Bitcoin and the cryptocurrency market are in the process of consolidating as the new asset class. With so much money in it, one would think that the market is not going anywhere. But there are always doubts, and people that capitalize on those doubts. But could bitcoin reach zero in today’s market? We try to find out if in the current conditions that could be possible.
From Hero To Zero: Could Bitcoin Reach Zero?
Tales From Crypt-Apocalypse: Bitcoin has lost 70% from the peak; Ethereum 85%; other Top 10 crypto-currencies about 90%; the remaining crypto-zombie-currencies between 95% & 99% of their value. It is a bloody massacre that will continue as almost all of them are worth ZERO!
— Nouriel Roubini (@Nouriel) September 6, 2018
This Tweet from Nouriel Roubini serves as an introduction to the issue of bitcoin going to zero. He describes an apocalyptic future that has been fueled by the latest developments of the bear market. This event brought bitcoin prices below 5K, a level that is considered to be under the break-even price of mining.
This would be one of the first conditions to make bitcoin get to zero. The inability of miners to keep mining due to operative costs. This is already happening. Of course, big mining companies and pools can afford to mine at a loss for certain amounts of time. When this happens they are operating on the idea that the price will go up and that they will recover these costs when they sell at a higher price.
Another thing that would happen is that the network would experience a loss of functionality, and transactions times will be longer, with fees higher. Eventually, unconfirmed transactions will pile up due to network congestion produced by the lack of hash power to operate the network. And from here the collapse could happen.
People desperate to cash out would start paying irrational fees and whales would be the ones to cash out first. Micropayments would be impossible to do because transaction fees would be way higher than the amount of the withdrawal. However, all of this is hypothetical and highly unlikely to happen.
Bitcoin has exhibited volatile behavior as an asset class: there is no doubt about it. But every time that is has lost a big amount of its value, it has retrieved it again. It does not matter if it appeals to the greater fool theory, but bitcoin has lost and regained its value cyclically through the years.
2012: New ATH
2013: 83% correction from ATH
2013: New ATH
2015: 87% correction from ATH
2017: New ATH
2018: 71% correction from ATH
Bitcoin has yet to make a new ATH without a greater than 80% correction.
An 80% correction from 2017 ATH would be approximately $4000.
— NebraskanGooner (@nebraskangooner) September 9, 2018
We cannot predict what will happen in the future, but bitcoin does have clear use cases and it has an intrinsic value that makes it useful for some, even if for others it is just a speculating tool to generate profit. So summarizing, it is really unlikely that bitcoin could reach zero now, given the circumstances.