practice, ordinals are being used to issue what are essentially NFTs on the Bitcoin network.
This has provided some upwards pressure to Bitcoin transaction fees, contributing to fees representing a bigger portion of miner revenue. However, it remains to be seen whether ordinals are a temporary fad or a long-term source of demand for transactions on the Bitcoin network.
The threat of quantum computing
Quantum computers are computers that utilize quantum mechanical phenomena to perform certain computations exponentially faster than even the most powerful computers in the world today.
To be certain, quantum computing technology is still in its very early stages, and utilizing them for practical applications is extremely impractical at the moment.
However, sufficiently mature and large quantum computers would likely be able to break many of the encryption schemes that are in use today. This would potentially also make it possible to derive the private key associated with a public key used in Bitcoin.
If quantum computing advances to the point where this becomes a real threat, Bitcoin would need to adopt a new public-key algorithm that would be resistant to attacks from quantum computers.
The good news is that quantum-resistant public-key algorithms do exist (although implementing such an algorithm in Bitcoin would introduce some challenges). If Bitcoin does switch to a new public-key algorithm in the future, a new type of Bitcoin address would be introduced and BTC holders would need to move their coins to an address of this type to remain safe against attacks from quantum computers.
States cracking down on Bitcoin
From a technological perspective, Bitcoin can withstand even the most severe crackdowns from governments and other powerful actors — after all, Bitcoin was born from the cypherpunk movement and censorship-resistance is one of the main principles guiding its design.
As a technology, Bitcoin is extremely resilient. For example, it’s possible (but not exactly convenient) to send Bitcoin through radio waves even if you don’t have access to the internet. A Bitcoin wallet can be as simple as a piece of paper, so even people who are fleeing war or another type of emergency can take their Bitcoin with them quite easily.
Despite this, if powerful states began cracking down on Bitcoin and attempted to ban it, the price of BTC could see a significant decline. While Bitcoin itself is censorship-resistant, cryptocurrency exchanges and other companies that make it possible for users to actually purchase Bitcoin with fiat money are not.
If governments made Bitcoin illegal and started to shut down cryptocurrency exchanges and other means of acquiring crypto, it would be much more difficult for Bitcoin’s userbase to grow, which would likely result in lower prices. While people would still be able to arrange peer-to-peer deals to exchange between BTC and fiat currency, the inconvenience and potential legal consequences would drive many people away.
The bottom line Could Bitcoin lose all its value?
Although it’s extremely unlikely that Bitcoin will crash to zero, it’s important to understand that Bitcoin is not a completely certain long-term bet and there are real risks that could jeopardize its growth.
Despite the risks, Bitcoin could be a very good investment for the future. If you’re interested in buying some BTC for yourself, make sure to check out our ultimate guide to investing in Bitcoin.
